How to NOT get ripped off by a Real Estate Wholesaler

Dan Austin: [0:00] You have no idea what you're you're literally assuming those rights. Like you said, Mike, you're assuming the rights to that person's sale agreement and whatever else is in between. And so you need to be sure you know what's gonna happen once you do close on that. And I could definitely see how people would be blindsided at closing by not knowing what's gonna happen. All of sudden, they walk into a property. There's still people there even though they were told by some sleazy wholesaler that it would be vacant.

Speaker 2: [0:25] Welcome to the Collecting Keys real estate investing podcast with your host, Mike DeHaan and Dan Austin. From wins, losses, horror stories, and tactics for optimizing your business, Mike and Dan take a real uncensored deep dive into the ins and outs of running a full time real estate investment and wholesaling business.

Mike DeHaan: [0:49] What's going on, everybody? Welcome to episode 48 of the Collecting Keys Real Estate Investing Podcast.

Dan Austin: [0:56] Wow. There's 48 states in America, isn't there?

Mike DeHaan: [0:59] And then Continental America. Yes. There is. And then there's the two the two bastard states that people only care about, you know, during summer vacation and then the one that's way up to the north.

Dan Austin: [1:08] Yeah. The one that people think about that they go hunting on their hunting excursions are the ones that go, yeah, to Maui and yeah.

Mike DeHaan: [1:14] Yeah. Exactly. The one where the deca millionaires go to get their untarnished salmon runs or whatever the hell is this

Dan Austin: [1:23] for. Deca millionaires. Yeah. Right. I know some hillbillies that go there.

Mike DeHaan: [1:27] Yeah. Right. That's kinda I mean, that's how a lot of that shit is there. Right? Is there's like, you know, it's it's funny because, like, there's super rural areas, which are, like, always, like, blue collar and, like, you know, that was where, you know, the layman used to live and work the lane and all that sort of shit. And now that all those places are being inundated by the ultra rich that are like Right. Oh, you own this? That's cute. I'm gonna give you more money than God to get the fuck out so I can go and do what you're doing. Yes. Right?

Dan Austin: [1:53] So I could pretend to do what you're doing.

Mike DeHaan: [1:56] Yeah. Right. Right. Right.

Dan Austin: [1:57] Well, the place that I think really speaks to that a lot is Jackson, Wyoming. Like, I feel like because, like, Wyoming in general, other than Jackson, is a very, like, blue collar, hardworking, like, that's just the description everybody thinks of. But you go to Jackson, not at all that. No. But there's some beautiful farm fields, some beautiful old barns, and then, like, $30,000,000 mansions on the side of a hill.

Mike DeHaan: [2:22] I mean, even where I grew up, you know, Bozeman, Montana, when I grew up there, it was still a pretty quiet town. Like, remember when the first, you know, department store started coming there. Like, when I was younger, you know, like elementary school age, the only real department store we have was like a Walmart.

Dan Austin: [2:37] You guys didn't have a Montgomery wards?

Mike DeHaan: [2:40] No. Never any of that. But I remember when, like, Target came, and then, you know, it was Costco and then Home Depot. And then all of a sudden, now there's like everything.

Dan Austin: [2:49] Right.

Mike DeHaan: [2:50] And, you know, the the price of property there is now, like, average price of million bucks. Wow. You know, most of the homes are second homes, vacation homes. It's just ridiculous. And that's just how good it is. And it was it was People

Dan Austin: [3:01] like us are ruining the world.

Mike DeHaan: [3:03] We are. Goddamn it. Anyway, yeah, we are of, you know, on full, just like full steam ahead right now, man. We currently have what 17 in escrow. Yeah. You've been managing our dispo process entirely. All sorts of stuff going up and down. And to make it better, this is going to be the last episode with me for a little bit because I am pissing off to Africa. Actually, when this when this episode comes out, I will be on a plane headed to South Africa for the month of September. So

Dan Austin: [3:32] Trying to find that malaria.

Mike DeHaan: [3:34] Yeah. Right. Yeah. I'm I'm taking my drugs. I took my first, typhoid pill this morning. So I'm I'm getting

Dan Austin: [3:40] Do you take doxycycline for your, malaria?

Mike DeHaan: [3:43] I just took whatever the hell they gave me.

Dan Austin: [3:44] You don't have to do like a little pink pill?

Mike DeHaan: [3:46] I literally don't know. I don't I don't have to take them yet. Don't have to take them until three days before we're in, like, the malaria area.

Dan Austin: [3:51] Oh, okay. So yeah.

Mike DeHaan: [3:52] Yeah. Which is, like, gonna be a week or so after we get there. We're gonna be in South Africa for about

Dan Austin: [3:55] a week. Well, so I remember from the military, there's two types of pills they gave us for the malaria stuff. Mhmm. One of methaquine, which they have now shown to, like, create psychotic breaks Mhmm. In your mind and, like, create, like, people turn people into murderers. So don't take that one. And then the pink pill Yep.

