All Forum Posts by: Ryan Webber

K Marie The case law was criminally based. It was the State of Indiana (not Illinois, my bad) against a wholesaler. Let me throw in there that he was doing some jicky stuff on the back end that really caused the problems, but the Attorney General prosecuted under unlicensed brokerage and referenced that in their opinion an option did not constitute equitable interest. The AG's motivation to prosecute was not because of the option, though, it was because he sold the properties for retail prices to his buyers and then had them wrap the properties back to him on land contracts and he rented them out. A couple years down the road it all fell apart and when he gave them back to the buyers, they went to the Attorney General's office.

I had to look for hours to finally find the thread on BP where we talked about it. Looking for Illinois and not Indiana probably didn't help.

http://www.biggerpockets.com/topics/56221?forum_id=93&page=1

Someone somewhere in this book of a thread mentioned the definition of wholesaling. I think its definition can help bring some clarity to all this.

The actual definition of wholesaling really has two components. I would say that whenever you have these two components in a transaction in ANY industry, you are dealing with a wholesale transaction.

1. Reselling to a non-end user.

In real estate, this is someone who is not going to live in the property. An Investor.

2. Reselling at a discount.

Hopefully in real estate, an investor would only buy at a discount but that is not always the case. Wholesaling in any industry means you are NOT paying retail prices.

Now whether you assign, double close, sell an LLC, or close on the property with your own financing and sell it two weeks later, if it has these two components, its Wholesaling.

On the flip side, if it does NOT have BOTH of these two components, it is NOT wholesaling. So if someone is trying to resell a property to an investor (Component #1) at a price that is comparable to what a retail customer would pay (not Component # 2) then I would argue that they are NOT a wholesaler. They are in all actuality a Retailer.

So the real tension I feel here is not really aimed at Wholesalers. Its truly meant for Retailers who try to sell their product to investors. Its Retailers that act like Wholesalers.

The thing is that ALL, and I mean ALL new investors have the exact same problem. Every single newbie (now I mean newbie as in a new person in ANY real estate investment strategy and not just wholesaling) makes TWO huge mistakes EVERY time. I call them the "Big 2" in a rehab-to-retail because they are the biggest components of profit and they are the most common errors of a new investor.

1. Overestimating ARV

2. Underestimating Repairs

But wait a minute, I thought those two things were what all these supposed Wholesalers out there are doing that is wasting all of our time and destroying the market? Well its actually how ALL newbies screw up. ALL new investors do those two things whether they are buying for rentals, rehab-to-retails, or as a "wholesale" deal.

Every time. Its like clock work. You teach a newb how to pull comps to determine value, and they'll pull only the top 5% in the area and estimate ARV off of those. Teach them how to estimate repairs and they smudge it here and miss it over there. They didn't think about the funny smell in the house and the wet toilet paper in the back yard meant that it needed a new sewer line or that a new roof could be so much money.

My point is that its not about WHOLESALERS being idiots. Its about NEW INVESTORS being idiots, and the FACT that in real estate investing Wholesaling has the lowest threshold of entry. So Wholesaling will have the most new investors of any investing strategy. Put those two together and you get the problem we face.

Now most new investors are going to fail (wholesaler or not), but then there are just as many new ones to replace them. I've been watching this cycle since I started 9 years ago. The replenishment doesn't stop. I have to admit that I have been brain storming how to take advantage of that unlimited replenishment. I'm seriously considering tapping into the pseudo-wholesale market. My business' main competition in my town is a guy who will pay $5-10K more than me EVERY time and most of the time he still ends up wholesaling them to someone else. He doesn't promote over-inflated ARV's or anything deceptive but the buyers are usually newer investors that don't understand that they have a low chance of making any money at the prices he is selling them at. Nonetheless he sells a ton of property.

The dark side is tempting me.

Right now I am a REAL wholesaler. I sell most of my properties to a small group of very experienced investors who close in a matter of days. I've sold hundreds of them like that, and if I lived in your town you probably wouldn't know I even existed. I don't email investors. I don't put my deals on my website. I rarely advertise them at all, and I don't bug anyone to buy them. I also personally close on most of my deals whether I have them sold or not, but I have no issues with a wholesaler that doesn't.

On a side note, I have bought about 40 houses off of other wholesalers. Every one of them except one was a really good deal.

Holy cow this thread is long and chock-a-block full of wholesaler haters. Sorry I got here late.

