Lets get right down to it -
If you're wholesaling in this 2013 market - you best be a badass !
Low rates and - despite the hype, there's lots of inventory out there.
Granted - markets are improving.
So many foreclosures and short sales, over the last 5 years, have taken their toll.
YES !! Things will improve and are, already, heading in the right direction.
BUT - it still aint right out there - at least as far as "wholesaling" is concerned.
Rates are at, or near, historical lows AND so many people are happy to be able to, actually, sell their homes !
That said - many sellers are getting multiple offers/up-bids on their properties.
Wholesaling, traditionally, works in ANY market - but this market is a hybrid.
There's so many factors that have, previously, made it difficult to sell, even, cut-throat inventory (REO/Short sales) that would be considered "NO BRAINERS " !!
That has changed - for now.
I have, successfully, wholesaled - but market changes have presented numerous challenges to a successful wholesale flip !
For this, current, 2013 market - I recommend you use short term/transactional funding.
DO NOT use ANY transactional funding that is in excess of 1.75% - or you're an idiot that needs to have your ass beaten down !!
Secure the property, 1st, then sell.
Look at the basics of wholesaling.
Everyone knows you have a contract on the property you're wholesaling.
Your "Buyers" know you have to flip that paper too - and some are smart enough to know they can wait your sorry ass OUT !!
Informed buyers know that your contract has an expiration date.
So, the best a wholesaler can hope for, in this - current - market, is to get a 1st time buyer and/or someone who wants the property bad enough, that they're willing to accept your assignment of contract.
While some may opt to wait you out, some might realize that someone else might accept your terms, or - even - go directly to the seller and edge you out of the deal.
Yes - edge your sad and broken ass out of the deal, and it happens all the time in markets like NOW.
If I'm discouraging you from wholesaling, it's cool - because - IF you're a badass, you're doing your homework and ONLY you will know if wholesaling, in THIS market, will work for you.
Whatever your direction - MUCH success to you !!
I made $53,849 on one house in July 2005 for 3 hours of my time. It's a real estate investment property that I found through an advertisement, then called the seller, signed the contract, and sold within 20 minutes of taking possession. I did absolutely nothing to this home and only visited it twice (when I bought it and when I sold it).
If you've never heard of the term "wholesaling," let me explain. It's when you buy a home well below market value and quickly resell it, still below market value.
The advantages of this over other types of real estate investing are that it:
Step 1: Make your offer Whether you pursue FSBOs (for sale by owner) or properties listed on the MLS (Multiple Listing Service), you're never going to be able to flip a property unless you first make an offer.
In making your offer, you need to keep your customer, the rehabber, in mind. Your offer should be based upon a conservative estimate of the market value of the property after repairs minus:
Max Offer = ARV - 30% (or $25,000) - repairs - $5,000
Step 2: Offer is accepted, sign the contract to buy Once your offer is accepted, you will meet with the seller (if it's a FSBO) or your real estate agent to sign the contract and give them an earnest money deposit.
Step 3: Start the title work After signing the contract, contact your settlement attorney (title company, escrow company, etc.) to start the title work on the property. They will order a title search and schedule a settlement date.
There are two reasons to start the title work ASAP.
Fixer Upper*123 Main St., $80K comps,
only $40K (xxx) xxx-xxxx
Step 5: Come to agreement with prospective buyer At some point, someone will show interest in your property. Whether you have one potential buyer or multiple potential buyers will depend upon the deal. Each one is different. The more buyers you have, the less flexible you need to be in reaching a final sales price.
Step 6: Qualify the prospective buyer Make sure the prospective buyer either has the cash or a line of credit (ask for proof of funds if they say they do) or will be able to borrow the money from a private (hard money) lender to purchase your property.
Step 7: Sign contract with buyer & collect a deposit After verifying your buyer's source of funds, meet with him, execute a sales contract or an assignment agreement, and collect a deposit. The sales contract serves as the receipt for his deposit.
Be sure you either handwrite or include typewritten verbiage somewhere on your contract a statement such as the following:
"Received $(insert dollar amount) as an
earnest money deposit on (insert date)"
...and initial it once you receive their deposit. You might also include their check number or write "CASH" if they give you cash.
Step 8: Submit documents to the title company Submit both items: the executed contract with the original seller and the executed sales contract/assignment agreement with your buyer to your attorney (title company, escrow company, closing agent, etc.) and schedule a settlement date.