Mike DeHaan: [4:14] You can't get that one anymore.

Dan Austin: [4:16] You can? Okay. The government was just getting rid of the last bits from probably Vietnam. Yeah. And then, the pink one, the doxycycline, is like makes you, like, super sensitive to the sun. So if you're gonna be out, like, on safari, just be mindful of that.

Mike DeHaan: [4:28] That's good to know. Yeah. So the first one you mentioned, it's funny when we were doing a little bit of research, there's that one because you had to take it for it was like a month after you were out of the area and it get was supposed to give you like horrible nightmares. Yeah. You you can't get that one anymore. They give you the other one.

Dan Austin: [4:41] Okay. They got rid of that one. Oh, good. It's discontinued. Sweet. Yeah. That's what happened to most of our sellers is they were taking methaquine and they just turned into psychos.

Mike DeHaan: [4:50] Yeah. Right. But yeah. So I I am greatly appreciative of the fact that you are willing to let me go around and do this nonsense, you sort of hold down the ship.

Dan Austin: [4:59] Yeah.

Mike DeHaan: [5:00] I guess the benefit of us being good friends before we became business partners is,

Dan Austin: [5:03] you know,

Mike DeHaan: [5:04] willing to have a friendship side there as well.

Dan Austin: [5:06] We need to separate ourselves on separate continents for one month a year. That's how we stay together. Yeah.

Mike DeHaan: [5:12] I mean, to be fair, traditionally, I've traveled, those are usually some of our best periods of time. Yeah. I think, you know, I'm not there being the bottleneck for everything anymore.

Dan Austin: [5:20] Yeah. We'll see how it goes. Yeah. But we've got a lot I think this time around, we have a lot more going on, different business streams coming in, and then our businesses are scaling more so than they have in the past. And so this will be

Mike DeHaan: [5:33] Yeah. It will be. But I'll say the caveat, I think that with how we've started to structure stuff and with the team we currently have in place, I do feel that the team is a lot more independent than ever been in the past.

Dan Austin: [5:43] Oh, for sure. Yeah. We have people that our sales team is gonna keep doing their job. And Mhmm. Of course, with me just kind of looking at Dispo from its entirety right now, you know, that's it's already in my pocket, so I don't have to pick up anything there.

Mike DeHaan: [5:56] Yeah, exactly. So, but yeah, we got all sorts of stuff going on. We got some, you know, like a little cabin up on a hill that James actually messed me up before and said he was legitimately really impressed

Dan Austin: [6:07] with how it looks. So that's nice sign.

Mike DeHaan: [6:09] He said it's nice. He says, like, really nice. Yeah. You know, we got tons of stuff around the country. It's good in some fat deals that are coming through

Dan Austin: [6:16] fat stacks like geez.

Mike DeHaan: [6:18] Yeah, Yeah. 75,000 fee, a 40,000 fee, a couple of 40,000 fees. Well, that's under contract price. Never mind. But 75,000 fee and a couple of 40,040

Dan Austin: [6:28] thousand dollar contract price. Actually, I three of those right now. Three properties across like, one in Spokane and two, I think, in Ohio that are

Mike DeHaan: [6:35] Mhmm.

Dan Austin: [6:35] $40,000 purchase prices.

Mike DeHaan: [6:37] Which is just so crazy. I mean, I would have thought that last year. But, yeah, things are moving. And, you know, I think the biggest challenge right now, which I guess we would say we predicted this a while back, is that people have always asked for now, like, how is the market affecting us? And, like, why I think it's a while back on the acquisition side, I expect it to get easier. On the disposition side, I expect it to get harder. And that's exactly what's happening.

Dan Austin: [7:02] You're absolutely right.

Mike DeHaan: [7:03] We had a little low in leads in in acquisitions through, like, May and June ish period. You know, like, there was wasn't a lot of action going on. People want to have conversations. But now all of a sudden, it is, like, full steam ahead on lead generation. Yeah. We're getting so many new calls. We're getting calls from stuff that we sent out six, seven months ago. And people are, like, starting to come around to it, like, you know, even if they didn't have any interest before, now they're like Right. We need to sell right now. Know, we're having stuff that's like, huge price drops on some of the original asks of people that we talked to six months ago, and now they're willing to sell to us for, 30% lower, you know, because they realize that their property is a piece of shit. No one else

Dan Austin: [7:42] is gonna buy it. Nobody's looking at it at all.

Mike DeHaan: [7:45] Yeah. And, you know, the the plus side of it, though, is is we have those opportunities. But I I guess, would say the downside is just the disposition is challenging, especially in somewhere like Spokane where we don't have, that token company. You know, like, feel like a lot of places, a lot of people we talked to in, larger markets, they're like, oh, yeah, you just sell everything to this group that does, 100 flips a year, like, they're massive, all sorts of stuff. We don't really have that. And the one thing that we had that was kind of close to that is ceasing operations for a little bit. So, you know, like like, there is it's kinda like a weird thing. So we're basically trying to sell stuff to amateurs. Mhmm. But the amateurs right now, it's kinda like scary for them. So it's it's been an interesting.

