All Forum Posts by: Ryan Webber

Well "technically" you don't have to give earnest money. I will say that "culturally" or "typical societal pressure" alludes to giving earnest money as the proper thing to do, but it is not required to have a valid, enforceable contract. And I don't think its a dirty little secret. I've been telling people publicly on this forum that you don't have to legally give earnest money for the last 5 years and yet we still have these conversations.

Either way, Archie is exactly right about focusing on something else. I never bring up or discuss earnest money when I am dealing directly with a seller. There are extremely few sellers that even ask me about it. Probably about a dozen people have even ASKED me about earnest money out of hundreds of deals I've done directly with homeowners. And I've only given earnest money on 2 or 3 of those. One was an attorney and he said he wouldn't do the deal without it, and one was a title agent who said pretty much the same thing. If I am asked about it, I just explain that it is not legally required and that I don't give earnest money. Then I move on to something else.

I think something other than B.S. is going on here.

I think its important to remember that we have a lot of members here now, and we are all have different abilities of understanding and comprehension. We have extremes in the highs and extremes in the lows. There's not much you can do about it. You are who you are. I think its important to realize that sometimes people just come to BP to belong, and they like interacting socially, and for them understanding all the fancy nomenclature and jargon that Bryan uses around here will never be in their stars.

:wink: Just messing with you Bryan.

No, actually on second thought, I'm not.

Either way, I thought Tin Lam's riddle did a good job getting everyone to talk. 26 replies in 8 1/2 hours. Tin, that's AMAZING! That may be a new record around Bigger Pockets. I like how you think, Tin Lam. Keep it up!

Bill, I'm still waiting for your evidence behind your claims of simultaneous closings being fraud. Again, please enlighten me AND hurry. I just did one last week and I'm scheduled to do another next week.

Do you think I should just turn myself in now, Bill? Which overlording organization is now splititng the hairs of this strategy and cracking down on it? Tell me so that I can call them to come pick me up! Which law should I quote when I do? Hurry, time is running out for me!?! And for the multiple title agents, attorneys, and title companies that do them for me, too!?! Its all over for all of us!!! HURRY BILL, HELP

On a more serious note, Bill, I am truly interested in ANY and ALL evidence and research you have that points to this closing strategy being fraud. I am VERY motivated to research whatever you can find. Please share what or who first advised you that this strategy was FRAUD, or maybe share what or who confirmed for you that it is FRAUD.

I am eagerly awaiting your response. :whistle1:

Gene, as for the laws in Texas. Texas actually now has less strict laws on OWC's than most states. The new national SAFE Act which deals with OWC's went into effect for ALL states that didn't have a State SAFE Act.

So in Texas, at least for now, we have an exemption that as long as you do 5 OWC's per year or less, you do not fall under the National SAFE Act.

So point being, that a builder could OWC 5 houses a year without having to get a national AND possibly a state mortgage brokers license. There is still some dust in the air whether a person needs both licenses to be able to do more than 5 a year in Texas.

Now most builders do not have the capability to wrap finance many, if any, of their houses long term. They make money when they cash out. A builder is like a rehab to retail investor. They are in it for the big hits that come when they sell the property not the little bites that come with a rental or note. Their business model is not normally designed for that. Not to say that if a builder is hurting bad enough that they would not be open to it (if they can get the long term financing).

I'd say its worth a try. Maybe you could get buyers on 2 year or 5 year balloons, which is probably the best a builder could get right now anyway. That gives the builder some protection, too.

:lol:

I have to admit, J Scott, you got me rolling.

Colden, outside of lease options, contract for deeds, and other executory contracts that don't really pertain to wholesaling in any way, Texas RE law is actually very similar to the rest of the country.

Now I AM a Texas investor, I HAVE wholesaled over 300 properties in Texas, and my professional opinion is that I really think you should open your questions up to anyone that is willing to take their time to answer them, even if they aren't lucky enough to live in the best state in the United States. :D

There are some pretty salty investors around BP that can point you in the right direction with greater accuracy than ANY guru. I've been to different guru courses (including Rich Dad's) and I've mentored many people that have been to many more, and the information, direction, and assistance you can find right here from BP members (even those outside of Texas) by far surpasses it all.

I do have to admit, I think your profile needs some assistance, too. It definitely makes you sound like a pompous arrogant newbie that just got out of a guru course, and that's definitely not the image you seem to want to portray.

As for your wholesaling questions, ask away. I'll be glad to answer any of your Texas specific questions that J Scott can't.

Developing your people and conversation skills will absolutely increase your closing percentages, but no matter how smooth you get you can't make a pig sprout wings and fly.

You are looking for two things. Equity and motivation. If they have one but not the other, its not a deal. If the house is paid off but they aren't motivated to sell any time in the next 5 years, its not a deal.

Now if they have the equity but only a glimmer of motivation, you are probably wasting your time to go look at the house, BUT at least they COULD take your offer if you butter them up enough to slip in there. If they have plenty of equity and I can smell some slight motivation, I'll usually go look at it, but it depends. I don't want to waste my time driving all over town making offers on properties I know I won't get. My time would be more productive finding people who have equity and ARE motivated.

Now if they don't have equity, you are wasting your time all together. If you are a newbie then you should go look at all of them and get your practice figuring numbers and repairs and having people laugh at your ridiculously low offers. But once you get out of investor diapers, I personally don't have the desire or the time to meet with EVERY seller that calls me.

John, the only problem I really see with what you did is that you didn't pre-qualify the Seller first based on equity. There's a good chance that he responded that way because he owed 100K on the house and there was no way he could sell it for 90-100K. Qualify their equity first, and then move onto motivation. Motivation is swayable. Your personal skills can influence motivation, though I would still argue that that you won't influence it much. But what you can not sway at all is their equity position (outside of a short sale that is).

