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What Does a Real Estate Wholesaler Look For In a Buyer?

by Sharon Vornholt on September 3, 2012 · 8 comments

  
real estate wholesale deals

There has been a lot of conversation lately on BiggerPockets about working with wholesalers; the good, the bad and the ugly.I think that we can all agree that there both ethical wholesalers in this business, and those that are less than ethical. This is no different than you would find if you were looking at rehabbers, landlords or any other group of real estate investors.

Since I am a full time wholesaler, I wanted to talk a little bit today about what I look for in a buyer which is what I think most professional wholesalers look for.

Do You Want to Be on the Top of Your Wholesalers List?

I can’t speak for all wholesalers, but to be on the top of my list you have to possess certain qualities. I have to know that you are a professional real estate investor. I’m not really looking for someone that did a deal one couple of years ago, and now they want to be on my list. I am looking for someone with a track record. Now that might come in different ways.

  • There are a couple of folks on my list that actually have other jobs (one also has his real estate license as well), but they typically have several rehabs going at one time. They are most definitely in the business even though it is not their only business.
  • The vast majority of my buyers on my list have come to me from my local REIA meetings. I know when I see these folks month after month they are committed to learning this business. These are the same folks that you will see at seminars that you attend. If your closest meeting is in the next city, quit making excuses about how far it is and go anyway. Show other investors that you are committed to this business.
  • They have a good reputation with other investors. I don’t want to be associated with those real estate investors that have questionable ethics and business practices.
  • They know where their cash is coming from. They can close in 7 to 14 days in most instances.

Speaking of cash buyers, where does their cash come from? It can come from a number of different sources. Here are just a few:

  • A HELOC or Home Equity Line of Credit. There are a whole lot of folks out there with a bunch of equity in their home. You can establish this line of credit and instantly become a cash buyer.
  • A Self Directed Roth IRA. This is one of the best ways to build wealth through real estate. There are numerous articles on this site on this topic.
  • Private Money. You would be really surprised at just who you might know that has cash in the bank earning pennies on the dollar. Get in the habit of asking everyone you come across if they know someone that would like to make a great return on their money and have it secured by real estate.
  • Hard Money. While this isn’t the best source of funding, it works. Just be sure to add the cost of this money into your purchase.
  • An Investor Friendly Bank. This is getting harder to find, but there are still some folks out there with good credit that are taking advantage of this way of having quick access to cash.
  • Actual Cash! This is my favorite! I have a couple of buyers on my list that actually have cash.

The Bottom Line

The bottom line for me boils down to these 5 things.

  1. Can I count on this person to look at the property right away? Someone that tells me that they will look at the property when they have a chance but can’t tell you when, is not a serious buyer in my book. The investors on my list all get out there within 24 hours, usually much less.
  2. Do they have the ability to make a decision quickly? My buyers usually know instantly what they want to do.
  3. Do they have a source of funding lined up?
  4. Do they close on the transaction (on time) every time?
  5. Do they always do what they say they will do?

Those are the folks that are on my “A List”, that get a call when I have a property. Why do these folks want to be on my list? Because I have great deals for them!

Photo: Bill Ward

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{ 8 comments… read them below or add one }

Ayaz September 6, 2012 at 12:30 am

Hi Sharon!

Excellent tips. For me its the experience and the real estate ability which he learns with the passage of time so that he can analyze which person is a real buyer or there for you to only get a information or learning something, but certainly your tips are essential to chalk out the real buyer.

Reply

SHaron Vornholt September 6, 2012 at 6:52 am

Ayaz –

In the beginning, I had a lot of “buyers” on my list that never bought a single house. With experience, you will determine who the real buyers are. And, that will change over time. Someone who is actively investing today, may take a break down the line for one reason or another.It has been my experience that those same folks will just pick up the phone and call you when they are ready to start buying again.

Reply

Alex September 29, 2012 at 9:42 pm

I am a real estate investor and I have a pretty much the same list of question I go thru when dealing with buyers. It’s actually very common to see a person interested in buying a home but unable to come up with necessary funding. A buyer with the highest price offer is not always the best person to sell to.

Reply

Sharon Vornholt September 30, 2012 at 4:54 pm

Alex -

Cash is king!

Reply

David Ramos July 17, 2013 at 6:37 pm

Sharon,

This is a great informative article. As a newbie investor myself it all narrows down to be straightforward with anybody you come across with in the business. Decisions must be made within short notice and investors must be ready, willing and able to strike down a deal with little to no hesitation. I will keep this article as one of my fave’s. Thanks and best of success to everybody.

Reply

Sharon Vornholt July 18, 2013 at 7:47 am

Hi David -

You know what they say; “When you are new at ..(just fill in the blank), you don’t even know what you don’t know”. That is true for all of us. I wish someone had written about this when I was brand new. It could have saved me a lot of headaches when I was on the other side of the fence.

Now that I am a wholesaler, I have several action takers who have access to cash that I make that first call to. It is my special “24 hour head start notice” on any property I have for sale. I have learned what they like to buy, where they like to buy and what they look for in a property which is so important if you are a wholesaler. Armed with that knowledge, I am pretty sure that they would be interested in the property am offering when I make that call. If not, I send it out to my list.

In the end, it’s about all of us doing our best to make every transaction a “win-win” for all the parties. Thanks for taking the time to comment David. I’m glad you found the article helpful.

Sharon

Almost all of the time, I have a verbal offer immediately. I want to reward these folks that are my “A listers”. I appreciate them.

Here’s what I know about these particular investors:

-I know that they can close within 7-10 days typically. One is an actual cash buyer. Several are not, but they have several lenders in place the they are 100% sure will fund the deals. You don’t have to have cash, but you must have quick access to cash, so those systems have to be in place beforehand.

-When I get a verbal acceptance I am 100% sure they will sign the contract even if we don’t get that done for a day or two and this deal will close.

-If the property isn’t right for them that’s OK with me. Rather than them beating me up on price, they just pass and I move on.

Everyone has to make money on a deal. I want my investor buyer to make money every time, but I also have to make a living. Since I often market to these folks for a long time I don’t feel bad about getting paid, and my buyers could care less.

Reply

Chris Burr August 1, 2013 at 9:59 am

Hello Sharon,

As a beginner to wholesales what are some important questions that i must ask the seller to find out in an appropriate manner what I need to know about a property? Are properties with liens but good equity, good prospects to pursue?

Reply

Sharon Vornholt August 5, 2013 at 11:27 am

I’m sorry for the late response Chris; I am traveling this week. I don’t know that lien properties are so much better than other niches but they are one to try. Liens always get paid off at the closing, but sometimes folks don’t have the money to pay for them.

Sharon

Reply

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