Dan Austin: [8:29] Right. Yeah. Well, they don't yeah. And they don't have as as much of a runway.

Mike DeHaan: [8:33] Mhmm.

Dan Austin: [8:33] So one flip is gonna hurt them if they're only doing one flip at a time. If they're flippers or even buying old folks, they're a little bit smaller. And you're right. It's like we've talked to quite a few wholesalers across the country and the ones that are like massive operations, they have that one person.

Mike DeHaan: [8:46] Exactly.

Dan Austin: [8:47] Right? That they sell to. Or they have big hedge funds operating in their market, and they're not doing too well right now because all the hedge funds are on pause. Just like a lot of buyers are, they're like, I kind of want to see how the summer goes. Yeah. There's still buyers out there. We're still selling them. We just have to get more creative with how we're locking things up. And we have I think when we're underwriting deals, it's like, how do we not buy this house and then see if we can get it for that price?

Mike DeHaan: [9:07] For sure. And and I think that's been the big sort of change as well as, you know, us looking to potentially close on more if we need to, but make sure that we have multiple exits and then but that's always managing the capital problem there. And then, you know, as I would say that the disposition at this point is less just like throw it out to the wolves and and see who wants it and more finding specific properties that individual people want and going to them directly and basically making that direct connection.

Dan Austin: [9:36] Absolutely.

Mike DeHaan: [9:37] Because if you throw something out right now, I think people, like, just aren't necessarily looking to compete on stuff. You know, even if they do want it, if they're newer, they're typically not even going to inquire because they're like, oh, somebody else is probably are going to buy, which is generally not the case. Right? Especially right now. That's something that's always been interesting to me is there will be people that are like, oh, yeah. I see your emails. I just never looked to put in an offer because I figured someone else is gonna pay more than me. I'm like, well, you don't know? Like, you might as well give it a shot.

Dan Austin: [10:06] Might as well at least put an offer. Yeah. Even if it's a low offer every single time. Exactly. Because then we know who you are.

Mike DeHaan: [10:11] Yeah. I mean, that that's actually really I would point is if you're making offers for wholesale deals, as long as you're not kicking people through the mud because we also have our shit list of buyers now Yeah. Of people who have gone through that whole process. And then they, like, say, like, yeah. I'm super interested, and then they kick it around for four days. And they so go, well, actually, I didn't realize that, I was gonna have to redo one of the bathrooms, so I'm out. It's like, well, fuck you. It's a fixer upper house.

Dan Austin: [10:33] Yes. And then those those type of buyers, because I'm spiteful, don't get a second chance with us.

Mike DeHaan: [10:39] Totally. Yeah. Which is fine. It's probably why we can't find anyone. No one has a second chance anymore.

Dan Austin: [10:43] Because we're so spiteful. Like, I'll buy it just to prove a point.

Mike DeHaan: [10:47] Yeah. Yeah. One of which is normal what we do for better or for worse.

Dan Austin: [10:51] Yeah. Yeah. No. I mean, it's the same thing. Like, we're seeing that across the market. People are throwing up trash on the MLS and making money. We threw up trash on the MLS and made money. Like, I'm not gonna say we didn't. We have one flip going on right now. That's a sweet deal on all fronts, but it's like really balancing the budget and putting it out there for a price that's very competitive because you can't just throw it out there. You do have to wait for the right buyer that wants that property specifically. I have another listing, like just a regular listing, not one of ours, and it's a bad, I mean, it's a terrible property. So we listed earlier this year, it's a whole two bed, one bath type first time home buyer for a low income family or an investor that want us to get a dirty property, more of a retail investor, and then fix it up and rent it out. We took it off the market, got the tenant out, and then the homeowners wanted to do some renovations to it.

Mike DeHaan: [11:47] This is that one where they did their Yeah. Boring work.

Dan Austin: [11:50] To make better and more presentable. And I and I agreed with that idea. I was like, know, we should at least because the tenant wouldn't leave when we were listing it. And even in the hottest market this spring that those people have ever seen we've seen in a long time, we couldn't sell it. And we sold three other properties for them in that same time frame that are all similar. And so they go in there and they do the renovation, and I was just embarrassed. I was like, I don't even know if I can put my sign out front here. This is so bad. Like, it doesn't smell anymore, which is good. But it was just I'm like, how did you even like, do you guys live in these kind of houses or something? Like, how

Mike DeHaan: [12:23] did you think that that would work?

