Wholesaling Packet Questions?

Question

Hello everyone beginner here.  With wholesailing and getting a packet ready for a buyers are we suppose to get the home inspected before we look for the buyers for the property... got a wholesaler packet website that is asking a lot of information about the repairs of the home which I would not know what repairs are needed and how much it would cost but a home inspection would be able to provide that information correct.

Ryan Blake · Answer

@Watreceia Burks You do NOT need to get an inspection as the wholesaler. That is not part of what you are selling. You are selling an off-market property at a deep discount to someone else who wants to come in and make the repairs. They are the ones that will need to know the details of what is wrong and how much it will cost to fix it.

That being said, for you to price the home right, you need to have an idea of what the repairs are and a very high-level estimate of what it will cost to get the house in good enough repair to hit the ARV you are estimating for the home.

Example of how wholesalers price homes in DFW, TX right now:

(ARV x 78%) - repairs = wholesale price

(ARV x 78%) This means you will take 22% off the price the home should get after it is fixed up. This 22% is what will make up the rehabber's holding costs (utilities, insurance, property tax, financing costs), purchasing costs (you will ALWAYS ask the rehabber to pay your closing costs and your seller's closing costs when you do the wholesale deal), selling costs (agent commissions, closing costs, home warranty, and any other concessions needed), and finally profit. When working with just 22%, the rehabber's profit will be low. Unfortunately DFW is hot right now and that is still working. When the market cools off again, the % taken off the ARV will have to increase back to 30% like it was about 5 years ago.

REPAIRS You need to be able to get a good ballpark number. If you are consistently off on your repair estimate, serious rehabbers will not want to work with you. You also may end up buying properties too high if you don't accurately assess the repairs. If this happens, you will have to use your contingency clause to back out of the deal with the seller. If you do this too much, you will lose credibility among sellers and won't be able to buy a home because of your reputation.

I hope that you will take time to learn how to properly asses repair costs because it is very important. But I still don't think you need a home inspector.

Watreceia Burks · Answer

@Ryan Blake thanks you information helps