All Forum Posts by: Richard Balsam

I've seen wholesale deals go under contract without any real calculations being done - or done incorrectly. Be careful. Just saw one this week- tell me if this sounds good to you: ARV: showed one 5/2.5 comp for a 3/1.5 being wholesaled. The 5/2.5 was shown as sold for $165K. The 3/1.5 was bought at the foreclosure auction 30 days prior to posting for $20K. Wholesale price $67K...was under contract with one e-mail blast. Only a $47K markup!!!! Estimated repairs showed $45K on the e-mail... Don't know the actual under contract price.

My estimate: ARV $125K - based on neighborhood 3/1.5 previous solds. House needed a minimum of $55K++ due to huge mold issue on entire ceiling in picture shown (must be removed, and tested for type of mold). Floors rotted, entire house must be gutted and re-done form the few interior pictures provided ( approx 1500 sq feet I believe). E-mail mentioned potential two bedrooms can be added to basement- making this house a 5/1.5. Is this supposed to be a "close enough" situation? Of course not! No other comps listed. Must we assume this 1960's house meets electrical and plumbing codes, no lead paint, etc...? Yeah right...

Now...it is up to each buyer to do their own calculations- do not rely on wholesaler comps, repair estimates, etc. Just brought this up- because house was under contract one day after the e-mail received. Someone didn't do their due diligence - or doesn't know how, or knows something that the rest of us don't...

To answer your question - if you are comfortable with 70% ARV less repairs - that seems to be the calculation being offered as a starting point. Others don't use this at all- or forgot how to calculate things. Either way - caveat emptor. There are plenty of good wholesalers out there - don't think all of them are like the above example. Most are ethical, and don't mark up $47K 30 days after a purchase. Most of us will know a decent deal when we see it. Good luck!

Sounds great...Looking forward to meeting everyone.

@David Dachtera - HOA= Homeowner Association. POA: Property Owner Association. Biggest Difference ( among the 25 pages to create it using expensive POA attorneys): A POA does NOT have to file with a judge to impose a lien on any property. Just fill out the fform and mail the lien to the courthouse. Automatic lien placed on the homeowner. It's up to the homeowner to get it removed after paying the fine ( a release of lien filed by the same POA). A HOA had to file with the courts to impose a lien, and have expenses to do so.

Very restrictive covenents placed in the neighborhood is now becoming the normal way to do business. Can limit number of rentals through rental permits ( paid annually by the "lucky" landlords that were able to obtain a permit...ask me how I know), can limit and place fines, liens etc for: weeds in yard, seeing garbage cans from the street, etc. 

I've never heard of these assignments from the bank before. Sounds like they wanted it off their books...quick, due to the HOA foreclosure. Call the attorney for the HOA to see what can be done to stop the foreclosure sale. I see homes fall off the county foreclosure list all the time - so people are able to work deals.

It sounds like you are the one that owns the house- based on all the assignments of whatever paperwork the original seller signed with the bank. Could you settle with the HOA? Most likely yes. HOA's are not in the business of owning houses that need work. They may appreciate the phone call. They do not want the previous owner- for sure. - which is why they paid to foreclose on the house. If they do not handle the ownership of the home correctly - they could go under if they're not careful ( holding costs, repair costs, marketing costs, etc - in additon to their own HOA duties and costs).

So...they might drop the sale asap - if you prove you can settle on what's owed - and do it now before the sale. Once the sale occurs (for example -today is the county foreclosure sale here in Georgia) it would be too late. My guess without knowing any details - they would settle for 30-50% of what's owed, with payments spread over a few months. Do not agree to reimburse their foreclosure costs - it would only add to their future arsenal of "tricks" to other homeowners.

I have one house in a newly formed POA ( more restrictive than a HOA). Had to hire an expensive POA attorney since they had one woman who detested anyone not owning in the subdivision - and resorted to tricks, and illegal harrassment to my tenants (lease option clients). We won- in a different sort of way - but the threats have stopped. So- its expensive - but certainly can stop - with the right pressure. If you want the name of the attorney I used ( in Decatur) PM me.

In addition to the above - 

1. The age and condition of the roof. When was it last repaired/replaced?

2. Age/condition of the HVAC units

3. Is this is a flood zone? Get all documents - or flood map from the city?

4. You might want to verify how each renter pays. How many bounced checks during the year, or if all money orders only. Also- what day of the month do they pay. The landlord will tell you they all pay during the first week. Try and verify just in case. 

You should have plenty of material from the above answers to assist you.

If you find a homeowner that will work with you - once you sign a purchase contract - give yourself at least 30 days to close. Why can't you contact a transaction loan broker- that lends for the day - do a double closing and hide your wholesale fee? Depending on the laws in CA - could you sell the assignment and walk away with your fee? If the deal is right- I'm sure there are investors at your REIA that would step up and buy your assignment - assuming that is legal in CA.

