CONTRACTS FOR WHOLESALING AND FLIPPING HOUSES
In this video I talk about real estate contracts and the type of contract you should use when you want to wholesale a property. If you are a wholesaler, then the type of contract that you use will depend on who the seller is. This is very important for you to understand – especially if you plan on bidding on bank owned properties.
For motivated sellers that contact you from direct mail or bandit signs, you should always use a simple one or two page real estate contract like the one that I am holding in this video. And you should always use the words “and or assigns” on the contract after the buyer’s name. That gives you the option of assigning the contract to a cash buyer instead of double closing (if you want to assign it).
However if you are buying bank owned properties (REO’s), short sales or anything where the seller is an entity (like a bank) then you should only use a standard real estate contract for your State, and you should never put “and or assigns” on the contract. If you do your offer will be rejected.
Remember that for wholesaling, you need a real estate contract that suits your purpose. Wholesale real estate purchased from a motivated seller is not the same as buying and REO from a bank. With a regular seller, all that matters is that they sign your contract. With an entity like a bank they will want you to use their contract. A good example of this is Fannie Mae (Federal National Mortgage Association) which will allow your contract initially, but will want all of their forms and addendum’s signed. When you buy from a motivated seller, you make the rules. When you buy from a bank they make the rules. And the banks are not dumb. They don’t want wholesalers getting in between their properties and cash buyers. So they put measures in place to make it more difficult for wholesalers. For example they will ask for a proof of funds letter, they will put deed restrictions or other things in place. You need to learn how to negotiate these measures – one thing that always works is to just close on the property. They can’t complain then. And once you own it then you can market it, rent it, fix it or do whatever you want with it. It’s all about learning how to control the deal. Make sure you understand how inspection periods work and the advantage of long inspection periods and the disadvantage of no inspection periods. Learn how larger deposits are more difficult to work with than smaller deposits. And then go get some houses!