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Questions about my first wholesale deal...

JanelleJ

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Hello veteran wholesalers,



I want to become good at wholesaling. I have just negotiated a good price on a residential lot (I have it under contract until July 19th) and now I want to wholesale the contract to another buyer. This is the first wholesale deal I have ever tried to do. I put an add on Kijiji with a price that has my contract fee built into it. The owners have a for sale sign on their property with their phone number. Here is my problem. When I got phone calls of interest on the lot, I gave the lot address and told the buyers that I had a contract to buy the property and that I could pass on the deal to interested parties. Was this a foolish mistake? I am now thinking that when the buyer goes to see the property and see the For Sale sign, they can easily contact the owners themselves and ask when my offer expires. They already know that the owners will accept a little less than the price I had advertised on kijiji. Even if the owners didn't have their phone number on the lot, anyone can find out who the owner is by paying a small fee at Alberta Registries and then buy the property directly from them after having found out from me how low the owners are willing to go. Do you have any suggestions and or advice that would help me to prevent this from happening in this deal and in any future deals I may do?



I don't necessarily want to buy the lot, but I don't want to keep finding and negotiating deals that get bought out from under me. When doing these deals what information should you give to the owners of the property and what information should you give to prospective buyers? Please help me. I appreciate any advice and or information you are able to offer.



Sincerely,

Janelle
 

Aaron Moore

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Most sellers don't have their phone numbers on the front lawn. Not many people will bother to find out the owner name and address from the registry office... and then they may or may not find their phone number.

The main question is are you offering a great deal that people want to buy? Or is it just a moderately good deal? If you bring people great deals then they'll appreciate that it's a lot easier to get deals from you than to find them on MLS. You should be able to find someone who wants to secure the deal before your conditions expire on July 19th... otherwise the price may go up if you've attracted a bunch of potential buyers to the property and now people are bidding the price up.

Some wholesaler use Non-Circumvent, Non-Compete agreements before they give the address details. But I don't bother with that.

It is good that you're only giving the address to people who contact you. I usually have potential buyers ask me for information twice, so it reduces the number of people I give the address to. The first info package I send them has details about the deal (comps, pictures, etc), but I don't include the address (if they play detective they may be able to figure it out). If a buyer is interested based on the details, then I'll give them the address. This just reduces the number of people with the address.

Many times when I've assigned a property, the seller is in the house when I let investors view it. It's never been a problem for me. Just focus on the fact that your deal is a great deal for investors... and I trust it is.
 

Thomas Beyer

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you buy it, then you resell it.



Wholesale is not a great strategy. It works mainly on TV and in free seminars, but not in the real world. It works only if you have ample cash, can close very quickly without a mortgage, know the sub-market very well, and have a large database of willing buyers which takes years to build.
 

RedlineBrett

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[quote user=ThomasBeyer] you buy it, then you resell it.



Wholesale is not a great strategy. It works mainly on TV and in free seminars, but not in the real world. It works only if you have ample cash, can close very quickly without a mortgage, know the sub-market very well, and have a large database of willing buyers which takes years to build.





Great advice here!
 

JanelleJ

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Thank you Aaron. I really appreciate your response. Here is my situation so far. I have a couple of people who are interested. However, the buyer with the most potential is interested in the lot because his parents live next to it and don't really want anyone to develop it. The conditions are up on Friday 19th July. What is the next step? If this guy makes an offer, does he make an offer to purchase where I am the seller and he is the purchaser? After I receive his offer in writing, do I then go and fill out a contract amendment form to amend the original contract with his name as purchaser instead of mine? What do you do? I was thinking that I want him to put in an offer in writing at the same time I invite offers from the other interested parties because it creates a little healthy competition, no? Do I tell the interested buyers to put my name at the top of their offers as the seller? Please let me know. Thank you so much. If anyone else can share with me what they do, I would greatly appreciate it. Thank you all. Janelle.
 

JanelleJ

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Thank you Thomas for your insight. I hear from various people that it is a great strategy and that some investors are actually doing it with success. I will let you know if I have any success with this deal. I guess I am thinking that there is no harm in trying. As long as I remain ethical and legal, right?

Cheers,

Janelle.
 

Aaron Moore

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What is the next step?

>> You need to know what they'll pay and if they can close on the date you negotiated. Then get him to sign the paperwork for the "Assignment of Contract".



If this guy makes an offer, does he make an offer to purchase where I am the seller and he is the purchaser?

>> He takes over your existing contract. He can sign an Assignment of Contract that specifies your assignment fee. If he's putting an institutional mortgage on it, then I would sign an amendment that changes the buyer's name from yours to his... you'll need to get the seller to sign this amendment.



After I receive his offer in writing, do I then go and fill out a contract amendment form to amend the original contract with his name as purchaser instead of mine?

>> Once he is ready to firm up the purchase and commit, then you'll often do an amendment to change the purchaser name. (He'll need the amendment for a bank mortgage.)



What do you do? I was thinking that I want him to put in an offer in writing at the same time I invite offers from the other interested parties because it creates a little healthy competition, no?

>> I'd go with whoever will pay your price and can make decisions quickly. It's much easier to assign to an experienced investor than a first time buyer. They need to be serious (i.e. pay you a deposit on your assignment fee). Ask them to tell you what they'll pay for it, then have them sign the Assignment of contract that specifies the assignment fee, then you sign the assignment agreement once they put up some money. i.e. they sign and pay you, then you sign it over.



Do I tell the interested buyers to put my name at the top of their offers as the seller?

>> No. I use the Assignment of Contract paperwork as described above.



PS. If you feel you're running out of time on conditions and you're confident you have a buyer to assign it to, then ask the seller to extend conditions a few more days.
 

Thomas Beyer

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You can assign a contract to another person, but you are still ultimately responsible for closing the deal if your buyer decides to not honor the contract with you. The seller does not have to close directly with the new buyer, he can make life difficult for you in this skip-transfer closing.
 
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