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Wholesaler Essentials: How to Assign a Real Estate Contract

Steph Davis | Investing Strategies > Wholesaling
" Hey Moguls, Steph Davis here… Today we’re going to go back to basics. Or, for some of you, this may be totally new. So for those of you who are newbies and can’t quite get your head around this stuff about assigning a contract – this is the lesson for you. Knowing how to assign a real estate contract is something you must understand in order to grow your business. Let’s Demystify You’d be surprised at how often I get this question from newbies. Which means those of us who’ve been around awhile shouldn’t take for granted that everyone knows how to do this. That’s why I’m taking this opportunity to demystify this process. And I’m going to do it in a simple and straightforward way. Basically… You first you put the sale under contract using a Purchase and Sale Agreement, then you assign that contract to the end buyer. This process eliminates the need for any double or simultaneous closing – there is only one simple transaction. An Easy Example Let’s say you have a deal worked out with your seller, and you’re going to buy the property for $50,000. Then you find an end buyer who has agreed to pay you $55,000 for the property. You put the property under contract with the seller for the $50K. Next, you assign that contract to your end buyer for $5K using the Assignment of Contract Agreement form. This is a simple, one-page document containing a couple of short paragraphs. It states that you are assigning all of your rights (the rights that are laid out in the Purchase and Sale Agreement), over to the buyer for X-amount of dollars. In this case that would be $5K. You and your end buyer will sign the Assignment of Contract Agreement at which time you’ll collect a deposit from the buyer. You will also supply the end buyer with a copy of the Purchase and Sale Agreement that you have with the seller. Take both of those documents to the title company and they will take care of the details from there. You don’t even have to show up at the closing. Your funds will be dispersed to you after your end buyer closes on the sale. All in all, it’s a very simple process. This means there’s seldom, if ever, a need for a simultaneous closing. Other Helpful Stuff 1. Some investors believe that you must have the words “and/or assigns” on your Purchase Contract in order for it to be assignable. Actually, contract law states that it’s automatically assignable from the get-go unless the contract itself, or an addendum to the contract, states that it’s not assignable. 2. There are other deals that you cannot assign, which would include REOs (bank foreclosures), HUD properties or short sales. (These contracts are worded specifically forbidding the assignment of the contract. For these, you will have to do the double closing – or the simultaneous closing – instead.) 3. When you’re doing an assignment, make sure the buyer puts down at least $2,000 so they have some skin in the game. If they’re not comfortable writing the check to you, they could simply make it out to the closing company. Assigned contracts typically work best with the common, ordinary, mom-and-pop sellers. They’re very effective, and definitely the cheapest and simplest way to wholesale properties. Awesome Power Pack Tools For those of you who are Mogul Elite members, I’ve included a FREE downloadable assignment contract that you can use. It’s from my good buddy, JP Moses, who quarterbacks so many of the other awesome lessons here on Real Estate Mogul. Enjoy.   "

Wholesaler Essentials: How to Screen Your "Cash Buyers"

Steph Davis | Investing Strategies > Wholesaling
" Hey guys, Steph Davis here… Cash buyers are one half of the life blood of your wholesaling business. You’ve got to have good deals and you’ve got to have cash buyers. Those of you who know me and who follow my lessons, you know that I like to start with my buyers first. While this is a critical piece of the puzzle, there comes the dilemma of… How can you determine who are the genuine cash buyers and who are just door-knockers and tire-kickers? The latter being a huge waste of time. So, how do you tell the difference? The questions that I ask – and the way that I ask those questions – can reveal a lot about the person. That’s what this lesson hones in on – how I do this – and how you can do it too. Another Great Article Not long ago my buddy, Jamel Gibbs, published this awesome lesson: Four Critical Cash Buyer Questions to Ask. It’s a great article. This guy is a great wholesaler, very successful, but what he didn’t reference in his article is how to tell the difference between your quality cash buyer and your tire kickers. So that’s what I’ll be talking about here… What’s the Buyer Looking for? As it often happens, after you’ve put out an ad, say on Craigslist, those who respond to the ad aren’t always as clear, open, and honest as you’d hope. What I like to do is find out from a potential buyer exactly what they are looking for in a deal: What part of town they like to invest in. What parts of town they stay away from. What their maximum price is. What is the minimum square footage. What is their preference for number of bedrooms and bathrooms. In other words, I’m digging down to find out exactly what they want in a deal. I do my wholesaling backwards from most other investors. I get my buyers first by asking what they’re looking for. From there I’ll go to the MLS or talk to other wholesalers that I work with to target properties that fit that potential buyer’s criteria. How Can the Beginner Investor Tell the Difference? So how can you, as a beginner, determine who of your responders, are bona fide cash buyers? First of all, if you’re advertising on places like Craigslist, just know that there are a ton of new wholesalers and investors who are all over Craigslist. They’re pretending to be cash buyers. Now there’s nothing wrong with that. In fact, that’s how I got started. I was too afraid to call people and actually negotiate, so I’d do it all by email. It seemed safer that way. I still use Craigslist, but now I’m not afraid to talk to people, and my BS Detector is pretty accurate. I can usually tell within a few minutes into the call if this person is just wasting my time. You have to realize that a lot of these people are not going to be actual buyers – just so you know. Are There Vague Answers? If I ask the person, “What kind of deals are you looking for?” and they give a vague answer like, “Oh, you know, just any good deal,” – that’s a definite red flag. The thing is, the buyers on my list who are repeat buyers have very specific criteria. They know exactly what they’re looking for. Rarely will a true, died-in-the-wool cash buyer be vague about what he’s looking for. They know what they want. This will be your first indication of whether or not you are talking to a valid cash buyer or a wannabe. Never Ask This Question Another thing that I’ve learned is never to ask the question, “Are you a cash buyer?” What I’ve found is that almost everyone will just say, “Yes.” (By the way, in all my marketing, I always stipulate Cash Only, which helps to weed out some people.) Here’s the problem with asking that question. Some people feel that if they get a bank loan or a traditional mortgage, and pay at closing, they think they are a cash buyer. They are too new to know the difference between getting a loan and actually paying cash. Instead of asking “Are you a cash buyer?” I ask, “What are you doing for financing?” Or “How are you going to finance this deal?” An actual cash buyer will quickly say, “I’m not getting financing, I’m a cash buyer.” The ones who are getting financing will usually say, “Well, I’m getting my credit fixed,” or “I’m getting an FHA loan,” or something to that effect. Be a Good Listener The winning combination here is to ask decisive questions, and then listen carefully to the answers. As you can see, this is a great way to weed out the tire kickers.  Quick, simple, easy, effective. What are Your Thoughts? Leave your ideas, questions, and comments below. We love hearing from you!   "

