Flipping Houses: 3 Ways To Spot A Fake Buyer
From Andrew “The Maestro” Massaro…
Nothing is more annoying than having some dude see your ad somewhere, contact you and express interest in buying your property… and then turn out to be a fake.
Happens all the time. Much more than it used to…
Somehow, bird dogging someone’s property has become very, very popular. Why? Because all someone needs is a buyer’s list. Actually, most of the bird dogs today don’t even have that. What most of them do is stick your property on their website, or on a bunch of websites, and pass it off as their own.
As a wholesaler, we’re not against a guy bringing us a buyer. In fact, I welcome it. But, there is a protocol that needs to be adhered to. If you lie to me and pass yourself off as a cash buyer, I’m not as likely to trust you. Bad way to start a relationship, dude.
So, to protect your time and reputation, here are 3 dead giveaways that the “buyer” you’re speaking with has no intention of actually buying your house, but wholesaling it to someone else. (Oh, and let me preface this list by explaining that I’m referring to new buyers… not one of your regulars that buys houses from you each month.)
1. He wants to buy sight-unseen.
So, this guy you’ve never met or spoken with before, sees your bandit sign or online ad, and wants to buy the house, sight-unseen. Doesn’t happen. Your go-to, regular buyer may… but, not someone you’ve never done a deal with before.
In fact, you may need about 10 deals with a buyer before he will travel that route with you. And, most still won’t.
Look, these guys are sinking thousands upon thousands of dollars into an investment that, if it doesn’t work out, could crush their business. One bad deal could be disastrous. And, they aren’t about to take that chance. What takes them all of an hour – total, including travel time – to walk through a house, could save them tons of money and headaches later.
2. He asks you to send him the contract to sign.
This is a huge red flag. As a wholesaler, you always want to meet your buyer in person when he is signing contracts and delivering deposits.
Again, it takes almost no time whatsoever to get this done. In fact, I take all contracts, copies and addendums with me whenever I show a house. That way, if they want it, I can write up the assignment contract right then and there and collect a deposit.
I kill two birds with one stone. And, I can then deliver all of the docs and the check to the title company on my way home or back to the office. Saves a ton of time and effort. Much more efficient…
Most wholesalers will go ahead and honor the ridiculous request and send over the contracts. Thinking the deal is done, they will stop promoting it, only to have a week or two go by… with no signed contracts in sight.
So, never send over any contracts. When a buyer makes this request, kindly explain that you prefer to meet in person to get the contracts signed… and collect the deposit.
Which brings me to my next red flag…
3. He refuses to give you a deposit.
Even though the deposit check is written out to the title company, he refuses to put any money down. Or, and this one really cracks me up, he offers a deposit of $10. Give me the world’s biggest break, will ya?
Am I wearing my Ronald McDonald costume, or something? What do you take me for?
Any “buyer” who refuses to give you a deposit of at least $1,000 is not a buyer. He not only will not be buying your house, but he will take weeks trying to find a buyer, tying up your property the entire time.
The earnest money terms are non-negotiable.
It’s a non-refundable deposit, made out to the title company. And, if you fail to close, I keep your money and move on to another buyer. The only part that’s negotiable is the amount.
My rule of thumb is, if your selling price is less than $50k, a thousand bucks is fine. If it’s more than $50k, then I need at least $2k. And, if your property is super expensive (for a wholesale deal), like $250k or more, don’t be afraid to require $5k down as your deposit.
Look, if a guy is going to be plunking down $50k+ cash to buy the house, then a few thousand bucks shouldn’t be a problem. If it is, he’s a fake.
Okay, so what do you do with these people?
Just explain that you don’t mind if he shops your property to his buyers. But, no way are you going to allow him to lock your property down while he does this. So, cut a deal (either a percentage split or have him mark your selling price up) and then tell him to pull in a buyer. And we’ll make sure everyone gets paid.
Now get out there and flip something!
Andrew “The Maestro” Massaro
Got any questions about this stuff or anything else? Let me hear from you in the comments section below.