All Forum Posts by: Shawn Ryken

There’s a HUGE difference between making an offer on a property you intend to purchase, and utilizing an “out” because of a legitimate issue, and making an offer on a property with no intention to close, I.e, the deal will only close if you can find a buyer to pay you a fee to flip the contract to, otherwise using the option period to terminate the contract with no legitimate reason other than not being able to flip the contract at a profit.

You may be doing nothing illegal, but once you bail on a few of your executed purchase offers word will get around, and the brokerage community will begin to regard you as a parasite, time waister, and flake. Nobody wants an offer from someone who will only close IF he can find someone else to flip the contract to.

In your scenario the seller is (1) paying the broker a 6% commission, plus (2) paying you an assignment fee (based on the price the end buyer pays) of the difference between your purchase price and the ultimate cost to the end buyer ( I realize he’s doing so willingly). However, the effect is a doubling of selling fees on $100k home.

Regardless, I don't believe the MLS is a fertile ground for wholesaling properties as wholesalers tend to add value when they deal with properties that brokers can't, or don't want to sell, such as those in war zones, very low priced, or needing extensive repairs. If the sellers agent is knowledgeable and honest he will advise the seller that your offer is lowball, that you aren't providing a solid deal, and that the deal is actually contingent on the seller selling for below market. That should be enough to discourage most sellers from accepting your purchase offers.

As in all wholesaling situation, if the wholesaler either (1) will close whether or not he finds an end buyer or (2) informs the seller that he will only close if he finds a buyer at a higher price, then I have no problem with the concept. But wholesalers who hide behind the option period, or a weasel clause, not providing full disclosure of their intentions, are “gaming” the system at the expense of a typically unsophisticated consumer.

True, but isn't every wholesale deal with the "intent to close"? Isn't this why the concept of wholesaling with buyers in place ideal? There are also many agents who blow smoke to their clients to get a listing by promising a false number/figure from the get-go and that agent never provides.

Everything I have consumed and read says to have the buyers in place before ever getting a deal....getting properties based off your buyers criteria, buy formula, etc. So if you know what Buyer X will pay for the property minus repairs (if any) and assignment fee... what time are you wasting if the seller agrees to move forward? Just trying to pick your brain on this concept. I definitely see your concept when going into a deal without anything else established or lined up (buyers, inaccurate repair estimates, etc) and flaking because the deal falls apart or was never really established to get from point A to Z from the get go.

Why would wholesaling concept be frowned upon on a property that is not in a war zone, no extensive repairs, etc etc but more so move in ready? (#5 in my original post)
5 - Wholesaling a deal that is a buy & hold (just a good deal as is). Most interested parties for these type of transactions I would assume are actual cash buyers and not hard lenders correct? Ex. House is worth 250k (as-is with no repairs or updates needed) sells for 230k with a 10k assignment (220k under contract) - this would take away any investor using hard money loan concept. Wouldn't a true cash buyer still be of interest if its +20k equity sitting there as is? (not many wholesale videos explain this concept).

^This would actually be the most ideal part of wholesaling to me as every hard money investor can really fluctuate on numbers when it comes to ARV & repair costs due to different contractors, material, labor costs, etc.

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Originally posted by @Don Konipol:

@Shawn Ryken, sounds like you intend to make offers and then utilize the termination option should you be unable to 'flip' the contract. If so, be prepared for A LOT of negative feedback, complaints, etc. from the Realtor community. Even the successful flips will encounter negative feedback since you will be accused of using your superior knowledge for personal gain at the expense of the consumer/seller.

I personally don't like the 'wholesale' model when used by realtors also acting as agents for buyers or sellers. Seems like doing both is an inherent conflict of interest. How can you tell a seller/buyer that you operate in their best interest when you also try to get the lowest price from a seller and highest price from a buyer when acting as a middle man? just seems to muddy the message. You may find that wholesaling leads to a decline in the agent side of your business.