Dan Austin: [12:25] Or why didn't you just stop and call me? I they know I'm a professional at this. I could have helped them. And now it's even worse, and they wanted to list it for like $30 more, so we did, and we're not getting anything on it. And so it's like Right. That house though, the way it looks now is really trash, but like six months ago, you would have thrown that up there, and we would have at least had some offers. Totally. So it's just it's tough on all fronts, whether you're doing retail or off market for that sale. But you just have to dig deep into your into your list. And really, you said, Mike, is just align your properties with the right buyers. That way and don't, don't be greedy. Be fair. We're all on the same team here. We all got to make money and survive. So just do what's right. And if you're signing crappy deals, then just don't sign any deals at all, I guess.

Mike DeHaan: [13:12] I mean, that's super valid, honestly. And that that is one of my pet peeves with wholesalers, especially newbie wholesalers are getting started and, you know, they're just so desperate for that money is they don't take into account the impact you have on the seller when you're signing around shitty deals.

Dan Austin: [13:25] Right.

Mike DeHaan: [13:26] I mean, you know, we we went through a a little phase here where I would say on the on the dispo side was not performing appropriately, just because some of the systems and stuff we had in place over there. And we're having to, like, cut people loose just because, you know, the dispo wouldn't do what needed to do. And that scares with people. Like, if they're expecting money and they start moving out, they put money down an apartment. Yeah. Like, you know, if you're a wholesaler and you're doing stuff with these sellers, you need to understand that, like, realistically, they're gonna start making moves in their life that will be extremely detrimental to them if you do not close the deal.

Dan Austin: [13:58] Yeah. Yeah. I had to pick up the pieces on one of them, and I called the people and had to cut it loose, they had already paid for and mind you, we're buying their house at, like, $30,000. So this isn't like a real high end situation, a lot of income or anything like that, or high income, I should say. And they've already gotten a storage unit, $100 a month. That's huge for somebody that's selling their house for $30. That's $1,200 a year. I mean, that's like a large percentage of the actual value of their home that the to get a storage unit. They move stuff. They they've leased up an apartment, and I had to cut it loose and said, hey, we just financially can't make this thing happen because the dispo wasn't working, and and I felt terrible about it. I mean, that's really wrong to do to people. And so what I did in that situation was I found some other local wholesalers and connected them with those local wholesalers. And those guys were excited to kind of pursue that lead. Mhmm. And so they did and and helped the people out, which is like, I'm glad we were able to at least do that for these people. Most people would have probably just, you know, cut it looser. I've seen it where they just don't even they just stop calling. They just don't answer their phone anymore.

Mike DeHaan: [14:57] Yeah. That's Terrible. They just ghost own people are like, when's our money coming? And they never hear from the investor.

Dan Austin: [15:02] Never hear from again.

Mike DeHaan: [15:03] Yep. So

Dan Austin: [15:04] which I mean, I get it. We've had sellers do that to us. So like,

Mike DeHaan: [15:08] yeah, I

Dan Austin: [15:08] mean, flexible sides, but

Mike DeHaan: [15:10] yeah, at the end of it, you know, you're realize you are dealing with people when you do this business, you know, on especially if you're a wholesaler, you're the middleman, you know, you're the human representative on both the seller side and the buyer side. And you need to, you know, have customer service on both sides of that. And that, you know, there's bad actors in this space that do weird stuff, that do shady things, that don't give all the truth. But if you're working with, like, professionals, like us that have a legitimate operation, you know, we're gonna try to do best by everyone. And if you wanna be like us, and you wanna actually, like, have a business that's successful and, you know, has traction and does these things on a regular basis and makes legitimate income, you have to do that same thing. Because if you don't, tell you what, you're gonna start getting a bad reputation among sellers. Like, believe it or not, the lower sort of class folks that we end up buying a lot of profits from, it's not a huge sphere, you know, even in like larger areas, like stuff gets around if you start doing it long enough. Yep. And then it will especially get around with buyers. If you get flagged as being a scummy wholesaler on the buyer side.

Mike DeHaan: [16:11] Yeah. Then you're gonna not gonna be able to move shit. Like, you're gonna be in major trouble

Dan Austin: [16:16] Yep.

Mike DeHaan: [16:16] On the disco side. No one will trust you. You know, unless you unless you can find like that one sucker that does and then you're able to, you know, do your shady thing with them or whatever, but eventually will run out. Like, that is not a long lived strategy that you can get by there.

Dan Austin: [16:28] Yeah. Absolutely. And, you know, one of my friends, James Daynard over in Seattle James Daynard.

Mike DeHaan: [16:35] You talked to him on the phone for what, like, five minutes about one deal, and now he's your friend.

Dan Austin: [16:40] He's a friend of mine. He's he's in the he's he works at BiggerPockets, you know, as a as a celebrity, influencer. He is a friend of mine.

Mike DeHaan: [16:48] Yeah. You're giving me a call. Met one of my friends, Brandon Turner. I was on a Zoom call with him, Ringo Abundance, like, a month ago, and now we're good friends.

