Real Estate Investor · Houston, TX · Member since 2013 · 43 posts · 34 votes
If I'm going to wholetail a property, do I actually have to purchase the property myself, or can I simply put the property under contract, place the property on the market, with the seller's consent, and do a double close.
If the latter can be done, how is this presented to the seller, in a way that is more beneficial then simply listing it with a realtor. Are the only selling points that they can avoid closing costs and realtor fee's?
Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
12y
If your contract states you have the right to advertise or display it on public websites and databases then yes.
That's the only way I've seen it done and it has worked.
Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
12y
If your contract states you have the right to advertise or display it on public websites and databases then yes.
That's the only way I've seen it done and it has worked.
Salt Lake City, UT · Member since 2014 · 35 posts · 18 votes
12y
Make sure you set it up right. In most states making money on a property without having interest in the property, you will need a license, or risk doing it illegally.
Not only will it save the seller time and money, but let them know you have interested buyers who can close quickly, assuming you do, and the seller should be motivated by the potential of a quick sale.
When wholesaling, I have told the seller my partner wanted to be on the contract and take over, they were fine with that.
Good luck
Investor · Vancouver, WA · Member since 2012 · 194 posts · 125 votes
12y
a) make sure you write your contract and/or assigns.
B) make sure your buyer isn't going to be using FHA financing, because you can't assign deals to FHA financed buyers (unless I'm wrong on this here). I whole tail every single deal I do... But I also only deal with lease options so I'm in a different type of deal that doesn't need a title company to close.
Real Estate Investor · Houston, TX · Member since 2013 · 43 posts · 34 votes
12y
@Eric Benzenhoefer , yes I have wholetailed 6 Properties since May, and it's a GREAT way to move properties that I get under contract.
You never have to actually purchase the property. The only benefit in purchasing the property, (if your going to wholetail it, and put no money into it) is that by purchasing it, it gives you more time to market the property.
But if it is a good deal you can simply place the property under contract....(make sure on your contract you add a clause stating the seller gives you authority to list the property on the MLS.) Find the buyer from the MLS and close on the property....in one of two ways:
If I'm making 15K+ on the property, I'll pay the additional fee's of doing a double close, (which will keep the seller from knowing how much money i'm making in the transaction.) However if the margins are under 10K I will typically just do an assignment, which has fewer closing costs.
Investor Agent · Burke, VA · Member since 2014 · 243 posts · 12 votes
12y
Hi,
I'm sorry. I'm trying to figure out the difference between wholesaling and wholetailing.
Also, is there a rule of thumb for the fee for wholesaling? I've heard some people make $3000 - $15K on a wholesale. Can you use a percentage of the selling price, say 1-2%?
Investor · Denver, CO · Member since 2010 · 99 posts · 20 votes
12y
Wholetailing is marketing to "retail" buyers or owner occupants (as opposed to investors) that are handy or would like to purchase at a discount and fix up their own place themselves.
My question is, doesn't wholetailing limit you to cash buyers if you are not doing a double close? Does this limit the effectiveness of it since most homeowners get a loan?
Real Estate Investor · Houston, TX · Member since 2013 · 43 posts · 34 votes
12y
@Brian Huber In both wholesaling and wholetailing you are marketing for motivated sellers who are willing to sell their property at a discount.
The main difference is in how you dispose of the property.
In wholesaling you build a buyers list, and you present your deal to your buyers and sell the property to them without using the MLS at all.
In wholetailing you either buy the property or you use a contract which stipulates the seller gives you the authority to list the property on the MLS. You then list the property and sell it that way.
With wholesaling you can avoid paying realtor fee's and some closing costs. With wholetailing you can typically get more money for your property.
Real Estate Investor · Houston, TX · Member since 2013 · 43 posts · 34 votes
12y
@Sebastian Gast MOST of my wholetail deals have been purchased by CASH investors. Investors look on the MLS too.
At least 2 of my wholetail deals last month were purchased CASH by wholesale companies, who then took my property...marked it up...and then marketed it to their pool of investors.
Lot's of bigger wholesale companies.....where i'm from.....do this.
With wholetailing you are mainly limited to CASH/Hard Money Buyers, although there are ways around that, but if it's a deal, it will FLY off the MLS CASH regardless.
