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Why You Should Get the Contract First

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Hi there – The Maestro (aka Andrew Massaro) here…

I speak primarily to my fellow wholesalers out there in the arena because that’s what I do. My entire business is a wholesaling machine – quick flip, quick turn wholesaling machine. I’ve already provided some super helpful info in my previous lessons here at Mogul and my awesome training call; you should check them out.

I love being a contributor here because I’m happy to pour into the community…

Having said that, the tip I’m going to give you today applies to almost any type of real estate investing – whether wholesaler, rehabber, landlording, or whatever. What I’m talking about has to do with your philosophy on making offers, and getting contracts on properties.

This applies no matter what your exit strategy is.

Here’s what I believe you should do: Get the Contract First!  Do this even before you go out to see the property.

Why? There are several reasons – three of which I’m going to show you right here in this lesson.

Reason #1

The first reason why you should get the contract first is because your competition is doing it.

If your seller has called you up because they read an ad on a bandit sign, chances are they called a bunch of other wholesalers as well. It could be that your competition is putting properties under contract while you’re out there dilly-dallying around spending hours viewing the property and making repair estimates even before you make an offer.

Guess what that means? The other investors are out there beating you to the punch.

So, if you want to beat your competition to what you’re both going for, then you’ve got to put that property under contract and tie it up right from the get-go.

Reason #2

Money favors motion. Okay, but what’s that mean?

It’s closely related to the term the velocity of money. This usually refers to the type of real estate transaction that you do. For instance, a wholesaling transaction is a very fast transaction. The money you invest, if any (we typically don’t put any money into a deal because we assign the contract), is very short term. Then we get it right out again. That is high-velocity money.

contractA rehabber has a lower velocity of money because the money will be in the property a lot longer. Personally, I prefer the high velocity because I can get my money back really fast, and I can get into the next deal. Even though it’s smaller chunks of cash, it’s always moving.

The saying that money favors motion also refers to this very lesson. If you go out there and you take action and you get the transaction in motion, then money favors that.

In other words, the investor who stalls, and thinks, and analyzes, and takes days to research, is not in motion. That’s not action, that’s preparation.

What gets things in motion? Getting the property under contract. It will serve as a money magnet.

Reason #3

Once you start the practice of always getting the contract first, you’ll get used to making quick decisions. Let’s face it – if you can’t make quick decisions, then you’re not going to cut it in this business.

The looky-loos, those who take forever to make a decision, rarely buy the properties. While they’re stalling, I’m buying properties right out from under their noses. Even if it means I have to renegotiate or back out of the deal – the downside is far outweighed by the upside of how fast I move, get deals underway quickly and get money in the bank quickly. 

Extra Tips

Now that you know three strong reasons why you should get the contract first, here are a few more tips on exactly how I do this:

  • You can do all your due diligence on the phone. Ask the seller probing questions that will help you determine the information that you need to know about the property.
  • Once you’ve taken that step, then use the internet to do almost all of your research. You can check out all the specs on the house, get an aerial view, pull comps, tax assessment value and the date and price of the last sale. All of that information is free on the web. Use it to your advantage.
  • Compute the ARV (After Repair Value), and compute the repairs based on what the seller has told you. From that information, and the other facts you’ve learned from your online research, make a cash offer. Get it under contract.
  • Fax/scan the contract over to the seller and get it signed. Whatever you have to do, get it signed. After that, make your appointment to go and see the property.
  • As mentioned, if you get there and find it needs a lot more in repairs than the seller first indicated, you can renegotiate or cancel the contract altogether. If that happens just shake the dust off and move on.

Once you begin to do business this way, you’ll be surprised at how many deals you can snag and turn around in a very short time span.

Follow this strategy and you’ll watch your business explode.

Holla at us

Was this helpful? Do you agree with me about getting the contract first? Let me hear from you in the comments section below.


Do It To It! Immediate Action Steps

1. Have a phone conversation with the seller – Ask probing questions and get as much initial information as possible.

2. Do your research online – Research the property on the internet.

3. Get the property under contract… first – Make a cash offer either by fax or scan. Then make an appointment to go see the house.

4. Renegotiate or cancel, if necessary – If, when you see the property, you feel that you’ve been misled, either renegotiate your purchase price (down) or cancel the contract altogether.

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