Being transparent with a homeowner about wholesaling their home
Can someone advise me on how to be transparent, what to say to a homeowner who is willing to sell me their home way below MV? I would like to try to wholesale it as I'm not interested in buying it myself. I'm new to this or at least I have not done a deal yet and I want to be transparent instead of pretending like I'm going to be the one to purchase when I'm going to sell the contract...Thanks in advance.
You're definitely going to have to address the fact that if they sold and borrowed on another home, they'd likely be borrowing at a much higher rate. Wishing you success.
The wholesale contracts around here are written with language that says "and/or assignee" which just means "I will be your house, or whoever I assign this contract to will be buying your house." I'd imagine similar language is used in your area.
Regarding the transparency, you can just explain to them that either you will be buying the property, or one of your partners will be buying the property. You can share that you have a large network of investors that you work with on deals, and often times you pass deals off to these other investors instead of doing the deal yourself.
Expressing that you have connections and convincing the seller of the strength of those connections is key.
If the home you are wanting to wholesale is listed as an FSBO, a pitch that may be intriguing is that they wouldn't have to list and pay realtor fees and that in wholesale situations, the buyer pays the "finders fee" in most cases.
Quote from @Scott E.:
The wholesale contracts around here are written with language that says "and/or assignee" which just means "I will be your house, or whoever I assign this contract to will be buying your house." I'd imagine similar language is used in your area.
Regarding the transparency, you can just explain to them that either you will be buying the property, or one of your partners will be buying the property. You can share that you have a large network of investors that you work with on deals, and often times you pass deals off to these other investors instead of doing the deal yourself.
I would be concerned about being called out if i didnt have proof of funds.
Quote from @Marie Grabo:
Check out Ryan Dossey on BiggerPockets or YouTube. I think he's very ethical in this regard.
When I’ve wholesaled in the past I tried to explain it for the sake of ethics etc, but I found 99% of the time no one really understood it. I developed language for talking about “my business partners “ which made sense for me, as in some cases I did move a deal to people I do a lot of business with, and are friends with. Also I look at every deal as an end buyer, almost to a fault. If I am not certain I can get an end buyer I never get a sellers hopes up. I’ve never lied to a seller or buyer and I’ve got sellers who were able to provide me referrals and be a reference. We created the “win win” as they say. In my opinion finding such language could work for you and cover your basis on informing the seller without causing confusion.
You are buying their house, but you might assign the contract because you might get an offer before and want to leave open that possibility. You have the time and the contacts to market the house. You are not guaranteed an end buyer, and are prepared to go through with the sale either way. It won't make a difference to them, because they have a reason for selling their home quickly below market value. Selling to you gives them the cash they need when they need it and the certainty that the transaction will occur on their timeline. If they really do need the certainty and the fast sale, then your attempting to sell the house to someone else shouldn't concern them.
The reasons they need the quick sale should be the focus, what's in it for them. Make sure they are clear on their motivation and okay with the structure, if not, it's best to find out sooner than later.
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This is very situational, feel the seller out. I wouldn't go out of my way to disclose i'm wholesaling but if they ask I say I like to keep my options open incase I want to pass along to my partner. Don't put a property under contract that you know you can't close on