Step 9: Go to settlement Go to settlement, pick up your check, and celebrate!
An additional tip based on real life experience When I first started, I believed everyone who signed a contract to buy a home from me. I believed everything they told me and took their word. Often, I got burned. It didn't take too many slaps in the face before I realized that I needed to take control of the entire process.
At that point, I decided to control every deal by lining up contractors, lining up the lenders, starting the title work myself through my attorney, and mandating that my buyers use my attorney.
Before taking control, I estimate that about 25% of my deals didn't settle with my first buyer. Since taking control, that percentage has been reduced to about 5%.
I can't emphasize, enough, about the importance in knowing the property values in the areas where you choose to conduct your real estate investing business.
Too many times, when I first started out, I'd get a house under - what I thought was, an amazing contract price.
I'd be, totally, stoked about my ability to negotiate a great buy AND the "fact" that I was about to make my $$ !
All I had to do was market and I'd find my buyer, right ?
Wrong - because I'd be marketing a price that wasn't the amazing price I thought it was.....and all my hopes and dreams, along with the "fact" that I was going to get paid - got trashed.
Why ? Because I didn't take the time to educate myself on the current market prices.
Marketing is ALWAYS key - but price is king and keeping pace with this 2011 market is critical.
More factors affect property values, than ever before - like: Unemployment, job loss, pay cuts, ARMs, property DE-valuation, stress and other crap.
It all contributes to an unstable real estate market that is changing, sometimes, weekly.
You'll spend LOTS of time to find, research, walk-through, negotiate and flip - a property.
NOT knowing your values will make it ALL a waste of your time, energy and sanity.
Know your markets based on the previous 2 months values -
Anything over the previous, 3, months values is garbage - in MY opinion.
You also want comps that are REAL close to your subject property - no more than a mile away, if possible.
Also - while it's great to have real comps - like similar square feet, bedrooms, baths, etc - knowing all the sales, overall, as well as how many properties - in the area, are still for sale, how long they've been on the market, what their original list price was, what the current list price is, how many are short sales, REOs, "traditional" and everything else, will also serve you well.
By identifying AND using all your, local, available resources, including your area MLS (Multiple Listing Service), you'll have as best a window, to current values, as possible - will which will make all that time spent, "worth" while.
Remember, there's nothing worse than locking that house up, under assignable contract, only to realize that you can't find a buyer to assign it to.
Don't be "THAT" guy - or gal.
Wholesaling is really working out for our business AND the Buyers who are getting to know us.
Initially, even though EVERYBODY makes wholesaling sound easy.....it can be a tough go -
You'll need specific skills to make wholesaling a viable business:
* Market knowledge - know the market(s), well, in the areas you want to wholesale.
There's nothing worse than negotiating a "GREAT DEAL", only to find nobody else sees your deal as great
* Access to County Resources/Public Records - Nowadays, most everything is online and available, 24/7. Locate your state/county online resources and bookmark them, because you'll need em !
* Access to the MLS/Real Estate Agent(s) - You'll need to see what is/was on the market w/in 1 mile of your target property, how long have they been on the market for, how many price reductions they've had, what SOLD w/in the last 60 days, what the sale price was, what was the original list price and how many TRUE COMPS there are, out of the SOLDS....and Actives.
Also, using a state approved real estate contract, which you'll get from a cooperating agent, legitimizes your offer(s)
* Escrow/LPOs, Title Companies and/or Attorneys - When your offer is accepted, you'll want to open a title search (To identify liens, assessments and/or judgements) and provide earnest $$ (If the seller requires you to put up some earnest funds) plus, your deal will be ready to close when you find your buyer to assign the offer/contract to
* Negotiation - Where the rubber meets the road. It's easy to write your offer, but you need to SELL your offer to the Seller
* A Personality - You'll be making some bold offers, some of which will, absolutely, piss off would-be sellers. You'll want to be able to walk away without burning any bridges, so to speak. Many times, your ability to diffuse an upset seller pays off months, or weeks later, when that seller calls you back to do the deal
* REIA Group - (Real Estate Investing Association) A great resource, especially if you're just starting out. Lots of like-minded investors are there and the resources you'll gain make the average of $150. a year, for membership, well worth the investment
* Bandit Signs - You'll want to put up a few signs in the immediate area in which your wholesale flip resides, with a catch phrase like "Handyman Fixer" and your phone #
* Online Advertising - Like craigslist, ebay classifieds, backpage and LOTS of other FREE advertising sites
* Local Publications - Most small towns and cities have local newspapers and the classified ads can be a great advertising resource to liquidate your flips
There's more to the list of elements you'll "need to succeed" in real estate wholesaling, but the above are the more critical elements -
You'll figure out the rest !
