In this instructional segment, real‑estate investor Joe Homs explains the essential property‑level due‑diligence steps a wholesaler must complete before contracting a deal. He outlines how to identify all encumbrances on a property—first, second, private, and bank loans, as well as various liens such as mechanics, tax, and child‑support liens—and why each must be accounted for in the purchase‑price calculation. Homs details the hierarchy of payoff at closing, emphasizing that the first trustee (first lien) is paid before any junior liens, while tax and child‑support liens must also be satisfied. Using a concrete example (ARV $500k, max allowable offer $350k, first trustee $300k, mechanics lien $10k), he demonstrates how to compute the minimum cash‑out price ($310k) and the negotiation window ($310k‑$350k). He then walks through a step‑by‑step negotiation approach, starting low, making counter‑offers, and showing how to negotiate down the amount owed on mechanics or child‑support liens to improve the deal economics. The overall message is that wholesaling is a numbers game: gather accurate lien data, run the numbers, and negotiate both the purchase price and any junior lien amounts to stay within the investor’s maximum offer.
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Hi, my name is Joe Homs. I'm a real estate investor. I work with H&M Realty Group, and we're here talking about wholesaling. In this segment, we're going to talk about the property itself and what you, what you need to find out about the property before you put it under contract. Obviously, the biggest thing is what loans are on the property, whether it's a first, second, third, private loan, bank loan, whatever. It really doesn't matter. You just need to figure out how many loans are on the property. What is encumbering that property, because you're going to need to use that in your calculations to figure out if you can buy this place. Okay. Be aware that there could be some liens on the property other than loans from banks. Mechanics liens are a perfect example. A mechanics lien is placed on there when you hire a contractor and you don't pay him, and so he has the right to lien your property And whenever you decide you're going to do something to refinance it or sell it, you have to pay that off. Okay? And so that's why that lien's on there. Same thing with tax liens, child support liens. Well, you have to be very careful with tax liens is even at the courthouse steps when you're buying a property with the first trustee. First trustee wipes everything out behind it, whatever's recorded after the first trustee. Okay. Except for tax liens, state, federal, county property tax liens, things like that. All those are there. You have to pay them. I purchased homes at the courthouse steps before, and believe me, I've paid my share of property tax liens, U.S. state income tax liens, state liens for other people. Again, flipping properties is a numbers game. You just put that into the numbers. And and go forward from here. So, in the process of doing this, let's say you know let me give you some examples here. So you have a property you know with an ARV of $500,000 ARV, and you're talking to this person and. You know, the most you can pay, let's say, is $350,000 is your maximum allowable offer. And there's a first trustee for $300,000, first trustee. And I won't get any more difficult than this, but, you know, let's say there's a mechanic's lien for $10,000, mechanic's lien down here. Okay. So to buy this property, You're going to need to pay off this portion down here. Okay, you need to make sure that that's all accounted for. So because when you go into escrow, the first trustee has to get paid off, and the mechanics lien will also have to get paid off. So the minimum that this guy can sell the off— the house for is $310,000. So what you're basically dealing with in this type of transaction Is the difference between $310,000 and $500,000. Obviously, the seller wants $500,000. You're at $350,000. You don't want to go higher than that. He's at— $310,000 is the most that he can sell this property for and walk away with basically nothing. So the part about negotiating the number is right in between here. It's between the $310,000— in this case, $310,000 and $350,000, which is your maximum. So there's like a $40,000 difference here. So I'm talking to this person and I say, you know what, I'll give you— because you don't want to start at the maximum, maximum allowable offer because they're going to go up from there. They're going to say, well, he's already said he'll buy for $350,000, so let's ask him for $375,000. So you want to start out smaller. So, you know, in this case I would start out at $310,000. He'd come back with a number. I'd say, you know, the most I can pay is $325,000. Which means he gets $15,000 in his pocket to walk away from his problem. And then that's a decision that he can make, and he or she can make, and that's why you're there to negotiate that transaction at that point. The other thing I will say is that mechanics liens and some child support liens are negotiable. So in this transaction, you owe $10,000 to the mechanic, and you call them up and you say, hey, I know you're owed $10,000 on this. I'm trying to buy the property. But the numbers aren't working correctly. What about if we just pay you $5,000 for this? Is that okay? And the mechanic may— the contractor may say, you know what, I've been waiting for this money for 5 years, 6 years. My choice is to either wait longer or take you up on your deal. Yeah, I'll do it for $5,000. So now you've saved yourself another $5,000. So negotiate with these people as well. Child support, there's a little bit of negotiation that could possibly go on because a lot of this stuff comes from the court. But, you know, they understand as well that a little bit of money is better than zero money. So they look at the file and they say, you know, yeah, we're owed whatever, $10,000, $20,000, $30,000, $100,000. If we can get, you know, $75,000, $50,000, for the mother and the children, that's better than not getting anything at all. So it's, it's, it's just a negotiation process. So I hope that helps you out. Definitely you need to know information about the property. Again, my name is Joe Homs, and I'll see you on the next video.