Dan Austin: [16:56] Hey, bro. You gotta take it where you can. Anyhow, James Daynard, my friend, was was stating that he paid a $150,000 wholesale fee for a a you know, obviously a luxury flip, so it was a little higher end. And he was okay with that because there was profit on his end. But then he made a comment like, hey, wholesalers, like, don't get dirty with this. Like, we all we all have to make money. We all need each other. We're all essential to the process. All too often, you're right, people kind of screw up that relationship with the buyers because they get greedy on a deal. And we did a on Eclectic Keys, I think maybe a Friday Focus episode a while back where we talked about the decisions you make to keep your business alive long term. Yeah, you're leaving some money on the table. Well, some of those decisions are treating your buyers right and making deals or making good on your word where I've I've made good on my word with people where I said, hey, you can have this deal verbally at that price, and then somebody else, you know, twenty minutes later calls literally and says, hey, I'll give you more than that. And I'm like, I wanna take that, but I've I've verbally told this guy that I would Yeah. Do it. Even though we don't have a signed PSA, I said it, I don't wanna ruin that relationship.

Dan Austin: [18:02] Yeah. Sure. We gave up quite a bit of money, but, you know, it's it's about keeping that buyer's list strong long.

Mike DeHaan: [18:08] We've had that happen a lot of times. That's that situation.

Dan Austin: [18:11] I know. It's it's terrible. And you're like, you you kinda, like, question yourself, but you're like, you know what? I'm making money. They're making money. Let's just do the right thing.

Mike DeHaan: [18:20] Exactly. So cool. Well, anyway, so for our educational topic this week, we wanted to address something which is going back to the very basics because it's something that, I guess, we've taken for granted, the knowledge of it, just we've been doing this for a little while. We've had a lot of new buyers as, you know, we sort of mentioned, if you're doing this disposition, if you find people that have specific needs and you can bring them the opportunities, that's great. That's what they want. That's how you get so close. We've been doing this recently and people come back and say, okay, great. How do I buy from you? What does that look like to buy from a wholesaler? So for this episode, we're gonna go back to the very basics of what exactly is wholesaling a property? How do you buy something from a wholesaler, and what does that general process look like. So really quick, we are going to talk about our instant investor program, which by the way, if you want to be a wholesaler, you should go check out instantinvestorprogram.com. And, we'll be back to talk about the general process. The instant investor program is our twelve week group coaching program, which includes a self driven course and access to our private investor community. We will take you through the full process of how we find our leads, how we market, how we do our sales and follow-up, and how we determine the best strategy for every opportunity that comes our way.

Mike DeHaan: [19:29] On top of that, you will also join a community of other like minded investors nationwide that are all marching towards the same goals, and you'll have direct access to Dan and myself so you can continue learning and growing with us as we continue to adapt and grow our business. Whether you're a new investor or already established, our systems can help take you to the next level. So if you think you might be a good fit, go to the instantinvestorprogram.com and schedule a call, and we can have you talking to motivated leads in as little as two weeks. Alright, guys. So wholesaling real estate, what exactly does that mean? And how is it done? So essentially, a wholesaler, what a wholesaler does is they work with the seller to get a property at a discounted price. And then they get a person sale agreement signed with that seller between the wholesaler and that seller. And then you take that contract, and you do what's called an assignment to another buyer. So you have a separate contract between the wholesaler and the buyer called an assignment contract, which basically outlines the fee that they're going to pay to be able to purchase that contract that you have with the seller. So very basic numbers. So you have a property that's worth 250,000, You work with the seller, you know, place needs work, you need to need to sell fast, all that sort of stuff. You go and you get the contract for 120,000. So your name with PSA with the seller is 120,000, then you go and you find an end buyer and you say like, hey, you can buy this property from me for a $130,000. And basically, you will make that $10,000 split on the middle between the 130,000 and a 120,000.

Mike DeHaan: [20:59] That's what it looks like from the wholesaler side. Yep. And the

Dan Austin: [21:03] the reason why we call it assignment is because you're assigning your rights to the PSA to the new buyer.

Mike DeHaan: [21:09] Exactly. Yeah. So what that looks like on the buyer side, and if you are buying from a wholesaler, it's important to realize that distinction that you are basically assuming that contract that the wholesaler has. So if you're working with a wholesaler, always make sure you know what the terms of that contract are because you are now taking the liability of that contract. And if the wholesaler does some weird stuff, like, can get caught with that. Mhmm. Right? You know, and, like, typically, the assignment contract will have its own agreements with the, the wholesaler during the transaction process. But if there are terms in the with the original purchase and sale between the wholesaler and the seller that occur after the transaction takes place or at the closing table that you're not aware of, for example, maybe you there's like a credit back to them to cover some sort of expenses, a better credit back to, like, subs subscription sort of expenses. Maybe you're gonna be paying more closing costs than you realize. Maybe you're gonna be inheriting tenants, but they have agreed with the seller to let them keep the deposits and the rents, which is illegal, but we have seen this happen. And then the buyer shows up at table and they're like, woah. Woah. I didn't know that this was a thing. Right?