Contact us, here at New To You RE, LLC - if we can help you out further.
Check out our coaching at We Buy Houses Coach
Getting a homeowner to sell his home to a real estate investor can be a formidable task or it can be very simple if you learn some prospect qualifying techniques. The investor has to fulfill a specific need or provide a solution to a problem that a realtor can't supply by simply listing the home on the MLS and waiting for the property to be sold. One of the biggest needs that investors fulfill is a speedy purchase and a cash closing. However, most investors get frustrated by homeowners who can't seem to make their mind up quickly about selling, but there is a simple solution.
The ability of a homeowner to make a decision quickly is determined by whether he is motivated and needs to sell his home and, ideally, has some type of time limit imposed by an outside force. These outside forces include probate, pending death, foreclosure, divorce and a legal action to mention just a few. When investors are prospecting for homeowners selling their properties they should ask a series of questions about the sales features of the property and to determine if the homeowner is truly motivated to sell or is just price shopping.
Often the homeowner will say they want to sell "yesterday" but in the next breath, they are asking for an unreasonable price. Unreasonable for investors is any price where the investor cannot wholesale the property quickly with no market risk. The fact is that if the homeowner wants to sell at his price but doesn't need to sell, he isn't truly motivated.
What investors need are homeowners who have to sell their properties and better yet, by a specific date in the future. These homeowners are motivated; the others are mostly shopping and are not truly ready to accept a solution that is solely dependent on a sky-high price. One of the best ways to determine a seller's motivation is to simply ask the most powerful qualifying question, "Why are you selling?"
This single question is so important because the seller will usually tell you the truth to gain your empathy for his having to sell. You can then establish a timeline for him to move out and you now know you are working with someone who needs to sell their home, not just a shopper. Shoppers will eventually become motivated sellers but it can take time, sometimes even years. Persistence in following-up will often get the deals that seemed impossible when you first approached the seller.
Just because a seller says no once, twice or even three times or more doesn't mean he won't sell at a price where you can make a profit, it simply means he isn't ready just yet. Some of the largest deals we have had, with profits exceeding $100,000 on single family homes in the price range of less than $125,000 have come months and months after we originally made a proposal to the seller.
Besides screening the seller for his motivation level, persistence is going back to the seller time and time again and not taking a "no" for an answer. Pre-screening the sellers with the powerful qualifying question of, "Why are you selling?", is the key to saving you time and money and to making larger profits in real estate investing.
If you are going to jump into real estate investing, then you'll want to make sure that you avoid these common mistakes made by most property investors. I've seen some well intentioned investors give up completely when all they needed to do was follow these five simple suggestions.
Property Investor Mistake # 1 - Negotiating Over the Telephone
Why is it that so many property investors think that they can effectively negotiate the deal over the phone? Yes negotiating over the phone saves you time, but it also is extremely difficult.
You will ALWAYS be more effective in person as compared to negotiating via the phone. In person you'll have the non-verbal cues to watch for in their body language.
In person the other party can really get a sense that you are a good person and come to like you more. And in person you can more easily connect with the other party, something we'll talk more about in a moment.
How is it that property investors get TRICKED into negotiating over the phone? Sellers will say things like,
"Tell me about your program?" or "What will you give me for the property?"
Be WARY before you answer. If you are not careful, you will get yourself into the heart of the negotiation prematurely.
Instead, answer these questions cautiously. Say,
"Well Mr. Seller, to be frank I'm not sure if I do want to buy this property. With all that's going on in the world I'm not sure that now is even a good time to buy. May I ask you a few questions to see if this is even a house I would want to have you show me through the inside of?"
Notice how you have effectively turned things around on the other party.
Property Investor Mistake # 2 - Negotiating Money Before Motivation
The single most important key to closing the deal for property investors is to remember to never talk through any numbers or specifics of price and terms before you have spent time talking through the seller's motivation to sell the property. In order to get a great deal on a property you need the seller to feel motivated. We use the word feel intentionally. It's one thing if the seller intellectually knows he is motivated. It is quite another thing for him to feel it in his gut. One is an intellectual response, the other an emotional response. When you can help the seller cut through the layers of denial and get to the emotional core of why this property you are talking with them about buying is such a burden to them, then you will get a great buy.
