We get a lot of people new to the real estate investing industry that contact us about working together and there are often a lot of misconceptions about how the process works. Nearly all the information out there on Youtube, or put out by real estate gurus, masterminds, and mentorships, outline a process that works in 49 states, but not in New York. This post will explain some of the differences between New York and the rest of the country.
What is a Bird Dog vs a Wholesaler in New York?
A Bird Dog acts as a scout or spotter for a real estate investor. It is their job to hunt for and identify distressed or underpriced properties that have good investment potential. They then take these leads to a real estate investor who will handle the negotiations with the seller and ultimately close on the property. Once the closing goes through, the bird dog typically gets paid a commission/finder’s fee for bringing in the lead.
A Wholesaler will still source their own property leads, however, they will take the process further. After identifying the property, the wholesaler will handle all negotiations, they will use their attorney to go under contract with the seller, and put up the deposit. The wholesaler will then look for an investor who can close on the property and will assign the property to that investor for a fee.
The largest difference between the two is that the bird dog is not under contract with the seller and has no money (i.e. deposit) invested in the deal. Whereas the wholesaler is under a binding contract and has put up the deposit money.
The image below demonstrates the difference between being a bird dog and wholesaler in New York based on the different interactions each party has. As you can see, the wholesaler has the additional responsibility of having their own attorney in the transaction whereas the bird dog is just providing the vetted property to the investor to contract themselves.
What’s Different About Wholesaling in New York?
The big difference between being a wholesaler in New York and most of the rest of the country is the process for going into contract with the seller and the fact that New York is an attorney state.
Everywhere else you can go meet with a seller, bring a copy of a contract that you got from an attorney or another investor, have the seller sign on the spot, and optionally you’ll put down a $100 deposit.
Whereas in New York, when you come to an agreement with the seller, the seller’s attorney will first need to prepare the contract, their attorney will send the contract to your attorney who will forward it to you to sign, then you send it back to your attorney who forwards it to the sellers attorney who forwards it to the seller to countersign – you’ll then be under contract. During that signature process which takes multiple days, you’ll wire your deposit to an attorney escrow account. The standard for deposits in New York is 10% of the purchase price, so it’s not surprising to see a seller’s attorney ask for a $30k deposit on a $300k purchase price, and you need to have those funds available to put down.
Once you are under contract, the process isn’t that different except that the attorneys manage the closing process in New York whereas this is handled by a Title Company in most of the country. It is important to note that the contract you’ll be in is binding on both sides and is not subject to an inspection contingency. In many other states, it’s standard practice for the seller to renegotiate the price after more carefully inspecting the property, however, in New York, that inspection process happens before you enter the contract and is not an excuse for backing out of the contract. Because the contract is binding for both parties unless there are issues with the title, you are obligated to buy the property at the contract price or lose your deposit, and likewise, the seller is bound to sell the property.
How We Work with Wholesalers?
The way we work with a wholesaler in New York is very simple. Wholesalers approach us all the time with properties that they already have under contract. We run our comps, evaluate the property condition, and make a cash offer. If the offer is accepted by the wholesaler, we go ahead and sign the assignment contract and we close on the property. Since the wholesaler already has the property under contract we just make the decision about whether we want to buy the property for the wholesaler’s asking price.
However, if you have a seller and you’ve agreed on a price and just need some assistance with funding the deposit or actually getting the property under contract, you can contact us and we can help you get the deal locked up.
How We Work with Bird Dogs?
There is more variety in the way we work with bird dogs because different people like to take a lead to different stages of the process.
Some bird dogs will send us leads they have gathered from “driving for dollars” and we’ll work on seeking out the owners of those properties. Others will make initial contact with the seller to gauge their interest in a cash offer before turning them over. Regardless of how far the lead is taken, we’re able to collaborate on the deal.
What We Expect When Working With Bird Dogs in New York
Don’t just send us MLS properties unless you have some “inside information” about the property or are already in communication with the agent or seller. We regularly review properties listed on the MLS, so you need to bring some additional value for the lead to be useful. For example, if the property is being sold tenant-occupied, if you are one of the few people who know that the tenants are open to cash for keys, this would be valuable information. Good deals on MLS have gotten harder and harder to find but they still exist.
Unless you are sending us driving for dollar leads, please do some research on the property and provide us with more information beyond what is publicly available. If you think there is a good deal to be had, send over some comps that show the ARV (after repair value). Imagine you are pitching this deal to an investor – convince us why we should invest the time chasing down this lead.
Common Misconceived Questions
Because of the confusion about being a bird dog and wholesaler in New York versus other states, we get a bunch of misconceived questions that aren’t relevant in New York. These questions are often perceived as a roadblock to doing your first deal, but we’re here to tell you that it won’t matter.
Do you have a contract I can use?
In New York, the seller’s attorney will be writing the contract – you don’t need one.
Do you have an investor-friendly title company?
In New York you don’t need to worry about finding a title company. You just need an attorney to handle your real estate transaction.
Do you have an investor-friendly attorney?
If you are acting as a bird dog, you don’t need to worry about having an attorney. The seller will have an attorney and the investor buyer will have an attorney.
If you are wholesaling, you will need an attorney. We’d be happy to recommend an attorney to you.
If you are a bird dog or wholesaler in New York and looking for a reputable investor to partner with, learn more about the benefits of working with us and reach out!