Really Will? God forbid you have to look at houses that don't end up being deals or OMG have to push the delete button on your email. I really thought you were joking at first but then I figured out you weren't.

Let's be clear, to be successful in this business you will look at hundreds of houses that waste your time to find one that is a deal. If you plan on buying 10 deals in a year, you should expect to look at least 1,000 that will waste your time, and that is if you are NOT working with any worthless wholesalers.

And "inflated expectations for banks and sellers"? That's kind of ridiculous, Will. A bank bases its sell prices off of sold listings not contracts that fell through. Someone else had an angle that when a seller gets strung out by a wannabe wholesaler, the cash buyer can act like superman at a discount. Negatively impacting the market is laughable. Literally, I was laughing at you Will. I'm sorry that you didn't mean to be funny.

That's not necessarily true. The only case law I've seen against wholesaling was someone using options and they specifically referenced the use of an option contract versus a purchase contract. It was in Illinois.

I agree and think this is a good idea. HML's give an extra set of experienced eyes, which is tremendously helpful, BUT I've bought a lot of properties off of HML's that they loaned stupid numbers on and had to foreclose and take a loss. I wouldn't buy a property just because an HML would loan on it.

By the way, K Marie. Welcome to the Board.

Paying a fee to Pay Pal seems crazy to me, but I prefer to not have my buyers give the earnest money to the title company either. If they deposit the money at the title company, the Buyer can dispute you getting it, if and when they pull out of the contract. If its paid to me directly they will have to take me to court to get it back. Now if its a new buyer then I have let them give it to the title company to make them feel more comfortable with the transaction, but I still push to get it directly. In the case of an out of area buyer, I have had them wire it directly to my bank account before. This would eliminate the Pay Pal fee and still let me control the money.

You would follow your state's normal eviction procedures for a foreclosure. Many state's have unique eviction procedures for foreclosures so you should research them before you buy. In Texas it can take about 45 days. 30 days for the initial notice, 10 days for the court date, 5 days for the sheriff to escort them off the property. Usually they leave sooner, and "cash for keys" is always a solid option to explore in these situations.

As for the availability of deals, this business is about finding needles in hay stacks. Don't expect deals to fall into your lap. If you aren't ready to look at, research, make offers on, or bid on HUNDREDS if not THOUSANDS of houses that you will NOT get, then this business is NOT for you. Its a numbers game. You just need to focus on figuring out how to get through the hay stacks more efficiently and effectively. Most strategies for finding deals will require months and months of consistent and persistent focus and effort to see real results. The professionals in this business are the ones that understand this and stick with it through the HUNDREDS of "no's" to get to the one "yes".

In Texas, I would highly recommend you throw out Quit Claims TOTALLY. The title company will have to go back and get the Grantors to resign at least a Special Warranty Deed. Really and truly they are worthless in Texas. Don't waste your time with them.

Some offices/agents of Stewart Title do allow double closings, and I don't know about Chicago Title though.

Chris Pumplun is absolutely right. You can always request a courtesy closing at your title company, but you can also push a little and get the whole thing at whatever title company you want.

You, as the buyer, actually have the right under RESPA 2608 to pick the title company. The banks attorneys know this but they don't abide by it. When I push the issue they usually will let me pick the title company IF I am willing to pay for the title insurance, which is a good enough trade for me.

I would follow your gut feeling if you haven't already. Cancel that contract.

With just the basic 70% of ARV minus repairs you should be somewhere around $10,000 for that house IF its worth the high end of your comps. You should probably start reading up on the Wholesaling Forum.

Learning how to determine IF a property is a deal or not stands as the best first step you can do as a new wholesaler.

I've experimented with billboards and my main conclusion is that the ROI is too low. I still have a small cheap one over in the hood, but that's all I will do anymore.

Ditto, Jon Holdman

Quit Claims are the lowest level of transfer. A Quit Claim is actually not even a "transfer" of title. It is just attesting that the Grantor is no longer claiming any ownership. The issue being that a Quit Claim is not saying that the Grantor had any ownership in the first place.

I could give you a Quit Claim for the Golden Gate Bridge. All it's saying is that I quit any claim I might have had on the Bridge, but it gives no guarantee that I ever owned any part of the Bridge.

Just as Jon shared, in Texas, title companies don't even consider a Quit Claim a valid transfer. You have to use at least a Special Warranty Deed and preferably a General Warranty Deed or they won't insure the title.