Mike DeHaan: [22:19] But you need to understand that that is going to be a risk. So always make sure you get that paperwork. And if a wholesaler is not willing to let you see that, don't do business with them.

Dan Austin: [22:28] Absolutely. Plain and Yeah. Don't do it. Yep. And and you gotta be careful too because sometimes, you know, we just daisy chained one down in Colorado Springs through, New Western. And the the end buyer was fortunately engaged and smart because he wanted to see the daisy chain of contracts all the way back to the original

Mike DeHaan: [22:44] Mhmm.

Dan Austin: [22:44] And that makes sense because you don't you're you're literally get assuming those rights. Like you said, Mike, you're assuming the rights to that person's sale agreement and whatever else is in between. Mhmm. And so you need to be sure you know what's gonna happen once you do close on that. And and I could definitely see how people would be blindsided at closing by not knowing what's gonna happen. All of sudden, they walk into a property. There's still people there even though they were told by some sleazy wholesaler that it would be vacant.

Mike DeHaan: [23:10] Yep. Exactly. That's not designated in the contract with the seller. And that's something else too is before you close on these deals, you know, realize you're not the originator of the original contract. Do your due diligence and make sure that the things that were agreed to on there are actually followed through as as much as they can be. And if they're not, then work with the wholesaler to figure out what needs to happen

Dan Austin: [23:32] Yep.

Mike DeHaan: [23:32] For all the details are to be figured out. Like, especially when it comes to tenants and things like that. So frequently, there's a situation where it says in the contract that the tenant will be out at closing, you know, but it's a three week close. And the seller of the property, you know, who is the landlord of these tenants cannot get them out. Clothing time comes around, the tenants are still there. And the wholesaler will just be like, oh, just take it over. You know, like, yeah, I told you that the tenants are gonna be gone. It says in the contract, tenants are gonna be gone. They're not, but I'm just gonna try and push this thing through. You as the buyer need to verify that they're actually gone. Because otherwise, what'll happen is the seller will be like, phew, dodge that one. Wholesale will say, thanks. I got my money. And now the buyer's stuck with the situation and no

Dan Austin: [24:14] You hear the term like trust but verify? And this one, just don't trust and always verify because you're buying real estate. You're buying property. And depending on the state you're buying it in, you might have some unfriendly landlord tenant laws. And so if there are if it is a squatter situation or whatever, you might wanna be careful. I mean, you're literally buying something that you're gonna have legal obligation to. So don't trust. Always verify.

Mike DeHaan: [24:37] Exactly. And this is coming from people whose wholesale a lot of properties, and I've had tons of opportunity to screw people over. Well, yeah. We've got to for that long term reputation. Right? I mean, so, like, it's just it's little details. And if it's something like, you know, let's say in that situation, the tenants aren't gonna be able to be out for some reason. And you're okay with that. That's fine. Just renegotiate something with the wholesaler, get it in writing, do it by the books. And, you know, if you follow the rules and you make sure that there is a proper paper trail, you can protect yourself. And also too, you can keep our industry alive because the more people that are doing wacky stuff, the more, you know, legislation is gonna feel like they need come and start regulating off market real estate. Good for anybody.

Dan Austin: [25:16] Nope. Absolutely. Yeah. So I I was gonna step in and say so the a lot of the questions I've been getting from for newer buyers really stems from, okay, what do I do? They're not necessarily wholesalers. So this is a good conversation for anybody that's a new investor or just somebody that maybe is a listener because they are an investor but aren't a wholesaler. You know, they say, what do I do? Like, see you posted this on Facebook. I got your email off of I'm on your list. What do I even do? Well, the first thing is typically what you're gonna get with wholesalers is as is, of course, as is condition, and nonrefundable earnest money. So you wanna be able to walk the property if you can, unless you're a sight unseen buyer, and a wholesaler's always gonna go with a sight unseen buyer if that's the option. I shouldn't say always, but most often they will if it's easier to move it that way. Right? Doesn't mean you shouldn't walk in and you should always buy sight and scene just to be competitive. It's just that's the reality of the situation. Anyhow, so when you do that, like, obviously, if you can walk the property, look at it, yep, I like it. So now you're you're going to sign the assignment contract and then submit earnest money. Basically, earnest money goes hard immediately at that point, unless there's some other contract terms that are agreed to, but typically that's what you're going to see. Where in a retail transaction, you're going to have all these contingencies.

Dan Austin: [26:33] Once those contingencies are met according to the contract, your earnest money goes hard.

Mike DeHaan: [26:38] Exactly. And and but when you say goes hard, it means that if the you fail to close, the earnest money will be going to the wholesaler.