I recently found out that selling an assignment in Georgia is being investigated by our state ( selling real property not being on the title to another person)  -  it appears to be illegal without a RE agent license ( which I have anyway).

At least there are options if you don't have the cash right now. 

Nice job on the upgrade! 

When you first bought the home - did you do your research on the ARV values for the area? The reason I ask- if the house is 2200 sq ft under air - it works out to $66/ft retail -for a nice upgraded home. I'm not familiar with Austell retail prices - is this the market value for Austell? Just curious.

One thing that you can try in your area is do a google search for SMALL community banks. The ones with only a few branches trying to compete with the big boys. Sorry...this post became long with my answer!

I was given a name of a very small ( two branches) community bank near me. Spoke with the lending officer - and told him what I am doing, what I am looking for, and prefaced that with "I have been investing for years - but I need and will search until I find - a bank that understands what I am doing and will allow for a product that they might not have done before". When he asked me what I need to continue being successful- I told him "some type of line of credit product where you can send an appraiser to the house to verify the house value, and I will need financing for six months or so until I can sell the home, and will need the funds pre-approved so I don't wait with each house for financing approval. " Of course- his answer was along the lines of - "let's talk, and I am in a position to recommend to our board (of directors) any product that makes sense". Meaning...I am the one that suggested the product, the use of the funds, the time limit that I would need it for (for each project), etc. I also mentioned that the best homes I want to add to my portfolio - and will need a "standard" mortgage product on it - he really liked that statement. They are in the business of lending, and if I diversify with multiple homes - the risk drops substantially with any given house payment, with other wholesale deals also in the pipeline. 

Now- I also have a portfolio of cash flowing homes- so it may be a bit different in that regard. But...I also had to give him my personal information, SS#, etc - so they know who they are dealing with. All they are waiting for is my 2015 tax returns to verify everything. I expect an approval within weeks of me providing the return. Everything up to this point he mentioned was good. They are willing to lend up to either 70% of the before rehab value, or 70% of the after rehab value - so I am the one that will buy the home, all repairs, etc - and pull my cash out upon finishing and getting the appraisor to justify the new value ( this was part of my risk reducing strategy for them). But- the 70% was their offer to me -other banks will have their own different criteria. This work's for me, since I am looking for a $500-1MM line of credit. I must keep recycling my money and have them refinance me with a 1st lien until the house is sold. Since the line is quite large - I can do many homes before I max the line out. Hopefully, before house #3-4-5 I will have house #1 under contract or sold. And my strategy is to rinse and repeat.

So...you never know financing opportunities near you until you inquire, meet with them, and offer them some type of reasonable business opportunity where they are not taking the entire risk. They may start you with enough for one house at 70% ARV - but when you prove yourself with them, it will be easier to expand over time. Each bank wants a client that always pays on time, and is selective in their investment criteria. That's what relationships are built on with banks. They won't just lend because you found a home- they want a well thought out plan for growth, a safe investment criteria and some risk absorbed by you - so they are not in 100% on any one project. A well thought out written business plan is a must!

I guarantee there are banks near you in NC that want to hear what you can offer. Remember -  If it was easy - everyone would be doing it. 

it's always the few that spoil it for the many - in any industry. I have a feeling that states didn't just wake up to this. I think its multiple complaints from sellers that feel "taken" or "beaten up" by wholesalers and that they found out at closing how much the wholesaler made on the transaction. That makes more sense to me than states just cracking down- just because they can. It takes a lot of time effort and money for states to crack down on an industry - so there must be good reason for it. Since I am licensed, if fireworks are about to begin, I'm completely covered anyway. 

Funny seeing this post today! I just met with my new attorney today to review our new wholesaling contracts - to make sure they are legal in Georgia (they are from out of state). The first thing she asked me - "are you a licensed agent in Georgia?" !!    I am licensed, and have been for 15 years - but it is a bit ironic to read this post the same day I received the same question from my attorney. She did say there is trouble brewing recently for activity relating to wholesaling houses without a license. She is planning on adding a disclosure statement regarding that I am licensed to conduct wholesaling activity in Georgia.

She did say that Georgia is cracking down on unlicensed activity when selling houses. Of course- one could try to argue in court - that the wholesaler is selling the Assignment paperwork- but I wouldn't place the bet that the court would agree with that statement. 

I do know that Florida is also cracking down - and I am licensed there as well. I spoke to one of their real estate commission lawyers a few months ago- and was told that any selling of real property not owned by the individual is practicing real estate without a license and subject to prosecution. So-either states are starting to crack down, or have been for years but guru's don't say this for fear of losing sales of courses, seminars, etc. Caveat Emptor still applies! There seems to be a ton of wholesaling activity that is unlicensed in Georgia. We'll see how this plays out over the next few months and years.