Need Help With Wholesale Flipping - Posted by Martin Buckley


#1

Posted by Jennifer (NE) on November 09, 1998 at 21:20:08:

Thanks Jackie! That makes a lot more sense to me now.


#2

Need Help With Wholesale Flipping - Posted by Martin Buckley

Posted by Martin Buckley on November 06, 1998 at 15:29:35:

I need to know what type(s) of contracts do I use when I
plan to flip a property to an investor? and how can I get
into deals like these without any of my own money? For any
help on this I will be greatfull!

Truly,
Martin Buckley


#3

Re: Need Help With Wholesale Flipping - Posted by Jackie in Dallas

Posted by Jackie in Dallas on November 07, 1998 at 12:03:35:

You can use a standard purchase agreement however you need to make sure there is a VERY IMPORTANT special provisions added to the contract that will allow you to get out of the contract if you don’t find a buyer.
It is what you call an escape clause.

You could use something like, “Contract subject to inspection and approval by buyer’s partner.”

If you can’t find a buyer for your contract (partner) than you have a way out of the deal - you just notify the seller (in writing) that your partner didn’t not approve the purchase of the house.

Or, you could use it as a negotiating point - and tell the seller your “partner” didn’t approve the purchase at the contracted price - then try to get the price
down.

I rarely put up more than $10 as earnest money - and when I assign the contract, it clearly states that I get the earnest money back in addition to the assignment fee.


#4

Re: Need Help With Wholesale Flipping - Posted by Jackie in Dallas

Posted by Jackie in Dallas on November 07, 1998 at 12:00:41:

You can use a standard purchase agreement however you need to make sure there is a VERY IMPORTANT special provisions added to the contract that will allow you to get out of the contract if you don’t find a buyer.
It is what you call an escape clause.

You could use something like, “Contract subject to inspection and approval by buyer’s partner.”

If you can’t find a buyer for your contract (partner) than you have a way out of the deal - you just notify the seller (in writing) that your partner didn’t not approve the purchase of the house.

Or, you could use it as a negotiating point - and tell the seller your “partner” didn’t approve the purchase at the contracted price - then try to get the price
down.


#5

Re: Need Help With Wholesale Flipping - Posted by SCook85

Posted by SCook85 on November 07, 1998 at 21:34:46:

Make sure that whatever contract you use does not have a Non-Assignability clause. I ran into that a couple of times and I was fortunate that the seller was motivated enough to agree to the assignment. They didn’t have to. I’ve been burned on a couple of flips. If it is at all possible get your assignment money up front. Then you make your money whether the deal happens or not.

SCook85


#6

Re: Need Help With Wholesale Flipping - Posted by WLM

Posted by WLM on November 10, 1998 at 10:56:09:

Careful here. Negotiating a contract under pretense that you need permission of your partner, implying you have a partner, but in reality not having one at the time of contract, could land you in hot water. You need to be mindful of the “good faith” bargaining expected by parties to a contract. Sharp attorneys can make you look a little foolish when you try explaining your clever tactics to a jury.

The other thing to keep in mind is the value of your reputation as a straight shooter- There is little to be gained by being a “sharp” angler…except a cold shoulder from the real estate market makers. You can be sharp and direct at the same time- no need or benefit in trying to be “clever” using clauses which imply good faith, but actually are little more than ruses to hide your true intentions.


#7

Re: Need Help With Wholesale Flipping - Posted by Jackie in Dallas

Posted by Jackie in Dallas on November 07, 1998 at 23:04:04:

Good Point! That’s why I hate using cookie cutter contracts from Realtors or an office supply store. They just don’t cover all the bases for us investors.

My contract has a clause written right into it that allows for assigning.

I also have a paragraph that says if the house is vacant, the seller will give me a key or the lock box code upon signing the contract - sure does make it easier to show the house as many times as I want to prospective “partners”

Always CYA!


#8

Re: Need Help With Wholesale Flipping - Posted by Jackie in Dallas

Posted by Jackie in Dallas on November 10, 1998 at 18:59:34:

Those that follow my posts on a regular basis know that I advocate finding the investors you will be flipping to (partners) BEFORE you ever go out looking for a house.

Therefore, you do indeed have several “partners”, it’s just a matter of which one you choose to flip to. The more “partners” you have on your list, the greater the chances that several of them will want the house and have the finances available to buy when the time is right.

An added benefit of having your investors lined up BEFORE you go out looking for houses is the peace of mind that they are there - no need to get a house under contract then go into PANIC mode because you don’t have a clue about who you will flip to.


#9

Assignment Fees? - Posted by Jennifer (NE)

Posted by Jennifer (NE) on November 09, 1998 at 18:27:00:

A Newbie question–When you say “When I assign the contract, it clearly states that I get the earnest money back in addition to the assignment fee.” Do you have to pay the owner an assignment fee to exercise your rights to assign? Do you, in turn, request an assignment fee from your buyer? Do we pay assignment fees so the seller doesn’t balk that we may turn around and sell his/her property for more money? Do you show the house to prospective buyers even while the seller is still occupying the house? Thanks for all your help.


#10

Re: Wholesale Flipping - Posted by Adam

Posted by Adam on November 08, 1998 at 14:14:35:

Hi Jackie,

Jackie, you mention Realtor contracts and lock boxes,

I was under the assumption that you didnt work with

realtors(rarely) or listed houses ?


#11

Re: Assignment Fees? - Posted by DRM

Posted by DRM on November 14, 1998 at 18:28:22:

Jennifer,
I recommend that you spend sometime reading a book called “Nothing Down in the 90’s” by Robert Allen. It will bring you up to speed. Assignment is nothing more than a sheet of paper that you can get from a title company. You set up a deal with a seller making the contract assignable. You find a buyer and assign the contract to him for more than what you have it under contract for and keep the difference. I made a lot of money doing just that last year.


#12

Re: Assignment Fees? - Posted by Jackie in Dallas

Posted by Jackie in Dallas on November 09, 1998 at 20:56:56:

You don’t pay the owner an assignment fee.

  1. Your contract is to purchase the house from the owner.

  2. Within the contract there is verbage that states you have the right to assign the contract if you so desire.

  3. When you find a buyer, you can do (a) assign the contract or (b) sell with a simultaneous closing, if

(a) your buyer will sign an agreement stating that you are assigning your contract to him/her for a fee(your profit), it also states that any earnest money you may have put up to secure the original contract will be returned at closing. - or

(b) you write a whole new contract to sell the property to YOUR buyer and you do two seperate closings so YOUR buyer doesn’t know how much profit you are making on the deal and your seller doesn’t know you are immediately re-selling the property. In this case you will have to forget about the earnest money being refunded - however, you just add it into the price you sell the property for.

As a general rule, if I think my seller will have a hissy fit if I assign the contract or if my profit is more than $3000 I sell with a simultaneous closing - no need for anyone to know how much I’m making. And you might have to worry about your buyer’s GREED glands kicking in.

If you have a good relationship with your closing agent and explain the situation, they will handle either transaction with utmost descretion!