So you’ve dived into the thrilling world of real estate investing and wholesaling. You’re attending meetups, watching webinars, and perhaps even shadowing some seasoned pros.
And there’s this term you keep bumping into – “under contract.”
It might sound like legal jargon meant for the courtrooms, but trust me, it’s simpler than you think, and incredibly essential for anyone looking to make a mark in the property game.
Whether you’re aiming to flip houses or step into the fast-paced dance of wholesaling, understanding “under contract” is a rite of passage.
Let’s break it down, shall we?
What does “Under Contract” Mean?
When a property is “under contract,” it means that the seller and buyer have agreed on a price and have signed a purchase agreement.
But—and here’s where it gets a bit interesting—that doesn’t mean the deal is done. This stage is kind of like an engagement before the wedding. Both parties have made a commitment, but there are still some hoops to jump through and conditions to meet before the sale is finalized.
Think of it as a holding phase.
The property isn’t exactly sold, but it’s not openly available on the market either. It’s in a transition, waiting for inspections, financing approvals, or other contingencies to clear.
In the eyes of a savvy investor or wholesaler, seeing a property “under contract” signals that the race to acquire it is in its final lap. But, as we all know, anything can happen in the final moments. So, keep your eyes peeled and your knowledge sharp. It’s these details that can make or break a deal.
Assigning vs Double Closing Contracts
Navigating the real estate world, you’ll often hear terms thrown around like “assigning” and “double closing.” While they might sound like intricate dance moves, they’re actually strategies employed by investors and wholesalers, especially when a property is “under contract.” Let’s dive into what these terms mean and how they play into the grand scheme of things.
Assigning: Picture this: you’re a wholesaler and you’ve got a property under contract at a fantastic price. But instead of buying it yourself, you “assign” the contract to another buyer for a fee. In essence, you’re selling your rights in the contract to someone else. The original contract between you and the seller remains unchanged, but now there’s a new player in the mix who will close the deal. Assigning is all about leveraging a good find without taking on the full responsibility of the purchase.
Double Closing: This one’s a bit more of a two-step. Let’s say you’re that same wholesaler, and you’ve secured a property under contract. Instead of assigning the contract, you actually buy the property (that’s the first close). Moments or hours later, you sell it to another buyer (that’s the second close). It’s like a quick relay race where you’re the middleman, briefly holding the property before passing it on.
So, how do these strategies relate to being “under contract”? Well, both techniques hinge on having a property under contract. The contract acts as your golden ticket, giving you the flexibility to either assign the deal or to momentarily step into the buyer’s shoes before flipping it. Both paths have their advantages, risks, and nuances. The trick is knowing when to dance with each.
Can I Walk Away from a Contract?
So, you’ve got a property “under contract” and the pressure’s mounting. Maybe something feels off, or new information has come to light. Can you just walk away? Let’s unpack this.
What does “walking away” mean?
When we talk about “walking away,” it’s essentially deciding not to go through with the purchase even though you’ve entered into an agreement. Picture shaking hands on a deal and then, for whatever reason, letting go before the handshake’s solidified.
When can you walk away?
There are valid reasons to walk away, like discovering an issue with the property that wasn’t apparent during your initial check. Perhaps you uncover significant foundational problems or legal encumbrances that drastically change the property’s value. If your contract has contingencies (and it should!), and those contingencies aren’t met, it might be your exit ticket.
But—and this is a big but—it’s crucial to consult with a lawyer, especially when crafting a contract. They can ensure that you’ve got solid clauses in place, allowing you to assign deals and protect yourself from unforeseen issues.
It’s always wise to have a legal safety net.
The Ethical Consideration:
Now, here’s the part that’s less about contracts and more about character. Remember, behind that property is a motivated seller—a real person or family. They might be relying on your commitment to solve their own financial or personal dilemmas. If you’ve promised to help and then decide to walk away purely because you couldn’t find a buyer, that’s not just a contractual blip—it’s an ethical one.
There’s a vast difference between walking away due to unforeseen property issues and walking away because the deal isn’t as sweet as you’d hoped. It’s essential to be transparent and genuine in your intentions. Leaving a seller stranded, especially when they were counting on you, isn’t just bad for business; it’s bad for humanity.
So, as you dive deeper into the real estate realm, always remember: integrity and honesty are as valuable as any property deal. Do right by others, and success will likely follow.
Alternatives to Wholesaling Contracts
The world of real estate is vast, and while wholesaling might be the talk of the town, it’s not the only dance on the floor. Let’s explore a couple of intriguing alternatives that might just resonate with your real estate rhythm.
Instead of securing a property and then finding a buyer, reverse wholesaling flips the script. You first identify potential buyers and what they’re looking for. With a list of eager buyers in hand, you then scout for properties that fit their criteria. The benefit? It’s efficiency at its best. By knowing what your buyers want upfront, you can streamline the property search, often leading to quicker deals and satisfied clients.
Check out this “mini-course” on Reverse Wholesaling:
This strategy sits somewhere between wholesaling and retailing. Here’s the drill: you secure a property under contract, but instead of assigning that contract to a buyer, you actually close on the property and then list it as-is on the MLS (Multiple Listing Service). It’s like wholesaling but with the added step of taking the property to a broader market. The catch? You’ll need funding secured to close on the property yourself. But on the upside, accessing the MLS can expose the property to a wider pool of potential buyers, potentially increasing the profit margin.
See how wholetailing works in real life, in this video:
Both these strategies, like all things real estate, come with their own set of challenges and rewards. The key is understanding which approach aligns with your resources, skills, and goals. Real estate isn’t one-size-fits-all; it’s about finding the strategy that fits just right.
How to Find Sellers That’ll Sign Your Contract
If you’ve ever wondered how the pros snag those elusive property contracts, it’s not just about being at the right place at the right time. It’s about a methodical approach, a little creativity, and a splash of tenacity. Let’s roll up our sleeves and dive into a lead generation plan to connect with potential sellers.
Driving for Dollars:
It sounds simple because it is, but it’s also undeniably effective. This tactic involves cruising around neighborhoods, keeping your eyes peeled for properties that look distressed or abandoned. Overgrown lawns, piled-up mail, or boarded-up windows can be indicators of a potential deal. Once you spot them, jot down the address, do some research to find the owner, and reach out. It’s old-school, but it’s boots-on-the-ground effective.
It’s not everyone’s cup of tea, but it can be piping hot when it comes to results. Pull together a list of potential leads, pick up the phone, and start dialing. Remember, it’s a numbers game; you’ll face rejection, but all it takes is that one “yes” to make it worthwhile. And don’t fret—over time, you’ll refine your pitch and improve your success rate.
There are platforms and services where you can access lists of potential sellers. These can be folks in pre-foreclosure, owners of vacant properties, or even landlords of multi-family units. The magic isn’t just in having the list—it’s in how you use it.
NOTE: we use Deal Machine and Propstream to pull out lists.
Mailing Those Lists:
Once you have a list, it’s time to make your move. Craft a compelling letter or postcard that speaks directly to the seller’s needs and potential pain points. Personalization is key—no one wants to feel like they’re just another address on a mass-mailer. And a pro tip? Follow up. Sometimes, persistence is what separates a missed opportunity from a signed contract.
NOTE: check out our most recommended direct mail company FOR investors: Ballpoint Marketing
Check out this complete guide for finding deals (contracts) off-market:
Navigating the real estate waters requires more than just a sturdy boat; you need a reliable compass. By implementing these lead generation strategies, you’re charting a course towards sellers ready to sign on the dotted line.