Wholesale Real Estate

Posted by MichealH Alexander on December 13th, 2020

What is a Wholesaler in Real Estate?

It is called wholesale in real estate the process of getting a distressed home under contract for a limited time to then assign it to another buyer.

Your intentions as a property wholesaler are not to fix and flip the property. Instead, you market it for a higher price than the one owners requested in the contract.

This strategy is beneficial for those looking to get into real estate but don’t have the money to do it. You just need to be careful not to fall into legal confusions or tricky contracts.

Success is guaranteed if you follow this next 7-step proven guide to wholesale real estate

Step 1: Find a Property to Wholesale

Not all properties are wholesale material. The key to wholesale is finding properties with under market value. These are typically those needing some repairs, or whose owners need to sell quickly. Distressed homes can be sold for more than what you put it under contract for. 

It is super important to always mention you will pay in cash and buy as it is. The biggest pro about wholesaling real estate is the low investment needed to start. You can find homes to wholesale for free or for inexpensive rates.

How to Find Properties to Wholesale

Let’s talk about the most widely used methods to find the right properties for wholesale.

a. Real estate wholesale groups and investment groups

When we talk about these groups, we mean organized frequent meetings and social media groups on Meetup, Facebook, or LinkedIn, between real estate professionals and investors of all kinds. They are perfect to create valuable connections with potential lead sources, partners, and mentors. Usually, member receive weekly emails loaded with high-quality information about your area.

This way, you can be up to date regarding what is wholesaling real estate. You may also know about what properties are available for sale, prices, what neighborhoods are selling better and more. Actually, most of the properties listed in these emails come from desperate sellers probably interested in your alternative. All this data will nurture your property wholesale business.

b. Websites for Wholesale Real Estate Professionals, Investors, & Flippers

There are several websites you can visit to find some distressed properties for sale. For instance, Craigslist, FSBO, HAR (MLS site for Realtors) and HomesByOwner are well known among wholesalers. Make sure to apply location filter and use the right keywords to obtain the best results in your research. Phrases commonly use for posts in this niche include: motivated seller, distressed property, fixer upper, sold as is, must sell or estate sale are

c. Hire an Assistant / Property Finder to Wholesale Real Estate

Do you already know what is wholesale real estate “bird dog”? This is the alias used in the industry to name the property finder, a part-time worker hired by the wholesaler. He/she doesn’t need any special real estate knowledge. Just tons of energy and part-time availability to find good properties by cold calling, scouring neighborhoods, and knocking on doors. College students are regularly the right candidates for this duty.

This is a great option to identify great opportunities for property wholesaling that won’t consume your time. The best part is that your assistant will always keep hunting as they are not hourly-paid employees. They receive a fee when a house they found is sold.

d. Use Bandit Signs

What is a real estate wholesaler? Well, it is the person who puts those bants signs in the street. You’ve probably seen one, or many doing this!

And yes, this means you need to invest some money to get these signs made and put up. But they are a great way to attract property owners in need of fast cash. Also for those who don’t see putting their home for sale with real estate agencies as an option.

e. Mails and Flyers

You can hire direct mailing services or purchase online mailing lists to make sure the flyers, postcards and mails you send really get to your distressed seller audience.

f. Visit Court for Records

You can go to court and request to look at divorce, public tax, and probate court records to identify recently inherited properties and past due homeowners, respectively. They are great candidates to add to your mailing list.

Step 2: Convince the Owner to Sell to you

It is time to make you offer and present your best arguments on why you are the right option to get that sign. Here is how you can do it:

Let the owner see why you are not a conventional real estate agent, approach them in a delicate way, earn their trust, and make them feel comfortable before you try to move forward with the transaction.

Take the weight off their shoulders.

Once you know about the problems driving them to sell their property, tell them about how this decision can alleviate their pains.

Make sure to emphasize how the process will imply no stress on them, as you are taking complete care of it (contract, inspections, appraisal, and closing).

Also, highlight they won’t have to face any upfront costs.

Explain the reasons behind your offer. Let the seller know how the current conditions of the property will require repairs and additional expenses from the future owner, making your offer is totally fair.

Get that signature! Find an attorney to create a contract for you or add clauses for each case to a generic purchase contract. Despite wholesaling to an agent is completely legal, clients don’t feel ok about agents making a profit from their property right away. Therefore, agents usually assign the property to a partner.

Step 3: Build you Wholesale Dream Team

If you decide to dedicate yourself to the property wholesale industry, you better get your team built to save time and money in the long run. You will need:

An appraiser: this member will make sure the price you are paying will give you room enough to make profit later. Also, an experience buyer would request an appraisal before placing their offer.

A title company: when looking for a title company, there are two important thing to take care of: first, is being crystal clear about your wholesale intentions and second, make sure the title company if they deal with assigned contract. This partner will help you run a title search and check there are no liens on the property you are negotiating.

A reliable contractor: despite you’re not going to deal with any repairs when wholesaling, this team member is vital. A contractor can go with you and check the property out to define its real conditions. This way you can show future buyer an idea of the potential repairs or renovations needed and back your price.

Step 4: Determine Potential Renovation Needs

To continue with the previous idea, you must assess the renovations needed in the property you plan to wholesale. These costs are a determining factor when defining your cut in the deal. If the house has a great potential after few renovations, this allow the investor to get more money for the property, and so do you.

The greatest part is that you already have the ideas and budget you contractor gave you. This gives you the back up you need when presenting your option to investors. Let them know about the potential of the property. Use this as a negotiating tool to increase your benefit.

Step 5: Find a Buyer to Buy You Wholesale Real Estate Properties

As this is not a regular real estate transaction, you are not going to look for a regular buyer. When wholesaling, you must look for someone interested in buying a cheap property and make the repairs and renovations needed. These commonly are investors or contractors. They know better what to do with a property to turn it into a dream, higher-value place.

You need to find the right buyer the fastest possible to meet the settlement date in the contract. Experienced wholesalers already have a list of potential buyers. If you’re new to this game, you can start building your database (CRM) repeating processes from the previous steps, including:

Using wholesale websites to advertise your property.

Send flyers with property info around the neighborhood

Email investors you meet and group meetings, networking events, and social media groups about your property.

Step 6: Negotiation, a Critical Moment

This is probably the most expected step in the process, the moment of truth when you get to know what your profit will be. The difference between the wholesale price and the price under contract (plus all costs incurred to buy it and sell it) will determine your profit.

Make Sure This is a Good Deal for You

As you did with the seller, you must now convince your buyer of the value you propose. For this, make sure you use your contractor’s estimates to show the potential the property has.

The buyer must make a good faith deposit to the wholesaler or the title company and held in escrow until the property goes to settlement.

Make sure your price also covers all the expenses you made to carry out this deal (team fees, marketing, even gas).

In general, we talk about a good deal when profit is 00 and above. If you think you can’t make that much, better consider not to take it. 

Step 7: The Closing

The closing is a ceremony celebrated at the title company office, on the date set in both contracts. In this meeting, the deed is transfer to the new owner, who also receives the keys of their just-purchased property. Closing costs are buyer and seller responsibility. Wholesale Real Estate Contract

This final step is the reason why you must choose an investor-friendly title company, to keep all partied satisfied with the wholesale deal. Depends to state legislation whether each assignment is considered or not two separate transactions and taxes charged.