Wholesaling and Assigning Contracts

This strategy allows you to make money in real estate:

With no money or very little money
With a bad credit score
Without having to get a loan
With no job or low paying job
Without having to fix anything
Without taking risk of getting property sold (getting stuck with property)
Without having to own anything or put anything at risk

What is Wholesaling and Assigning Contracts?

The basic premise of Wholesaling is finding potential deals, analyzing those deals, getting them under contract and then assigning the contract to another investor for a fee. The investor will then actually close on the deal and take responsibility for getting the property fixed and sold or rented.

How does it work?

Assigning vs. Double Closings

Assigning

After the wholesaler has the deal under contract they will assign the contract over to the investor buyer using an “Assignment of Contract” form.

-Easiest and cleanest method
-Wholesaler paid at closing by title company (don’t worry about not getting paid)
- One contract

Double closings

This type of wholesale deal involves the wholesaler actually closing on the deal and then selling it to another investor immediately.

-Don’t do this method if you don’t have to
-Two contracts involved
-Wholesaler needs funding to close the deal (at least for a minute)
-Two sets of closing costs

Should you assign deals or rehab them yourself?

-What would you rather do?
-Rehabs typically require more money
-Typically make more money on rehabs
-Quicker short term profits with Wholesaling
-Make less money per deal Wholesaling
-Do more Wholesale deals and make same amount of money overall

After posting yesterday on selling homes quickly in a slow market, I stumbled across some more good points relating to this subject. Two of the most important things to consider when evaluating a deal are what you are going to pay for the property and what you are going to be able to sell the property for after rehab.

If you refer back to yesterday’s post you will see the first point mentioned in both of these notes is making sure you do solid market or “comp� analysis and price the property appropriately.

Rules for Selling Fast in a Slow Market

Anyone looking for advice on how to close a deal in a tough market might get some inspiration from William Bronchick and Ray Cooper, authors of How To Sell A House Fast In A Slow Real Estate Market(2008: John A. Wiley & Sons).

Here are some of their ideas:

Position the house in the right price range. Buyers search by price range. Positioning a property in the middle of the range increases the likelihood people will see it.

Have information available. Deals fall apart when the buyer has unanswered questions. Work with the seller to have key information available, including cost of utilities and taxes, neighborhood liens and covenants, and an evaluation of the schools.

Put out a good flier. People are much more likely to read the flier than they are to call the number on the “For Sale� sign.

Market to the neighbors. Market to people who have just listed their own homes in the same areas. Chances are they like the neighborhood and could be persuaded to stay in the area by the right property.

Talk to the seller about offering creative financing. For many people these days finding money is the biggest stumbling block.

In this market holding out for a better offer is a big mistake.

Source: Forbes, William Bronchick and Ray Cooper (10/21/08)

Posted by Carter Brown

Despite what you have heard, rehabbing properties and selling them at a profit in this crazy market does work. You need to make sure the numbers on deal work, you do your research and, perhaps most importantly, you need to have a strategy for getting the property sold and sold quickly.

Below is a short note I came across that mentions some good points on how to get properties sold quickly in a slow market.

Here are some tips from real estate professionals who now have a couple of years experience selling homes quickly in slow-moving markets:

Be the best buy on the block. “Run an accurate market analysis for the last six months and price the property accordingly,� says Alex Harb, a practitioner in Orlando, Fla.

Schedule your discounts. If someone has to sell in say, six weeks, start with a 10 percent or 15 percent discount from the comparables and then reduce the property another 5 percent to 10 percent each week.

Clean-up time. Scrub the house until it shines. Paint anything that needs it, and manicure the lawn.

Don’t sound desperate. When a buyer asks why the house is for sale, an effective response is, “I have a new opportunity in another city.� This answer sounds hopeful while selling in the midst of a divorce or other emotionally difficult time which otherwise could make the buyer leery about the home.

Offer to hold the mortgage. If a seller can live without the proceeds from a sale, a seller-financing arrangement may make sense. This helps those who can’t qualify conventionally and increases the pool of buyers.

Source: TheStreet.com, John Morell (10/27/2008)

Posted by Carter Brown

Think twice before paying a full 6% sales commission to a real estate agent. That is a lot of money and will dramatically cut into your profit. It is quite easy to avoid having to pay that full commission. Keep in mind this commission is fully negotiable and don’t think you have to pay it in order to get the help of an agent. Agents have become increasingly willing to negotiate their commissions becasue they are not making close to the money they were the past few years when the market was on fire.

Another option is going through discount brokers that will typically charge a flat fee for their services. As evidenced in the article below, the level of service is just as good but the cost of the service is much less. That is a good combination.

Sellers Report Satisfaction With Discount Brokers

In its September issue, Consumer Reports magazine reveals the results of its poll of more than 9,000 home sellers, indicating that those who paid discount real estate commissions and those who paid commissions of 6 percent were equally satisfied.

However, the survey shows that sellers who paid the full commission were more likely to express regrets about he transaction process, with approximately 33 percent believing they should have aggressively negotiated the fee.

