What Did I Do Wrong
I have a question for all the wholesale professional.
How many of you let your sellers know that you have no intention on closing on the deal and that you are going to assign the contract to another investor.
Im asking because I tried this approach. I told a seller that needed to sell their house in the next three weeks that I would not be closing on the deal but that I worked with other investors that would be able to offer all cash and close quickly. The seller asked what did i get out of it. I said a referral fee. The seller was very uncomfortable with me not being the end buyer and decided not to sign the purchase contract.
What I want to know is what I did wrong. Was I suppose to not tell the seller I wasnt going to be the one buying the property'? If so how do you keep the seller from knowing without doing a double closing. I prefer the seller to close directly with my buyer. I know I ask a lot of questions here but I really need help. I'm struggling to get started and I beginning to lose hope.
As long as your contract is assignable you don't have to mention anything to the seller, when you have a signed purchase contract you have a say in what happens to that property during the term of the contract, just give yourself enough time to find another investor or an end buyer, I usually put in my contracts that closing will be in 30-60 days if I'm planning on flipping the property.
NYD:
Just my opinion, but I feel you did the right thing and this deal just wasn't right; there are plenty more deals, so I would move on.
It doesn't seem right If you have to hide things from the seller to make a deal happen.
You're only as good as your reputation:
what happens when you go to close without telling the seller, the seller sees what's going on and decides not to close 'cause he doesn't like what he sees.
Now you, your buyer AND him are all in a bad situation. If he stays in town, you sure can't count on him as a recommendation. Also, the investor you brought in got stiffed and won't be happy with you either--and if he's tied into the investor community, you may have a tougher row to hoe.
You can certainly conduct your business in any way you see fit; my advice is to be upfront with everyone in the deal. It's easier to remember the truth than a string of lies...
Andy
Presentation is the key. Don't tell them you may assign the contract apologetically, spin it positively. When I buy a place--usually on terms--I tell the seller that due to my connections and the financing options I offer, I may be able to find a buyer soon. This could possibly be even before we close OUR deal--in which case I may be able to cash him out completely right away. I don't promise it, but suggest it. If anything, that adds to the seller's excitement. Most sellers don't much care who lives in their house as long as they get what they want out of the deal.
Thank you for the advice. I completely agree with arytkatz. My word and reputation is the only thing I have. I think it is extremely important to conduct myself in a professional and honest way and I will continue to do it. Also thank you loon for your tip on how to speak to my sellers I think it is a great idea and I will certainly try it.
keoki thank you for your imput but to be honest your tactics are a little underhanded and will eventually get you into a bad situation, probably the situation arytkatz outlined.
I don't think you understand what it is I was saying, if your contract is assignable, it is nobody's business but your own on how and who closes on the contract and for how much, as long as you or the person you assign your rights to, performs to the specifications of the contract. If I sign a contract with someone and we both agree to the terms and price of the contract, then the next step for the seller is to sign the paperwork at the settlement attorney's office and receive their funds from the transaction, whether those funds come from me directly or from a third person it doesn't matter, if your afraid that the seller will see how much you make off of flipping the contract to another investor and then deciding that he/she won't sign the paperwork, don't be. Nobody wants to be sued for "specific performance", and once they get to the table and their money is sitting there, they aren't going to quibble over what you did as a smart businessman, they know that you are an investor and that you are in business to make money, you aren't doing anything illegal, and if your embarrassed about how much money you would be making off of someone else's property than maybe you shouldn't be in this business.
Your offer could state your name/company and/or my assigns. Either you decide to buy it or wholesale it to another investor. As long as you are solving their problem and they are getting an amount they are comfortable with in a timeframe you agree upon I don't think you need to go into detail.
keoki I agree with you from a legal standpoint. I know It would be within my legal rights under the contract to assign to another buyer. However, I am not just trying to make a quick buck I am interested in establishing a business and part of that is to create a reputation of behaving in a honest way. More importantly than the seller is the buyer if the seller decides to back out at the last minute because he was not told about the other buyer then I am left with a deal gone bad and the buyer thinking I'm unprofessional and can't close deals. I'm probably over analyzing the situation but I will continue to try and see where that leaves me. I just perfer to have all parties involve know whats what. It makes the process a lot easier. Just my opinion
This all seems to be a matter of individual perspective to me. If you are not comfortable doing a deal the way keoki suggests, which I find to be legitimate, just don't do them that way. Keoki is correct - the deals he/she makes with others are not the business of the seller. I have been to a closing (as a buyer) where the seller did not appear. I was told by the real estate attorney that the seller had an appointment to close the deal later in the day. That's okay with me, as long as the deal closes.