"How long have you owned the house?" is one of the best questions to determine equity. Except for in a few select markets, if they bought it 5 years ago there is NO equity. If they bought it less than 10 years ago then chances are there is no equity.

"How much do you need to get get for the house?" is one of my favorites to ask. It gives me an idea of equity and motivation.

I also like to work in there, "How much do you owe?", but sometimes its overly awkward and can cause the Seller to feel defensive. I like to ask it in a natural progression with my other questions so it flows with the conversation. If I can get an answer, then it makes it real easy for me to figure out if I'm wasting my time or not.

Once you've determined that they have adequate equity, then you can move onto determining their motivation level. I always like to ask, "When would you like to sell?" I'm looking for a "NOW".

"Why are you selling?" is always good. "They are about to foreclose" or "I need my crack" are always good answers when looking for a high motivation level.

I think I still get my best judge of motivation from, "How much do you need to get for the house?" Many times they will give me a ballpark or sometimes a "I don't know" and then continue with what they need to do with the money or why they need that much. If they don't respond then I'll politely push in with some other questions about what their plans are with the money.

Asking if they have somewhere already to move to (if they are living there) can also give you a good signal of how motivated they are.

My partner always likes to ask what they plan to do if they can't sell it. This not only gives you insight into their motivation but it normally also helps increase their motivation level as they think about the alternatives.

Either way, no matter how good you get at connecting with a seller and asking the right questions in the right way and in the right order, you can't make a pig sprout wings and fly. They need equity AND motivation. Otherwise the call is just practice.

A Section 8 inspection doesn't mean that even that unit is up to code.

Many factors can be grandfathered in (a fuse box or an old electric meter base) or some issues may not be part of the inspection (plumbing or internal wiring). These factors may not be up to current code but they still can pass the inspection. Now major safety issues will be addressed (like proper venting for gas appliances) even if they were legal back in the day.

Keep in mind also that different Section 8 organizations/inspectors are not all the same in the stringency of their inspections. Some will let some things pass while others will absolutely not.

Advertize to your buyers the total price including your fee. If you separate your fee (especially as a newbie) you just gave your buyer a target to negotiate. Its like painting a big bulls-eye on your forehead. I've only seen one wholesaler that openly advertized their assignment fee. It worked for her but she was very experienced and well established with her buyers.

As for me personally, I used to do contracting and learned how to bid jobs. As a new wholesaler learning how to ballpark estimate repairs is essential to knowing if its a good deal or not. If you don't know how to figure repair estimates then you need to learn. It doesn't have to be exact, but you definitely need to learn to ballpark it. Your contractor buddy is going to get real sick of making up bids on 100 houses for you to only buy one. You need to pay close attention to his bids and start to figure it out yourself.

As David shared, ask them if they will do double closings. That will give you your best indicator. Assignments aren't a big deal for a title company, but double closings are a different story. You are looking for a title agent that already understands what one is and knows the ins and outs of them. Now understand that they may be investor friendly and still suck. You need to find one that is good at what they do and is open to doing double closings.

I give $0 earnest money unless I need to give some to make the deal work (as with listed properties).

The people that think they must give earnest money quote the need for "consideration" to make a contract valid, but "consideration" does not have to be money. A "promise" to buy a property has been determined to be "consideration" enough to make a contract valid. Each state could be different, but I haven't seen one that is, but you should always check legal questions with a QUALIFIED attorney in YOUR state, which I am neither.

If you decide to give earnest money then set up your contract to deposit it AFTER your contingency period is up, and make it a small amount ($100 or less).

I would recommend that you do. Its your baby. Its your paycheck. Babysit the thing until you get paid. There is not normally an upfront cost to open up title/escrow. Normally costs for all this are paid at closing.

I always do $1,000, which is pretty common. Now I normally deal with houses under $50,000 ARV. I think I would lean more towards 1% of ARV if I dealt with houses in the $100K+ range more often.

My experience is that many cash buyers will NOT want to give you earnest money. They are natural negotiators, and many of them would prefer to give you nothing if you will accept it. Just set it up as a requirement of your business, and communicate it like that to them. If you get a recurring buyer that you trust then maybe you can slide on it, but it'll only take you getting burned by your buyer on the day of closing one time and then you will ALWAYS require non-refundable earnest money.

If your question is in reference to an unwilling party, like a Seller or Buyer getting cold feet then:

If the Seller won't sell, you pressure him with legal repercussions. If they still won't then you have to make a judgment call about the risks/rewards with moving forward legally (consult an attorney). Normally you just move on.

If you don't show up, then you are an idiot. Unless of course you are doing an assignment, in which you don't need to show up (other than maybe to pick up your check).

If your Buyer won't or can't close then you keep his earnest money and either back out of the contract with the Seller using your contingency or you sell the house again to someone else.

Other than you being an idiot, you really should have a heads up on the other two before the day of closing. If you get blindsided on the day of closing by an unwilling Seller or Buyer then you probably weren't babysitting the deal well enough.

Now if your question was referring to someone not actually being ABLE to get to the closing table (like an out of town or imprisoned seller) then documents are normally emailed/mailed to them, executed and notarized (they do have notaries in jail), and then over-nighted back.

I've been studying Spanish every day for the last year or so. It just makes business sense to me. I've bought, sold, and leased property to families that speak little or no English. To be able to speak their native language builds trust and makes them feel more comfortable with me.

Its just a no brainer in my book. Now actually learning a different language takes some serious diligence.

Es mucho trabajo, pero es lo vale.

Holy cow I get long winded when I haven't been on here for awhile. :wowie: