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Most of us get really nervous just thinking about talking to a potential seller. One of ways to boost your confidence is to study the terms that may or may not come up.
The glossary below is comprised of the most common wholesale real estate terms you will hear, and most of them from other real estate investors and wholesalers.
Realistically, unless a seller is an experienced real estate investor, you'll know way more than they do about the wholesale real estate terminology listed below. But it's a good idea to get familiar with what each one means, so you are prepared. I assure you there will not be any pop quizzes.
Make a simple script outlining what you want to convey to sellers. Use regular, simple words to avoid confusion. If you plug in too many of the wholesale real estate terms, the seller may be too embarrassed to ask what you mean, and you'll alienate them right away. Sprinkle enough wholesale terminology to let them know you are confident and professional about your wholesaling real estate business.
It's best to keep it brief, so your "speech" doesn’t sound scammy or like you don’t know what you're talking about. And keeping it brief is easier to memorize.
When you are face to face with a motivated seller, keeping good eye contact will add confidence to your presentation, as well give off an air of experience.
Because sellers who need to sell quickly are typically in a jam, they will appreciate you and what you can offer -- if you keep it simple. Don't be nervous, these wholesale real estate terms may never come up, but if they do, you'll be ready.
ARV -- After repair value, is the expected value of a property after needed repairs have been finished.
Appraisal -- An appraisal for real estate purposes, just like most things that are for sale, is determined by what a qualified buyer will spend for a property. Most real estate appraisals are done by licensed professionals and are comprised of through research into the property, surrounding neighborhood and recent completed sales.
Assignment -- Most real estate wholesalers assign their buy/sell agreements to other investors. For this they charge an assignment fee, and the buyer of that assignment has the right to buy the property from the seller as agreed on the buy/sell form
Bandit sign -- No, it's not an alert to train robbers ;-) Those signs you see in many populated towns, stuck on corners with advertisements such as "I buy houses, Any condition". Those are called bandit signs. For some wholesalers they work really well, others, not so much.
Bird dog -- Contrary to popular belief, it's a term for someone who watches out for events, not a Labrador. If you hire a bird dog for your wholesaling business, you'll be offering to pay a referral fee to someone who gives you good leads about property that will fit your wholesaling plans. This link will give you tips on how to find really good bird dogs for your wholesale business.
BPO -- BPO is an acronym for Broker's Professional Opinion. It's a whittled down appraisal of sorts, much less expensive but not good enough for finance companies. You'll get an opinion of a property's current value based on real estate statistics in the area.
Bridge loan -- Not typically used for wholesaling, but a term you should be aware of from your buyers who may not have the cash right now to fund your wholesale deal.
A bridge loan is temporary funding, a loan to "bridge" the time gap from when a deal closes to when they can pay off the loan in full or get permanent financing.
Buyers list -- Buyers lists are names and contact information of individuals who are ready to buy wholesale deals. Some wholesalers run ads on Craigslist or FB with "straw" properties to get their lists of sellers.
Capitol -- Capitol is another word for money. Funds. You may also hear it in the phrase "capitol investment", which refers to the amount of cash invested in a particular transaction.
Closing -- To say a property has "closed" means that the ownership has transferred to someone else. The final act.
The closing is typically held in an escrow office, the office of a title company or in some cases, with a real estate attorney. It's a time that all the official and legal documents are signed, and the funds are transferred to the seller or seller's agent.
Contract -- When used in real estate, a contract is a legally binding agreement or form whereby one party contracts with another, and both parties agree on an outcome.
Some common contracts you'll come across with wholesale real estate are contract agreements to buy and sell, contracts for deed, and assignment of contract to name just a few.
Direct mail -- Postcards and letters announcing your willingness to buy a property is what direct mail is. Many real estate wholesalers get good results with direct mail. It's a way to take a list of names and addresses and directly mail them your personal advertisement or proposal. To learn more about direct mail, and how it can help your business use this link.
Distressed property -- When a homeowner no longer keeps the property up to acceptable standards for the neighborhood, you might call it distressed.
Often the property is in need of a roof, or the paint is peeling. However sometimes it's more than simply cosmetic repairs and the distress can go deeper into the structure itself. Think sinking foundation, or worst case -- fire damage.
Double close -- A double close is when a buyer buys the property and takes title to it, and then immediately (think minutes) sells the same property to another. A double close can be expensive, because you'll have twice the seller/buyer fees as compared to a single closing., so it's best to avoid a double closing. Just one of the wholesale real estate terms you will come across.
Driving for dollars -- Most of us have driven for dollars at one point of time or another. It's a catchy phrase meaning that you drive a specific neighborhood and search for particularly interesting real estate deals.
Some things to look for are Christmas lights still up in August, no trash out on trash day and a general state of distress. When I drive for dollars, I'm looking for the neighbor who may share information with me.
Due diligence -- Due diligence is a fancy word for doing your own research to be certain that things are just as they seem.
In real estate terms, you'll hear the term due diligence when you are directed to look for underlying liens, verify ownership, and other items like easements that may affect the property in a negative way.
Earnest money -- Cash or check. Typically earnest money is another term for the money that is included when making an offer on a piece of real estate.
Email marketing -- Even if you don't have a website or blog, you can purchase a domain name (your-name.com) and use that to email a list of potential buyers, sellers or maybes. Keeping your name in front of potential buyers and sellers is paramount to making lots of deals.
Escrow -- Escrow is a function that holds signed documents in waiting for the funds to close (end) a deal or transaction. Something like a middleman who charges for a service to guarantee the exchange of valuables (signed grant deeds, earnest money checks, etc.)
Motivated sellers -- A motivated seller is someone who is willing to take less than market value for their property in order to be rid of the underlying debt, or other biting issues they may have.
Rehab -- Short for renovated, which typically refers to updating a property to bring it to current code. Or more often, for aesthetic reasons.
Sellers list -- Something every wholesaler must have! After you've done a few deals, you'll have a healthy start on a solid sellers list. I always ask each potential seller while we're negotiating if they have other properties as well as the one we're discussing. You'd be surprised at how many additional deals this one simple question brings.
Target market -- Like a bullseye, a target market has been niched down to specific neighborhoods, or when it comes to people, your target market is a specific demographic (young marrieds, seniors, etc.).
Title report -- a proper title report is performed by a Title Company. Their job is to furnish a title report that includes all current vestings of a property along with any liens or financial encumbrances.
Having a title policy, which can be generated from the title report, insures the new buyer to the amount of the sales price against any claims of ownership or financial claims on the property.
War zone -- Neighborhoods that have disturbing qualities, such as gang activity can be a huge deterrent when you are attempting to market a property. Unless you are super-tuff, it's probably best to avoid wholesaling in these types of areas. When you hear this wholesale real estate term, it's best not to get too excited.