Wholesaler Essentials: Crushing Your Fear of Calling Sellers

Steph Davis | Investing Strategies > Wholesaling
" Hey Moguls, Steph Davis here… The first call jitters. We’ve all been there. If you’re a rookie wholesaler (welcome), you may be thinking that making those much-needed calls to sellers can be a terrifying experience! Even for those of us who aren’t so wet behind the ears anymore – seller calls can still be intimidating. Let me first say this to put your mind at ease. You’re not alone. That’s the good news. The even better news is that seller calls don’t have to be scary (breathe), and here’s what I mean… Get the 411 First The first call doesn’t have to be a heart racing, sweaty palms, cotton-mouthed situation. Use your first call to gather information from the seller. Let them know that you simply want to get important information on the property and that you’ll need time to do your homework and get back to them. Don’t put so much pressure on yourself to make an offer upfront. If you’ve already done your market research (pat on the back), or if you’ve already got some buyers lined up (g’on wich-ya bad self), then you’ll probably have the confidence to make an offer right away. And good for you. Truth is most beginners aren’t quite ready to talk about the future (numbers in this case) on the first date. So give yourself time to talk to other wholesalers and buyers to better know where your numbers should be. 411 Basics Here’s the list of key details you’ll need to gather during that first call: Get the property address up front (as if it wasn’t obvious, better to mention it to you anyway) Find out the number of bedrooms and bathrooms and square footage of each room Ask if the property need repairs and to what extent Find out why the seller is selling and how quickly he or she need to sell Be sure to get the seller’s asking price Ask if the property is vacant or not, and who is occupying it Find out what the tenant is paying and when the lease is up Ask if the seller’s payments are current or how far behind payments are Conclude by asking what is owed on the property You Must Verify and Be Confident Now that you have plenty of good info, you must verify property details on your own; don’t take the seller’s word for it, or I promise you, it will bit you in the butt. You can learn a lot about the seller’s motivation by asking these questions. If your seller recently lost a job and is behind on the mortgage then you know you’ve got a fire under your tush. Bottom line is the seller will probably be willing to sell at a discount to get the property out of their hair. Yay for you! When it comes to the asking price, stand your ground, and don’t shy away from this one. It’s important for both you and the seller to be on the same page and in the same dollar range. Otherwise you’re just wasting each other’s time. And who has time for those shenanigans? I’ll tell you – no one! If the seller says “Just make an offer,” you say “I buy and sell houses at a discount. Give me a ball park, so we don’t waste each other’s time.” Make it sound like you’re doing them a favor . If they still push back, just do the due diligence step and get back to them.  Suck it up. Now this is key, so pay attention... Save this question until the end of the conversation when you’ve (hopefully) established somewhat of a rapport and you’ve started to (fingers crossed) build some trust with the seller. If you hear “That’s none of your business” or “Why do you need to know?” certainly don’t panic and definitely don’t bang your head against the wall, although it will be tempting. Just reply that “asking saves me an extra step instead of having to spend time looking it up in public records.” Again, it’s about saving you both time and energy. Finally, ask if there is anything else you need to know about the property. You may be surprised at what you hear. (Nothing shocks me anymore.) Politely thank the caller for their time, remind him or her that you’re going to do some homework and you’ll be back in touch shortly. Now get off the couch. Chop, chop! Again, this one should be obvious – don’t take your time calling back. Make it a priority, do your homework quickly and efficiently, and get back to that caller ASAP! Good stuff, right? Well, be sure to check out my other awesome previous lessons too. Give us a Shout Please leave a comment below about what I’ve shared with you today. I truly enjoying writing about REI, and I love hearing from you guys, so speak up! Your feedback is helpful to all of us.   "