Wholesaling properties - Posted by john M

import · August 26, 2011, 9:40pm

Posted by Frank Chin on September 03, 2011 at 09:00:33:

Nike:

Yes, the guy asked as simple question. And the answer is someone has the be extremely careful buying at way below market with the reasons why.

Something wrong with that??

I know people on a creative real estate board go nuts if anyone makes any mention UNSAVORY acitivities, because of the “see no evil mentality” of some investors.

I don’t see you contributing any of your great ideas on this thread except making useless unhelpful remarks.

Yes, I am consistent.

import · August 26, 2011, 9:40pm

Wholesaling properties - Posted by john M

Posted by john M on August 26, 2011 at 21:40:04:

What is it and how is it done? Trying to learn some more about what people are
doing in this arena.

import · September 23, 2011, 10:55am

Re: Wholesaling properties - Posted by John Legend

Posted by John Legend on September 23, 2011 at 10:55:38:

You can find thousands of buyers for your deals at Leadtackle.com its free, good luck

import · August 27, 2011, 9:09am

Re: Wholesaling properties - Posted by Frank Chin

Posted by Frank Chin on August 27, 2011 at 09:09:47:

John:

When you go out to buy properties WAY BELOW market, perhaps as much as 50% below, then you are wholesaling. The idea is you can then DO ABSOLUTELY nothing but sell ths vary underpriced house to someone else just looking for a REGULAR UNDERPRICED house to sell or rehab.

This often means you have to have super salesmanship or luck. However, some states have looked upon such “super salesmanship” as cons, and have prosecuted the perpetrators for fraud. Google on the name “Joe Kaiser” who is a practitioner, and read all about Washington state AG going after him. Joe himslef posted here above his troubles, so you can even do a search under his name.

In my state, NY, they passed a law called the “Home Equity Theft prevention act” that pretty much outlawed many practices used in wholesaling. You’ll have to pay at least 85% or market value, which you’ll have to clearly determine, and the seller can claim he’s been screwed later and sue you under the act. See:

http://www.banking.state.ny.us/hetpyrul.pdf

So I hope you learn enough here that wholesaling can get a newbie into whole world of trouble.

import · August 27, 2011, 8:49am

Re: Wholesaling properties - Posted by Diane

Posted by Diane on August 27, 2011 at 08:49:24:

Wholesaling is when you buy a property from a highly motivated seller at a substantial discount to value, ie, wholesale price. Not an easy task to convince a homeowner to drop their price 50%, especially for the new investor with limited or no negotiating skills.
If you are just starting out you are better off with lease options, in my opinion.

import · September 1, 2011, 11:16am

Re: Wholesaling properties - Posted by Rsims

Posted by Rsims on September 01, 2011 at 11:16:44:

To imply that the Wa. State Attorney General’s action against Joe Kaiser was about wholesaling is way off the mark.The counties here pressured the AG to go after Joe because he was helping homeowners avoid tax foreclosures in exchange for a minority stake (percentage of ownership) in the home. So Joe writes a big check to the county to pay the back taxes,the homeowner gets to stay in the home vs. being forced to move, and Joe gets maybe 20% ownership in the property…the percentage varied. The homeowner would agree to cash Joe out of his ownership percentage years into the future.Often this didn’t happen but Joe never foreclosed on anyone. The counties were ticked because when they foreclose there are often monies left over after all liens were paid off…moneis that should have rightfully gone to the homeowner. But guess hard hard many of these counties tried to notify the homeowners of the excess monies? They’d just sit on the funds for the time required by law until they escheated into thier own coffers.

In short tax foreclosures are huge money makers for the counties and God forbid you try to help the hapless homeowner avoid the inevitable in exchange for a minority ownership. Joe got in the way of a nice little racket the counties had going on and he paid the price.

import · August 29, 2011, 11:40pm

Re: Wholesaling properties - Posted by BenT

Posted by BenT on August 29, 2011 at 23:40:34:

Frank:

Just thought I’d point out to you that this NY law applies only to houses in foreclosure. Foreclosure is definitely not the only area that produces wholesale opportunities.

For instance, I’ve bought many houses that were well below final fixed up value, but they were in poor condition. My bid reflected the cost of fix up and a profit for taking the risk and fixing up. My bid also reflected the fact that it was all cash, and that I was willing to close quickly.

I simply point out that there is no law against buying low in my state, and it sounds like there is no law against that in NY either. There are laws concerning foreclosures, and for that reason, these properties really don’t present much of an opportunity.

I might add that there would be no law against a buyer making a low offer to your father, either back then, or now, as long as he is not in foreclosure, at least in my state, and from my reading of the link you provided, the in NY as well.

The truth of it is that these days there is little equity in most foreclosure situations…so as usual, the law addresses a problem that is not currently a problem.