Dan Austin: [26:44] Going right to the wholesaler. Yep. So if you have some level of contingency, make sure that, like, that's you're going for it once you submit, once you sign that assignment and you give up your or you give your earnest money to title. You're gonna get the assignment contract, they're usually very simple. Try and get the purchase and sale agreement with the assignment when you go to sign it so that you can see them both at the same time. And then that assignment contract, typically the wholesaler will take that to a investor friendly title company. We have a very investor friendly title company we work with here in our home market, we're always trying to find that. Every market is not that easy. Like some of these remote markets we're with, I literally, when I send things over to Title, I literally outline in detail escrow instructions for them and teach them how to do assignments, because not everybody does. Some states you're gonna have to go to a lawyer for the closing, and some states you can just use a title escrow company like here in Washington, we just use a typical title escrow company. We can use a lawyer, we have used a lawyer. It does vary state by state and market by market what's available and who's investor friendly. So once that happens and you submit your earnest money, you're you're locked in to that contract, and they're typically gonna be closed within thirty days as your typical wholesale closer. I know lately, we've been seems like we've been signing a little bit longer closings just from, giving us a little bit more time on the dispo side and a little bit more.

Mike DeHaan: [28:02] It's also because all of our sellers have so much freaking baggage right now. It's all

Dan Austin: [28:06] like Right.

Mike DeHaan: [28:06] Yeah. Probate. Divorces.

Dan Austin: [28:08] Yeah. So we have one. There's six people on title, and they're all dead. We have to figure out the probate.

Mike DeHaan: [28:14] Except for one. The one is alive, the one we're

Dan Austin: [28:16] talking She's not on title, actually.

Mike DeHaan: [28:18] She's not on title. I'll send Her her

Dan Austin: [28:20] dad is on title, who's deceased as well. So anyhow, yes, assignment contract is signed, and that assignment contract is basically your contract. And like we said earlier, you are basically assuming the rights to the purchase and sale agreement, and it's basically a paperwork chain from the seller to you, basically giving you the opportunity, the rights to buy that contract. Earnest money goes in. At that point in time, as the buyer, the buyer should be having their hard money or their cash lined up, however they're going to purchase that. If it's gonna be hard money, then essentially a wholesaler may ask for proof of funds or something proof that you're qualified at a hard money lender prior to, so that's always good to have if you can work with a hard money lender prior to starting to put offers in. But anyhow, that's where you're gonna line all that up and put your lender in contact with the title and escrow company or the attorney who's going to be doing the closing. And from there, there should be handling everything. And that's where you just need to verify before you sign the paperwork that everything has been, met. A lot of times, we'll do walk throughs with buyers, final walk throughs like you would on a typical retail listing to ensure tenants are out.

Mike DeHaan: [29:32] Mhmm. Yeah. And I I think a big emphasis point there as well is, you know, if you have a good title company, really lean on them to do a lot of that dirty work, you know, like finding finding all the information with the sellers, you know, making sure that wells are figured out or, you know, utilities are paid off, liens are paid off, all that sort of stuff. And something that we find that's very interesting with new wholesalers is that they always feel like they need to take on that burden themselves because they kinda have the relationship with the seller. That's literally what a title and escrow company's job is to take care of that. You know, so let them do it, you know, like, and we've had a lot of people in our instant investor program as well, who have been like, well, you know, they said they want to sell, but I don't want to sign it around until we know what the deal is the probate situation. No, Just freaking get it signed. And or, we had one actually who say, like, yeah, I talked to the title company, and they said they're gonna charge me to look up all that. And I said, well, have you signed a contract and put it in escrow yet? He said, no. And I said, well, there's your problem. If you sign a contract, put it in escrow, they will do all that work because they're anticipating getting paid at the closing of the transaction. You know, if you go and if you go and you ask them to do it beforehand, you know, they will, they're gonna ask for some money for it, which isn't that expensive, a few $100. But like, realistically, there's no reason to do that. Right.

Mike DeHaan: [30:50] If they are willing to sell, the price makes sense, you know, go and get it signed around, get it in escrow, and then, you know, work with the closer as needed, work with the seller as needed to help, you know, provide a service to them to get all the things figured out. But once pieces are moving, you would be surprised at how much more motivated sellers are to get you all the information that's needed. If you're just kinda having a conversation too, something they've been running away from for ten years. Exactly. Start now.

Dan Austin: [31:16] Exactly.

Mike DeHaan: [31:17] When all of a sudden they can taste the money, the third party's involved, they're having conversations about the actual sale, they're gonna be right on it to get stuff done.

