What is a real estate wholesaler?
A real estate wholesaler is a SOURCE OF REAL OFFERS for other investors who have the cash to close those OFFERS. The wholesaler collects its “allocation fee” from the investor who actually steps in and buys your OFFER. They are like the wholesalers of any other intermediary in the industry that supplies products for its customers.
The “Assignment Rates” get their name from the way the sales agreement is structured in a wholesale OFFER.
A wholesale OFFER is as follows:
1. Wholesaler contracts the deal -The wholesaler negotiates the deal with a seller and puts the property under contract -they sign a sales agreement with the seller with their name (or company) as buyer. Their name appears like this, “Wholesaler Name and / or Assigns” as Buyer, which gives them the right to “assign” their rights in the agreement to another “Buyer”.
2. Wholesaler assigns the OFFER-When the wholesaler finds that the end buyer is willing to pay the contract price + assignment fee, the wholesaler and the end buyer complete a “Contract Assignment”. The “Contract Assignment” assigns all rights to the original OFFER and the original agreement with the Seller to the final Buyer.
3. DEAL goes to closing-The seller and the final buyer go directly to the settlement and the wholesaler receives their fee at closing. When I assign my contracts, I charge my assignment fee “off the sheet”, which means I receive a check that is not on HUD 1 and the Seller never finds out about my assignment fee.
The reason the word SALE is displayed in UPPER CASE is to emphasize the word. Investors are always in the market looking for the next OFFER. There is a BIG DIFFERENCE between a “house for sale” and a legitimate OFFER. Everyone in the business is looking for a deal, not just a house for sale. Many would be inexperienced wholesalers often “buying” “houses for sale” in hopes of charging an “allocation fee” for houses that ARE NOT DEALS.
Why are successful wholesalers so valuable to you as an investor?
A successful wholesaler will provide you with a constant source of OUT OF MARKET DEALS which are generally the LOWEST AND HOTTEST DEALS you can find.
Once you buy your first offer from a successful wholesaler, they will continue to call you with future opportunities.
How can you make wholesalers work hard for your investment business?
Most wholesalers maintain a mental “VIP” buyer list in addition to any email buyer list. The VIP Buyer (must be you) receives the phone call about the offer the first day it is available; To maintain your VIP Buyer status, go to the OFFERS immediately and give the Wholesaler a “Yes” or a “No”, or “Offer to Buy” the same day they call. Do this and you will always receive the first opportunity on your offers.
Do you want to become a successful wholesaler? Master these 3 skills:
1. Negotiation-Your job as a wholesaler is TO BE THE SOURCE OF REAL BUSINESS. Your success is based on your ability to negotiate and contract OFFERS that are SO VALUABLE that other investors don’t even think twice about paying your allocation fee.
* Please note that investors are looking for DEALS that represent 65% of retail value MINUS repair costs. You need the contract OFFERS for LESS than that number to count your allocation fee.
2. Marketing-A successful wholesaler needs to have a continuous source of potential customers to bid on. Master marketing for motivated salespeople and you will develop a continual source of opportunities to negotiate DEALS.
3. Dirty-Everyone says it is about numbers, although my experience has proven to be different.
To be successful, you must first sell to the Seller by accepting their offer. You are not pressuring them to submit, but are looking for ways to present the facts in such a way that they understand that their best option is to sell you your home “as is.”
When you present the OFFER to an investor, you will present the facts in a way that highlights the opportunity. You need to provide them with all the information you need to help them make purchasing decisions: comparable retail sales, square footage, market rents, renovation estimates, and so on.
Let’s be honest; people do business with people they like. They buy with their emotion and back up their decision with logic. It is much easier to decide to sell the house to you at such a good price if the Seller likes it. It’s also much easier for an investor, your end buyer, not to hit you on your allocation fee if you like it.
How is the wheat separated from the chaff?
As in any business, not all are the same. There are good and uh-not-so-good wholesalers in every market. How can you tell which wholesalers are good?
A tree is known for its fruit. A beginner wholesaler may bring in some mediocre offers up front before figuring out how to BID. Good wholesalers are like diamond mines, they will keep displaying unfinished gemstones for you to buy and polish. Good wholesalers bring good DEALS, while others do not know the difference between a “house for sale” and a SALE.
The best wholesalers I know buy houses themselves. Once you’ve made a few OFFERS from start to finish, you’ll have a better understanding of construction, property values, and the risk associated with buying and building a project.
To rate a wholesaler, ask questions about their most recent closed deals. Ask for details, “What was the contract price?”, “How much work did it take?” And “What was the retail value?” You may even ask, “How much did the investor pay?” If you listen to the words of experience in the answers, you may have found a diamond mine. Stay in touch with them and they will pay off!