Ben

import · August 28, 2011, 8:12am

: Wholesaling properties - Posted by Nike

Posted by Nike on August 28, 2011 at 08:12:12:

C’mon Francine-- get off of your Joe Kaiser hobby-horse. You don’t know what you’re talking about. Wholesaling is buying properties that have a market value well below the after-rehab-value. If you invest in lower income areas the spreads are greater because there are fewer buyers for properties that need repair.

import · August 27, 2011, 3:53pm

Re: Wholesaling properties - Posted by IB (NJ)

Posted by IB (NJ) on August 27, 2011 at 15:53:42:

From my reading of what you posted Frank, most of this applies to ‘buyback’ or ‘leaseback’ agreements. Certainly the ‘82%’ rule does. The Investor should even be able to wholesale after the cancellation agreement has expired. But I’d have to read the actual statute to be sure. Just going off of what you posted.

import · August 27, 2011, 1:30pm

NY blows. I’m glad I left - Posted by HankFL

Posted by HankFL on August 27, 2011 at 13:30:21:

I read that pdf and my thoughts can’t be transcribed here w/out using profanity.

import · August 28, 2011, 6:08pm

Re: Wholesaling properties - Posted by Karl

Posted by Karl on August 28, 2011 at 18:08:12:

Hi Diane…Lease options sound like a good way to start. I have some questions about the lease options.

How do you get the homeowner to agree to do a lease option with you?

What do you tell them when they want to see your credit report?

How do you approach the homeowner with a sandwich lease versus a lease option assignment?

Thanks!

import · August 27, 2011, 10:07am

Re: Wholesaling properties - Posted by john M

Posted by john M on August 27, 2011 at 10:07:09:

My understanding is that banks are looking to unload properties, and
they are doing so in Bulk to investors at a discount. Instead of doing one
here and one there the bank is trying to clean up their books quicker by
offering several at one time.

import · August 31, 2011, 9:28am

Wholesaling not illegal in NY - Posted by DJ-nyc

Posted by DJ-nyc on August 31, 2011 at 09:28:34:

We wholesale houses with no mortgages on them, ie: Estate deals. Thanks, Ben.

DJ-nyc

import · August 30, 2011, 6:40am

Re: Wholesaling properties - Posted by Frank Chin

Posted by Frank Chin on August 30, 2011 at 06:40:33:

Ben:

I agree with what you are saying.

First, the law is against “I’m going to save your home from foreclosure” investors. Year’s ago, it’s “let me buy your home before the minorities move in” investors.

In each case, the state had acted to stop these methods. I am pointing this out to the OP looking for wholesaling opportunities, and if you don’t know about the laws governing the purchase of properties, you are in a world of hurt.

Unfortunately, many wholesale investors often approach the elderly such as my dad, and you are right that there is no law against offering 50% of FMV, for a home where there is nothing wrong. And legally there is nothing legally wrong with lying about the FMV of the home to the elderly, or change the subject if it ever comes up either. I took a course in real estate investing some time back where the investor looks through the public records, find free and clear properties, and then make sure the owner is an elderly person. He would then make a 50% low ball offer, and if the person says no, he moves on. But sooner or later, someone would fall for it.

If you say there is nothing wrong with this type of investing, yes, there is nothing legally wrong. But morally, I would not engage in this type of investing. It is a grey area. Apparently, many state AG’s crack down on this grey area as well, as apparently, Washington state did.

And if you are saying there is no equity in foreclosure situations, the law cracks down on “investor rescuers” where the elderly may have run into trouble falling behind on home improvement loans, usually a small fraction of the worth of the home, or fell behind on taxes, for instance, for some debt for around $10,000. The rescuer would come in and say “why don’t I pay you $50,000 for your home, deed it over to me, and I’ll take care of your problem.” The problem here is the elderly may not have the means to go get a $10,000 loan even with a $100,000 equity, as they may not qualify for the loan.

Then, technically, if the house is allowed to go to forecloure, and sold, then normally the overage goes to the owner. Guess what?? The home is already deeded to the investor rescuer.

But, for every one person that tries to do a wholesale deal legitimately, there’ll be another one that’ll take an opportunity like this, and turn it into a scam.

For those that argue that the state took all this trouble to pass a law for an non-existent problem, GOOD, then there should be no complaints. And if you are saying there is yet NO LAW against investors scamming the elderly, then I’d say something should be done about it.

Just to add a story I read in the Chinese newspaper a few months ago. I studied that language as a young boy, and I read it weekly to keep up.

The story reports on an elderly women who was evicted from her home, and wound up at a shelter. The story got into the paper because her home health aide was arrested for fraud, as well as her boyfriend.

Apparently this elderly women had no children or any known living relatives. During the foreclosure of her home and eviction, the case caught the attention of someone at Legal Aide.

Checking into it, turned out this elderly women owned a shopping center and her home free and clear only a few years back. Her annual income ran half a million to a million from the rent. Apparently, the health aide learned of all this, and convinced the old women to deed the real estate to her and her boyfriend for a “low ball” price, and she’ll take care of her for free for life, as a daughter would.