The more time you spend letting the seller tell you all the reasons he or she has had trouble selling, the better deal you will get. Remember that the next time you are tempted to rush past this step. The amount of money you make in the deal as a property investor is directly proportional to the time you spent building the seller's motivation.
Property Investor Mistake # 3 - Talking In Technical Language Versus Descriptive Language
Can you imagine the seller's response if you were to say to them,
"Mr. Seller, what if we were to lease option your house with an option price of $150,000. We would give you $1 as option consideration, in addition to our commitment to the long term lease which will be additional option consideration. "
The term of the lease will be one year with five additional one year renewals to come up on a rolling basis every twelve months".
Have your eyes glazed over yet? Are you a little intimidated by the language? If you feel that way imagine how the seller will feel. Scared and confused.
And a scared and confused seller is NOT going to ask property investors the questions to clarify their understanding or to settle their anxiety. They are simply going to say one word...NO! So make sure you instead talk in descriptive language like,
"Mr. Seller, what if we were to make you a guaranteed monthly payment every month and then at some point down the road we were to cash you out of the property at the full $150,000 price we talked through a moment ago. Is that something we should talk about, or probably not?"
The funny thing is that what you said in the second example describes in functional terms what you said in technical jargon in the first example. Remember, sellers want to feel comfortable with whatever property investors offer them. You have got to explain things to them in language that is simple and tells them exactly what they get. Never use jargon or fancy language to cloud up the discussion. Using fancy language usually only results in bolstering an investor's fragile ego, but at the expense of his or her bank account.
Property Investor Mistake # 4 - Selling the Other Party On the Deal
One of the subtle negotiation applications of this take away approach is for you to become an expert at being a reluctant buyer.
The single biggest language pattern of the reluctant buyer is how they qualify everything they say with phrases:
"I don't know if I could do this, but what if"
"My partner might not like this, but what if I could get her to agree"
Also, when you get the other party to give their initial agreement on a specific idea or offer, fight the urge to rush in and SELL them on the benefits that accrue to them if only they move forward with the deal. Instead, get them to sell themselves! Property investors do this by asking them a question. For example, if they said they would be interested in a five year lease option ask them,
"What about me making you payments for up to five years and then cashing you out is such a fit for you?"
The result will be them telling you all their reasons for wanting to do the deal.
Property Investor Mistake # 5 - Negotiating On an Intellectual Level
Don't make the mistake that average property investors do of talking only in intellectual terms, work to get the conversation to touch the other party at an emotional level.
The single most important skill you have as an investor is your ability to connect emotionally with people. This is the skill that will help you get the seller to open up as to their real reasons for selling. This is the ability which will help you create trust and rapport with the seller. Master this skill and you'll never really be "negotiating a deal." Rather, you'll be talking over ways of coming up with a win-win solution with the seller.
So there you have the five most common mistakes that property investors make when negotiating deals, don't you dare make these common mistakes!
I was going to rant about statistics and current real estate trends, but decided that I'd be just another drop in a sea of BS.
I'm going to concentrate on the positive - because there's enough negative crap going around.
This market is amazing for us, here at New To You RE, LLC.
We've been concentrating, exclusively, on real estate wholesaling - since February, 2010 and our business has really been taking off.
Why did we step away from short sales ?
Too time consuming and our experience continued to produce less and less "solid" values in the deals we were getting approved.
As we always insisted on the foreclosing lender(s) releasing our Seller(s) from any/all future deficiencies - in other words, we required the foreclosing lender(s) to surrender their deficiency rights - we continued to see a decline in our "approved" offers.
Wholesaling is challenging, but VERY rewarding.
Challenging because we MUST ensure that we're contracting for a great value that we can pass on to our end buyer.
Challenging because we, generally, have a short timeline-from the time we contract to purchase-to get the property assigned to our end buyer.
Challenging because, if we overlook anything, we may get stuck with a property.
Rewarding because when it all comes together - BANG !!
Nothing like getting a nice, fat, check and knowing you passed a great value onto a buyer that you searched for and found.
If you're interested in seeing what real estate we have available - check them out here.
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