Real Estate Contracts For Wholesaling

To begin with, let's look at the nine steps to successful wholesaling.

1. Build your BUYERS LIST (this is CRITICAL as a 1st step!)

2. Market and ATTRACT Sellers to you

3. Analyze the Opportunities and leads that come to you

4. Negotiate the best possible solution - Make Offer

5. Control the Investment (via written contract or option)

6. Sell the paper or the property (get a buyer contract)

7. Close with your Seller (i.e. "Buy")

8. Deposit Check!

9. Ask the Seller "What are you going to do with your profits?"

Right now lets focus on 4 and 5. What kind of contracts or documentation do you need to invest in real estate as a wholesaler? You will need one of these four or five documents to begin with: Letter of Intent (L.O.I.), Offer to Purchase, Offer to Purchase and Contract, Contract to Purchase, or the Option to Purchase. You may also want to present the "Residential Property Disclosure" and "Lead Based Paint" addendums at this time.

Letters of Intent and Offers to Purchase

The Letter of Intent and Offer to Purchase are both option documents which carry no legal weight. They are simply a means to get your foot in the door so to speak.

Letters of Intent tend to be more popular with commercial property, while the slightly more formal Offer to Purchase is commonly used for residential property. Get the numbers agreed upon first, with the basic terms laid out in a simple outline and if everyone likes what is stated, then draft the contracts.

If no one can agree on the numbers in the Letter of Intent or Offer to Purchase there is just no need to keep beating each other up over the terms, move on. Generally you will want to offer well below the market value for the property, sometimes as little as 50%.

I've gotten some pretty heated callers with the "What is wrong with you? How could you insult me with such a low offer for my house?" calls from these. To which I simply say, "What offer did I put on your Letter? What do you feel your property is worth? etc."

100% of the time I engaged the Seller in a productive conversation, I've even purchased properties that way!

The Contract to Purchase

Once you work out the numbers and terms, you put them in a Contract, both parties sign the final agreement, and you are focused on moving toward the closing, not more talking.

The Contract for the Sale and Purchase of Real Estate is the main legal document used by the Buyer and Seller to establish and agree upon the terms and conditions of the property sale.

When possible, use your state Realtor approved contracts (with modifications, i.e. cross out, change, or add an amendment changing the Assignment paragraph to ALLOW assignments).

Please make sure you get any documents you use in your investing business reviewed by your attorney and approved for your state or the state you are making your offers in.

Each country, state, county, city, etc. has different laws and rules that govern what can and what cannot be done contractually and in real estate investing. Now, the safest way to buy and sell real estate is all cash, using traditional Realtor approved contracts and documents.

You should always try to control the creation of the documents and if you are not able to do so, NEVER sign anything without taking the time to thoroughly review each and every line in full and careful detail (or sign it, and carefully review each and every line during the 72 hour legal review and retraction period (if applicable.)

The final documents we will review are the Option documents. For wholesaling, and many other types of transactions in real estate, these are a favorite among the pro's of creative real estate.

You get an option to purchase from a Seller, you control the property, and if you set it up correctly, you only risk a small Option Fee. I often use less than $100.

Remember that as a wholesaler your goal is to get in and get out quickly while making a nice profit. Options allow you to control property so you can focus on selling it or getting the financing for it or finding a tenant, etc.

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