BiggerPockets

I would deal with FSBO's first because dealing with banks for a newbie can be daunting.

To get a better undersanding of what I'm asking, What deals are you most successful with as an experienced investor?

Well let's clarify a little. You are NOT looking for a "FSBO". A For Sale By Owner is a property that is being actively marketed by the seller with a sign in the yard and with different types of marketing. What you are looking for is a motivated seller. Most of the time when you buy from a motivated seller, there will not be a sign in the yard and the seller will not have been doing any public marketing.

Whether the property is vacant or not does not matter, though being vacant always help the seller be more motivated.

Ok comparing REO's versus buying directly from motivated sellers, my experience is that you will get much higher profit margins from buying directly from motivated sellers.

I'm curious, Curt, I thought you said that you only buy REO's and not directly from homeowners, so do you make your statement of REO's being the best profit just because REO's is all you focus on or because you've focused on motivated sellers and they're just not worth it?

I've personally never bought an REO cheap enough to make $20,000 wholesaling it, but I HAVE with a motivated seller's house.

With REO's there is a balancing of value via an open market on the MLS, but with motivated sellers that is not the case. The seller has not contacted 3 different realtors to get BPO's to determine market value. The seller is many times not getting offers from anyone else but you. That allows gives you more control in setting the "market" rate for the house.

Now even though they bring higher profit margins, buying directly from homeowners requires quite a bit more time and money to find the deals. It is a very proactive process to find motivated sellers, and spending thousands of dollars and/or hundreds of hours to find one or two is not an uncommon event. If you are not efficient and effective with your marketing dollar, you can easily spend enough to make the extra profit potential of buying directly from homeowners evaporate.

When you want to find REO's you call a realtor to pull them off the MLS, which costs you $0 and requires a 2 minute conversation on the phone. Yes, it does require that you show proof of funds and, yes, you do need to put earnest money down, and, yes, you do need to negotiate to pick the title company or at least the "courtesy agent" so that you can do a double closing, but other than those three things, wholesaling an REO is no harder or different than wholesaling a property from a homeowner.

So to recap, in my experience,

Buying direct from motivated sellers = more profit potential but more time and/or money to market and find the deals

Buying REO's = less profit margin potential but a significantly less amount of time and money

I normally do 80-90% of my deals buying directly from motivated sellers and 10-20% are from REO's or anything listed. From what I've seen it seems like larger markets will have a large enough base of REO's that wholesalers can make a decent living off of just REO's, but in a smaller market like mine (under 200K population) there are just not enough REO deals to sustain yourself on.

Will, that's another great point.

The better terms that you can negotiate with a motivated seller can make the difference in finding a buyer in time or not.

Having the extra time for the closing makes a huge difference, and on top of that assigning a propery versus double closing it will save anywhere from $200 on the absolute low side to $1,000 or more on the high side.

Many can attest that going for Flat Rate MLS Listing is an excellent choice. You're very first objective is to find not only one, two, or three buyers but many prospective buyers as possible. This is what MLS listing can give you as it exposes your property to a number of realtors all over the country that have buyers who are searching for a property similar to what you are selling.

Another plus factor is that if you availed of MLS listing, your property gets to appear in the website realtor.com, a site that has a very huge traffic.

Basically, more exposure, the more chances you have of selling your property in the quickest possible time.

I forgot to also mention that along with a Realtor and the MLS comes the commission that you'll be paying to the Realtor. No idea what the cost of the MLS listing is but I'm sure there is another fee for it. That is money that should be in your pocket.

Realtor's can be a big help, just not when a Wholesaler is trying to sell a property. Line up your buyers first and you should have no problems selling your deals.

Jeff