Of the 46 percent of sellers who engaged in commission negotiations, the survey shows that 71 percent succeeded in lowering their rate. Additionally, 87 percent of sellers who paid full commissions and 81 percent who paid 3 percent or less received a comparative market analysis from their real estate agent.

Palm Beach Post, Jeff Ostrowski (08/04/08)

© Copyright 2008 Information Inc.

Posted by Carter Brown

In this challenging real estate market, curb appeal is particularly important for a home seller. Here are some tips for hiring a landscaper who will do a good job at a reasonable price.

Review a portfolio. A neighbor’s recommendation is a good starting point, but it is also worthwhile to examine other jobs the landscaper has done and ask for references. Hiring someone who isn’t reliable, doesn’t finish the job or who uses unhealthy plants is a costly mistake.

Consider maintenance. Asking for a low-maintenance design will ensure that even if the home owner isn’t able to spend hours on the task, the lawn will continue to look good.

Know what good landscaping is worth. It can’t hurt to let a potential buyer know what the value of the trees and shrubs are. The North Carolina-based Horticultural Asset Management specializes in assessing the value of landscape plants. For instance, it puts the worth of a healthy 60-foot-tall European beech at $50,000.

Source: Smart Money, Kedon Willis (06/01/08)

Posted by Carter Brown

Selling a home is oftentimes more expensive than sellers anticipate. Agents’ commissions can be as high as 6-7%, the repairs and fix-up, even minor fixes, can add up and holding costs are frequently underestimated that are being incurred during the sales process. In an attempt to limit or reduce these costs, more and more investors are attempting to sell their investments without using agents. This can be a great way to save a lot of money, but you really need to know what you are doing if you are going to go it alone.

Below are a few ideas that can be helpful in preparing a home for sale.

8 Tips for Low Cost Staging

In a tough sales market, staging can help move a property.

Barb Schwarz, who claims to have invented home staging in the early 1970s, estimates that about one in four homes nationwide are now staged.

Julie Dana and Marcia Layton Turn state in their book, The Complete Idiot’s Guide to Staging Your Home to Sell, that a seller stands to gain as much as $9,000 on a $200,000 house if it’s staged.

Shelly Wagner, a Detroit-based stager, estimates that the cost per room for staging is $100 – small potatoes if it really helps a home sell.

Here are some ideas from Wagner for effective, low-cost staging:
• Remove scatter rugs and knickknacks from every room.
• Get rid of everything on the kitchen counters, including appliances, except for the coffee maker.
• Remove as much as you can from closets.
• Hire a cleaning service if necessary to make the house spotless. Scrub floors, walls, and windows. Pay special attention to the microwave, oven, and refrigerator.
• Focus on the feature rooms, the living, dining, and master bedrooms. Additional bedrooms are best left empty or minimally furnished.
• Arrange the furniture to show off each room’s best features.
• Set the dining-room table with napkins, plates, and flatware.
• When showing the house, turn on soft instrumental “buying� music, preferably classical or jazz.

Source: Detroit News, Marge Colborn (05/03/08)

Posted by Carter Brown

I’ve blogged in the past about investors’ concerns about getting stuck with properties. It is never a good thing when you have a property for sale and aren’t getting any interested parties, especially if you can’t make the payments. Hopefully, you don’t get in this situation because you are diligent in evaluating your deals and the numbers before buying them. There are many different things you can do to make your property attractive to buyers buy one that is an absolute must is curb appeal. Curb appeal is simply what your property looks like “from the curb� or the condition of the exterior. It is absolutely critical that when a buyer pulls up to your property they are impressed with what they see.

A survey of almost 500 real estate agents commissioned by JELD-WEN Windows & Doors indicates the increasing importance of curb appeal in selling a home.

According to the Real Estate Agent Community Trends survey, 82 percent of practitioners polled said buyers unimpressed with a home’s exterior will not want to look inside. The results also found that 90 percent of respondents said a sale depends on first impressions of the front entry, while 91 percent said the home’s exterior is just as important as what is inside.

Additionally, 75 percent of those surveyed said natural light is important; while the appearance of windows and doors and the presence of energy-efficient products were mentioned by 71 percent and 63 percent, respectively.

Universal design features are gaining in popularity as well, according to 65 percent of agents.

Source: BuildingOnline (03/18/08)

Posted by Carter Brown

A major concern investors have in this market is “Will I be able to sell this property after I rehab it�? It is hard to miss all the news reports detailing how the real estate market has slowed and how there are so many properties sitting on the market for sale with no buyers, etc, etc, etc.

That may all very well be true, however homes are still selling. I will repeat that, homes are still selling.

According to the National Association of Realtors, annualized sales of total existing homes were just under 5 million at 4.9 million units. Yes, this is a decline from where the unit sales numbers have been in the past year or so, but 4.9 million homes is a lot of sales.

Now that we have some hard numbers showing us that properties are selling, we need to ask what types of properties are selling? What price range are homes selling in? What amenities do buyers want? What are buyers looking for? As long we are doing our homework and doing proper market research and due diligence, we can be confident that our deals will sell.

Posted by Carter Brown