Part 3, Co-Wholesaling: A Disaster!

By on Jun 13, 2017 in Real Estate Investing, Uncategorized | 1 comment

            You have the opportunity to buy a good property on great terms. You think it would be a great property for you to fix and flip or, if you get too busy, possibly wholesale to another rehabber. I suggest that after speaking with the seller, the first thing you do is make a quick online search by going to the website for the local county auditor or county recorder and verify who the owner of record is according to those public records. The auditor’s records might be easier to access, but they are not as authoritative as what the recorder’s site will have.

            If you are doing business in a county that has this online access, see if you can locate an electronic image of the actual deed whereby title to that property is currently vested. That deed would be a tremendously helpful piece of information because it would show you who the owner or owners of record are, how their names are spelled, how they hold title and for how long they have held it. Print that deed and put it in your file relative to that transaction.

            Once you have looked at a copy of the actual deed whereby the sellers are vested with title, it gives you a chance to rethink the deal and see if you can improve the overall structure. For example, if the seller is someone who has been on title for some time and is using it as a rental property, they may have some depreciation recapture that could come due on it. Asking this question of the seller may lead you to set up the deal as an installment sale thereby allowing the seller to defer their taxes over a longer period of time.

            If the seller has been on title for less than a year, they are probably looking at paying ordinary income on any gain they may be making. This, too, presents the opportunity for an additional conversation with the seller about their motivation for selling and how a win-win deal could be structured.

            Many wholesalers believe this is a volume business. I agree when it comes to marketing for and attracting sellers; but once you have initiated the conversation with a potential seller, it’s time to slow down and focus more on the transaction in an effort to achieve a better overall structure for both you and the seller. This is especially important if the seller owns other property, which an online search as previously suggested would tell you.

            I’m afraid that in their haste to get deals done, many wholesalers fail to develop relationships that could lead to repeat business, which I’ll address in my next post.

    1 Comment

  1. Great advice!
    My wife and I got a deal from a wholesaler several years ago and it turned out that the wholesaler never could close because his contract was not with the actual property owner because there was an estate issue pending.
    Knowing this at the time would have prevented us from even trying to buy it.

    Brit

    June 14, 2017

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