Long story short, the health aid never kept up her side of the bargain, and obvioulsy the elderly women soon ran out of money, to pay for her care.

Anyway, the story ended that the attorney for the health aide and her boyfriend claiming that there is NO LAW against making LOW BALL offers. They claim the old women was of sound mind. And NO, they never told the old lady they’ll take care of her. “Well sorry, she heard it all wrong”.

So when you mentioned about no law against the investor making a low ball offer to my dad, it reminded me of this. But is this right???

import · August 28, 2011, 9:19am

Re: : Wholesaling properties - Posted by Frank Chin

Posted by Frank Chin on August 28, 2011 at 09:19:12:

Nike:

We’re talking about sharp real estate investors talking in many cases to the elderly, infirmed, ignorant, or the distressed. My dad bought his commercial property for $25K in 1963. By 1985, it had a market value of close to $350,000, and when an investor came by to give him an unsolicited offer of $150,000, he thought he hit the jackpot. It was only after I told him it’s worth twice that, he didn’t believe me, and he should first check with a realtor what the market is.

I went to school with a neighbors’ son who became a realtor, whom he checked with, before he realized he almost been had. And he was not the only one in the neighbohood getting these unsolicited offers, to sell that way low. It is normally the elderly that the pitches are made to. Some 20 to 30 years ago, the scare tactic of the day was minorities moving in, and this practice of “block busting” had since been outlawed. Now it’s saving your home, and the wholesaler is the only savior. However, back then, protesters on block busting were ranting about the “hobby horses” of its day.

Often, a the price quoted is well below market because a buyer investor said so, not what the market is. The elderly people who bought houses in another era never checked. Oh, the investor would tell you my dad made a profit if he sold, so he shouldn’t cry. Its’ attitudes like these, there’s nothing wrong with this chicancery, “you don’t know what you are talking about” that enrages people.

And there were some old threads here where I debated Joe, and disagreed with his methods. So I rode the Joe Kiaser horse straight to him. Not even Joe said I didn’t know what I am talking about.

None the less, the state of NY had heard enough, believe the numerous complaints, and passed a law.

import · August 27, 2011, 5:57pm

Re: Wholesaling properties - Posted by Frank Chin

Posted by Frank Chin on August 27, 2011 at 17:57:50:

IB:

As I understand it, the reconveyance and leaseback is IN ADDITION. This article goes more into it:

One element of most wholesaling scams is the buyer convinces the seller to sell to him at way below market with the promise that he’ll bring everything current. And then I will re-convey the home back to you.

Unfortunately, in most of these scams, the promise is never kept, the wholesaler scammer would have the house sold to him way below market, then immediately flips it over to a rehabber. Further according to the article:

>>>>>

Either (i) title to the property must eventually be reconveyed to the equity seller; or (ii) the equity purchaser must have paid seller at least 82% of the fair market value of the property within 120 days of the eviction or voluntary relinquishment by the equity seller.

>>>>>

If it is a deal without a reconveyance agreement, which is what you probably do if you plan to wholesale and quickly flip, then you’ll have to pay at least 82% of FMV. But if you pay 82%, is it a wholesale deal??

When I was following the discussions on this back when the law passed, the real problem is even if you agreed to pay 82% of FMV, the seller would have plenty of time to come back and claim the FMV the buyer came up with is bogus, so you get into trouble o matter what you do.

import · August 28, 2011, 11:07am

Re: Wholesaling properties - Posted by Jeanne

Posted by Jeanne on August 28, 2011 at 11:07:50:

John,

Be wary of advice given by someone who uses a fake email address.

Just thought I’d post a link to this page dedicated to Flipping aka Wholesaling Houses:

http://www.creonline.com/flipping-real-estate.html

You can get a lot of information in general here:

http://www.creonline.com/articles/

–Jeanne

import · August 28, 2011, 9:03am

Re: Wholesaling properties - Posted by Diane

Posted by Diane on August 28, 2011 at 09:03:44:

Not nearly as easy as you are being led to believe. The banks are NOT giving away properties, first of all. They’re a business not a charity.
Second, attempting to get through the maze of pencil-pushers at most banks is a daunting task for even a seasoned investor. For the newcomer it’s all but impossible.
Finally, when dealing with banks they want cash. If you’ve got it in large supply you might stand a chance. If not, look elsewhere and set your sights on more realistic opportunities.
My two cents. Whatever you decide, good luck!

import · September 3, 2011, 8:15am

properties - Posted by Nike

Posted by Nike on September 03, 2011 at 08:15:25:

The guy asked a simple question. You have conflated the issue to include all sorts of unsavory activity. You’re a bore, but at least you are consistent.

import · September 5, 2011, 2:35pm

Re: properties - Posted by Edwin

Posted by Edwin on September 05, 2011 at 14:35:39:

Geez, you think Frank is a bore?? Frank is a great guy! He has a lot of smarts and experience. I have learned a lot from whatever Frank has posted.