I know of at least one real estate "guru" who says it is, at the very least, immoral to sell a rent-to-buy because only about 25% of renters ever actually make the deal work. He says that is an unethical way of doing business. I disagree. I think that if the person with the option screens his buyers well enough the deal will go through a year from now (or whenever.) It's just what you are comfortable with. And I agree with you that your name needs to be protected. I'm sure keoki thinks the same thing.
keoki's cool, NY developer. No post is ever complete.
Try this with your buyers: "I have it under contract" or "I control the property." For the still inquisitive, you can say, "There are many ways to own the rights to a building, a contract, or a mortgage. I assure you I have complete rights to sell, rent, or lease-option this property to you, as a title check will reveal as we progress. There is one mortgage, no additional liens (and add other valuable, not garbage fluff, info, such as a recent inspection if done, etc.) This is one of my favorite properties. Your good faith deposit will be placed in escrow, with instructions appoved by both of us, for your protection" (if you plan to use refundable deposits).
There's PLENTY of room for "sharp and honest" in this business. Hooray for you.
If some of you feel like an expert in your area of RE one day, and an amateurs the next, it's ok. I feel that way every 2-3 days. But I make enough money for a comfortable future, while being happy now. I just make sure to pyramid with protections and treating others extremely decently--a whole lot fewer legal problems due to *perceived* wrongdoing.
A truly good feeling accompanies an excellent reputation (one that is deserved). I hope this feeling stuff of mine may help you in some way, because you are on your way to such a feeling. But ya gotta make the deals.
If distressed sellers turns you down from confusion it really IS their loss. Some people are actually willing to lose rather than, in their mind, be conned by an expert and extensive talker with mediocre confidence...you know, just like the ginsu knife or juicer salepeople in certain department stores. They talk and talk and provide and disclose and make you laugh. Do we really need the deadly tomato knife gift (without a sheath to carry it home) for watching the presentation? No, I'm thinking I need my $20-40 more. "And how many sets would you like?" For real? "Half a dozen," I think facetiously, while walking away from emptying wallets.
Good luck, NYdeveloper!
Alan
P.S. Great responses, Bruce. Thanks for your insight.[ Edited by fearnsa on Date 06/20/2004 ]
I guess it is a matter of idividual perspective. I'm just questioning the morality of certain perspectives that posted today.
Bottom line. I put myself in a seller's shoes. I am about to lose my house, and here this investors comes and offers me an all cash offer to purchase my house for a certain price. I'm not foolish to think that the investor is not going to make a profit. However, this investor is representing to me that he or she will purchase my home and then I show up at closing or find out after the fact that the investor made a $10,000 fee for just signing a contract to buy my house. I probably would be angry. First because the investor misrepresnted his or her intentions. second because if I would have found a end investor that did not intend to wholesale my house I could have probably gotten the $10,000 the wholesale investor got.
I do believe that wholesaling properties is a good and legitmate way to generate cash but I think all persons involved in the transaction should know exactly what is intented to happen.
Also I don't think you can compare selling rent to own properties with wholesaling without letting the seller know upfront your intention. For one when a buyer enters into a rent to own contract he or she is aware of all the transactions involved and knows what is expected of them and what the consquences are if they are unable to perform. By not telling the seller of a wholesale deal you plan to assign your contract you are taking away from the seller the right to make his or her own choice as to whether the seller wants to allow you to wholesale the deal or find an end investor that will be able to close.
You are way over analyzing this, 99% of sellers don't care what you plan to do with the property, all they care about is the dollar amount that they are to receive, they want to get the best deal they can, at the point that they sign a contract they believe that they are getting the best deal they can get, if later they find out or think they could have done better, than oh well too bad, nobody is putting a gun to their head, if they are too lazy to talk to some knowledgable people or find out what exactly their property is worth, then that's on them. We are all in business to make money we are not here to hold hands and sing around the campfire. If your going around signing contracts with no means to close the deal if you can't find someone to flip the contract to then by all means your being dishonest even though you might not be breaking the law, but with every deal that I've ever flipped the contract to someone else before the closing date stated on the contract, I fully intended to purchase and rehab myself, but if someone offer's me cash to walk away, 90% of the time I'll walk and find another deal.
Hey,
It never fails to amaze me that so few people understand even the smallest part of salesmanship. Instead of spending your money on the next RE Guru book, go buy a good book on selling.
Here is how the conversation should have gone:
Seller: "What's in it for you?"
Buyer: "That's the best part of this deal! From your side...ABSOLUTELY NOTHING!!! That's right you do not pay any fee at all. Think about this...the average RE Agent is going to charge you 6% to sell your house, that's $6k, but you will pay me nothing. What I am going to my Deep Well of RE contacts and find someone to buy this house, for CASH in the next 10 days and any money I make comes from them."
Seller: "That makes sense....where do I sign?"