Don,

Thanks for input but - I'm not sure how you quite view this. If I wasn't an agent and going to buy a property from a seller's agent - me (they buyer) still have the right to ask for option times (7-10 standard) or extended (14 days+), be able to assess rehab/costs, and have the option to move forward or not. I just happen to have more insights towards the contract process etc.

Also, I am being represented by the seller's agent on both sides so its more enticing to the seller to bring both parties to close the deal. My knowledge and background in this would benefit me but not using it from an agent standpoint (I don't think pursuing the representation of myself on agent side would be ideal to get a 3% commission + a lower market value of the house). But the true meaning of market value = A - the highest price a buyer is willing to pay for a property & B - the lowest a seller is willing to sell that property for. If I represent a buyer at any given time (#1 goal - get the property for the best deal out there). If I represent a seller at any given time (#1 goal - sell the property for the highest value). Does it work every time? No, market fluctuates with multiple offers, extended days on market times, etc.

How would one look down on me as another buyer in the market? Agent can easily say yes &/or no to the offer.

Not sure if I catch your message on this...

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Bump....any other input on this from anyone in the industry?

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Thanks,

All input is greatly appreciated.

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Hey BP!!! Happy to be here and have access to the info. I have a couple questions about wholesale deals with seller agents involved. I am an agent myself and have watched several videos (youtube, etc etc) on concept of wholesaling and rehab/flips. Little background - avg 7-9 million in sales a year in standard real estate but wholesales and/or rehab/flips is a new adventure I want to take on.

Anyone followed or heard of Alex Martinez program with wholesaling MLS? His concept (offer as much as you can via on-market deals from MLS) - This strikes me as the most cost efficient way to start to limit $$$ for leads as I have all the access to MLS. With that being said you have a seller's agent to deal with. Couple questions I wanted to know for wholesalers who deal with on-market listings:

1 - EMD on standard contract on most deals in DFW metro are 1% of sales price (with using a sales agent but obviously any fee is negotiable). With that if a property is purchased at 150k = 1500 EMD (general rule) for contracts. Buyer has 2-3 days to deliver EMD to title company. What if you do not have a buyer in place or agreed to yet. Is this a general fee the wholesaler pays out of pocket and if cash end buyer is found is reimbursed from them? Or do you account for this in your assignment fee?

2 - Option fee is typically $50-$200 depending on location, price, and amount of offers. This time frame is negotiable but you would want your time to be as long as possible to allow your buyers to inspect. I assume that this fee is paid by wholesaler and not credited back once deal goes through?

3 - Proof of funds (since inked as a cash deal). Starting to market to cash buyers in the area - but what is the best way to get a POF document/letter if wholesaling. (I know I always ask for POF when selling a property and a cash deal comes across).

4- Is it wrong to ask cash buyers or hard money lenders their buy formulas since I have watched HOURS of videos and read HOURS of material to see that the (%ARV - repairs - wholesale fee = purchase price)? Lots of literature says this varies per market - with hotter markets the % ARV increases OR if the cash buyer is a legitimate cash buyer and not a hard money lender.

5 - Wholesaling a deal that is a buy & hold (just a good deal as is). Most interested parties for these type of transactions I would assume are actual cash buyers and not hard lenders correct? Ex. House is worth 250k (as-is with no repairs or updates needed) sells for 230k with a 10k assignment (220k under contract) - this would take away any investor using hard money loan concept. Wouldn't a true cash buyer still be of interest if its +20k equity sitting there as is? (not many wholesale videos explain this concept).

Thanks to all the help and look forward to being a reliable source of info one day on this new adventure!

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All Forum Posts by: Shawn Ryken

Shawn Ryken has started 1 posts and replied 5 times.

Post: Wholesaling - 5 questions! Please Read

Post: Wholesaling - 5 questions! Please Read

Post: Wholesaling - 5 questions! Please Read

Post: Wholesaling - 5 questions! Please Read

Post: Wholesaling - 5 questions! Please Read