Dan Austin: [31:24] Yeah. Rheinzard, some of these title companies is is stuff like you're paying the title company to do this. Right? They're they're don't do it for free. And so once you do get this contract in escrow and it's inevitable. There's a lot of times there's just weird situations that pop up. Some unknown lien or some unknown family member on title from thirty years ago, some weird stuff. Either way, like, let that title company, like, help them, because you should. Don't just say, title company, do it at your job, because you want this transaction just to close as bad as everybody else involved, but also don't make them have you do all the work. You know, we work with some title companies in other states where they're like, hey, can you get me the, it's like 20 lines including the seller's loan number and all this sort of stuff. It's like, no, how about you call the person? They're gonna get it for you. Don't make me do all this work. I don't mind helping feed it, but I'm not gonna go get all this information for you.

Mike DeHaan: [32:14] Yeah. Escrow companies will kinda test you on that too because they're trying to offload their work as Yeah. And so you kinda have to train them, especially if it's a new relationship where you say, hey. Yeah. We can get you those things. The seller should be able to help you out with all that. And just give them the information, then they'll figure it out.

Dan Austin: [32:30] Then they'll figure it

Mike DeHaan: [32:31] out exactly. They're gonna lean on you if they feel like they can. So don't establish that relationship early, that that's sort of how it's gonna work. Right. That's how it'll help us be.

Dan Austin: [32:38] Yes. Because otherwise, you're gonna need, like, double transaction coordination for your for all your stuff because it is a lot of work.

Mike DeHaan: [32:45] It is. It's a huge amount of work. And realize they're making literally thousands of dollars on each transaction. Make them work for it. Yes. Absolutely. Give it to them for free. Don't don't pay them, you know, one and a half percent of the transaction purely just to take the money from party a and give it to party b. Sure. That's important. But make them at least do all the back checking and make sure it's a legitimate transaction. You don't need to do all

Dan Austin: [33:07] that for I just got a new business plan. We're gonna start a title company. You just made that sound way too

Mike DeHaan: [33:12] awesome. It's funny. I know somebody did that recently.

Dan Austin: [33:15] You

Mike DeHaan: [33:16] know, I think it's what Steve Schrang does to you. It's not like his main gig is he has a title company. Like, like Probably a

Dan Austin: [33:21] lot of guys do. I know a lot of investors that step into title companies and and, you know, build franchises.

Mike DeHaan: [33:26] I think it's because we all realize as you get into it and start doing lot of transactions, how not complicated it is and how most companies suck just because, like, they have poor systems and poor customer service. Yep. Yep. But it was just funny. Anyway, so to wrap it all around, the assignment process, we got all all in the weeds there. You're getting a a contract with the seller as the wholesaler. You're selling that contract to an end buyer with that assignment contract. And then, you know, as the buyer, make sure you're doing your due diligence. You're making sure that everything, you know, that you understand the full contract, what you're agreed to, that all the terms are met before you close. Let the the escrow company do all the work. Right? It's just like any other transaction. But instead of having, like, realtors that, you know, you kinda, like, talk up to and they talk to each other, you're basically talking directly to the parties and the wholesalers representing both sides. Mhmm. Like, it's not crazy rocket science. For some reason, people seem to think it is. And I think it doesn't help either that a lot of wholesalers are kinda, like, smooth talking all over the place and they make stuff sound super interesting. But it really is pretty simple at the end of the day. So cool. So anything else to finish that up, Dan?

Dan Austin: [34:35] No. I think you summed it up really well. Nice job.

Mike DeHaan: [34:37] Cool. Right on. So cool, guys. Well, thanks for listening. Please go and subscribe to this show and leave us a five star review. The next person that leaves us a five star review, I'll announce their name on here. And then if you give us a, give us your email, I'll send you a t shirt or something. I don't know. We'll some more five star reviews.

Dan Austin: [34:54] But I'm gonna go write this five

Mike DeHaan: [34:56] star review real quick. Yeah. Thanks. I can finally get Dan's t shirt. But go subscribe to the show, leave this five star review, and download as many episodes as you can. Besides that, you can follow me on Instagram at Mike underscore invest. You can follow Dan at investor man Dan. And then if you wanna learn how to be a wholesaler and how to make some fat stacks on putting deals together, you can go and check out the instantinvestorprogram.com. It is our group coaching program, which now also features a one on one coaching element, where, you know, if you sign up with it, you will actually get one on one time with us once a month where we will act literally physically help you build your business and dive into the weeds of what you're doing. And so for less price than you probably think, you can get some direct coaching from us. So go check that out. Instantinvestorprogram.com. Besides that, Dan, anything else?

Dan Austin: [35:45] Nope. No. Nice. Go, go sign up and get those fat stacks. We're gonna teach you click by click how to do it. That's that's how we coach. Click by click.

Mike DeHaan: [35:53] Click by click. Awesome. Thanks so much, guys. We'll talk to you guys next week.

Dan Austin: [35:57] See y'all.

Speaker 2: [35:58] Thanks for listening. Please leave us a review on iTunes or wherever you get your podcasts, and check us out at collectingkeyspodcast.com for tips and guides on starting your own real estate investment and wholesaling business.