If only it were that easy. "Where do I sign?" I find it to be just plain good business to let the sellers know what you are doing, but as the earlier posts explained, present it as a positive. You have programs available to assist them in selling there home, that a lot of other people are not utilizing. Just go on to the next deal, and be more positive. Until next time......
hey,
In sales there is an expression "ABC"--Always Be Closing.
Selling is not a bad word, it just how you get from point A to point B.
Each person will develop their own brand of salesmanship, but, if they are successful, they will have created SOME method of selling.
I think it is a safe presumption that no matter what type of salesman you are, you will NOT be successful if you highlight all the negatives, or create negatives out of neutrals or positives.
When I started out in sales (I was a Stockbroker), we had to fill out an application for each client. On it there was a question about Net Worth, Annual Income and Cash Position. When I would get to this question, I would spend 5 mintues explaining how this information was required and it did not leave the office and the IRS did not get a copy, etc, etc, etc. A senior broker finally pulled my aside and asked me what the hell was wrong with me. Because I was going on and on and on about this question, I was creating a negative issue out of a neutral question. Just ask the question and get the order.
The bottom line was/is when asked a question that is a negative/neutral always respond with a positive.
"Where do I sign?"
I have found that if you try to deal with trully Motivated Sellers, they won't care that much, just as long as your solving their problem. On the few deals I've done, they actually hoped I'd make money. Actually, I met with a motivated seller today and her exact words were "I hope they (other investors) pay you well on this deal" She was just happy to have someone solve her problem. I understand every seller won't act that way, but sticking with the motivated ones makes it easier.
Hope my 2cents helped.
bruce and keoki are right, in my opinion. you don't make progress by spelling out too much of your business to clients. all that can happen is that you end up telling them too much and lose the sale. simple. it's not dishonest, it's just your business. i remember one deal i lost in particular for talking too much ... i answered all the lady's questions (she was about to sign over her condo the same day to leave the country) upfront and in detail. from the initial call i had it, she brought up signing over deed and PofA, so by the time i got there to see the place and sign paperwork - she asked, i answered, i lost out. she decided she needed to "sleep on it", to which i never heard from her again. and by this time, i'd dealt with plenty of folks, so i wasn't quite a 1st timer.
when your car's broke, and you take it to a mechanic and they lift the hood and pull one wire and your car runs great. you don't get mad at him for paying his rate, he fixed your car! he earned his money in knowing "what" to pull to get it running. your seller doesn't need to care what happens to thier home, the result is that they got the money and you helped them do it - at no cost to them.
good luck and don't be so uptight ... go get the money AND make some friends.
Some of the replies I got from this post really disturbs me.
I get the feeling that most of the investors that replied believe that just because it's legal that means you should do it. It's no wonder why investors are thought of as being shady. I personally intend to continue doing business without lying or by misrepresenting my intentions. If I can't make it as an investor by being honest perhaps it's not a profession I want to be apart.
Also to all of you who believe being honest isn't going to get you the sale. I just sign a contract yesterday with a couple who is about to lose their house at a foreclosure for delinquent taxes and they wanted to move back to their home state. They asked what I was going to do with the house and I was HONEST. I still got the contract. The couple in my first post just wasn't comfortable with the situaton or not motivated enough.
NYDeveloper
Thanks for answering my question.
As I was reading the post, I got the impression that somewhere in the back of your mind, you think that RE Investors are somehow crooks. Well, your last post confirmed my thoughts.
Remember, you have to be careful on the info you provide and how much. Sometimes you can get so way above someone's head you scare them away, making them feel uneasy. I'm not saying not to disclose, but only disclose what is necessary. Don't overwhelm them with info that they cannot comprehend. And yes, if they have a specific question, you answer it.
Even people in RE don't understand all the nuances of the industry. And do you expect the average homeowner in trouble to not only process what you tell them but have faith in a system they know nothing about?
Look at it this way...
If you're confident you'll sell it, why overwhelm them with unnecessary info.
But, if you're not confident, disclose, disclose, disclose. :-D [ Edited by mpldja on Date 06/18/2004 ]
nyd,
after this i'll stop. just a few points. the subject of your email is "what did i do wrong?". the first post you put out there was asking for the opinions of wholesale professionals. then when you got the answer over and over (you talked too much), you started to flame everyone for thier morals. just take the info or leave it, man. it's not that big of a deal. if you choose to not do biz that way, that's great, but you did get answers to your questions and advice on how to move on in future deals.
one quote you said may have been right on target .. something about if you can't do business a certain way, then maybe this career isn't for you. i'm not saying it's not for you (at all, i'd never say that), but to me, real estate must be in your blood for you to be good at it. if you even have a doubt in your head about if it's for you (especially based on the details of just one deal), then you could be onto something ...
i'm not being negative towards you either, i'm just hoping you found your answers within the responses you got and hoping you weren't questioning people's morals/ethics based on a response. good luck!