Investor Agent · Burke, VA · Member since 2014 · 243 posts · 12 votes
12y
Very interesting. So if you list it on MLS, you've already closed on the property? If so, is it correct that if you list it on MLS, you need to mark it up to:
1) include your wholesale fee
2) Realtor commissions
3) and closing costs?
It seems difficult to make a profit if you're having to recoup those expenses. Maybe I'm missing something...
Perhaps the best way to answer your question is with an example.
We are about to close on a property here in Houston that we got under contract for $102,500. We listed it on the MLS for $124,500. Because this was a great deal in a great location, we got 3 full price CASH offers the first day on market. So even after you deduct a 3% realtor commission, closing costs, etc. We still stand to make around 17K on this transaction.
And again we are not actually purchasing these properties ourselves......usually. For this one we are doing a double close. We simply add a clause to our contract that states the following:
"Seller agrees to authorize buyer to list property on MLS for the purpose of finding an end buyer, seller will not be charged any fees or commissions if buyer decides to list property."
Based upon that, as soon as the seller signs our purchase contract, we list the property on the MLS, and find our Buyer.
Issaquah, WA · Member since 2012 · 9 posts · 1 vote
12y
@Stephen Brown Thanks for the great info Stephen! With wholetailing, what I don't understand is why you're retailing it vs wholesaling it to a rehabber. Are these wholetail properties those with very little work needed? And are you getting more on the MLS than any rehabber will pay you?
If it were a wholesale deal, would you have had to have gone deeper to make a good spread to wholesale it to a rehabber?
Real Estate Investor · Houston, TX · Member since 2013 · 43 posts · 34 votes
12y
@Glenn Bravy Again using the above deal since it has already been mentioned.
The ARV for that deal was $124,900. Those were the actual MAX SOLD COMPS in that subdivision.....those COMPS just happened to be CASH. The repairs were around 8K.
So if I were to approach this deal as a wholesaler using traditional wholesaling formulas. I would take 70% of my ARV....which would be $87,430......then subtract repairs of 8K.....which would bring me to $79,430.......then subtract my wholesale fee, which I have a standard of 10K......which would bring me to $69,430, which would be the offer I would make to my seller....so that I can make $10K and still provide a good spread for my investors on my buyers list.
As a wholetailer I don't care about my investors making a good spread on the deal. I don't care about meticulosity calculating repair costs. The only thing I care about are CASH SALES of comparable properties, with low Days on Market in the same subdivision. Which again for this property was $124,900 with less then 5 DOM.
So if a wholesaler was trying to bid against me on this property, I would have outbid them and still made a lot more on this transaction.
As they would offer the seller $69,430 to make 10K on an assignment fee.
I locked the property up at $102,500 and made 17K on an assignment fee.
That being said we don't wholetail every deal we get. Sometimes it's just easier to wholesale the property. So we evaluate each deal to determine whether wholetailing, wholesaling or flipping the property ourselves is the best and most profitable course of action.
Real Estate Investor · Houston, TX · Member since 2013 · 43 posts · 34 votes
12y
@Patrick Jacques It really is not that easy. I just provided a bunch of PRO's of wholetailing, there are several CON's which make wholetailing more challenging then wholesaling, in other areas, if compared side by side.
Again this is why a good portion of our deals we simply wholesale.
When your wholesaling you are primarily emailing your list of buyers whenever you have a deal for sale. In doing this you can establish your brand among that community....so they know you provide quality deals when you email something out.
In doing so you can command a certain authority among that community...i.e. "If your interested in getting my property under contract, a NON REFUNDABLE $5,000 earnest money deposit is required...most of our properties are gone within 24 hours....so you don't have time for any inspections you don't have time for any option periods.....we need $5,000 in the next 24 hours GO!!" And all the investors race to see who locks it up first. You can create that strong sense of urgency, among your community. This is exactly what most of the established wholesalers do.
Once you have established your brand, you can command that level of authority....which pretty much ELIMINATES 95% OF ALL TIRE KICKERS, and you can ultimately move properties very effectively and quickly.
With Wholetailing I am forced to deal with a smorgasbord of tire kickers and of course Realtors who at times seem like their only purpose in life is to waste my time. If I were to list a property on the MLS and say a $5,000 non-refundable earnest money deposit is required to get it under contract....it would seem absurd......no one would call.....it would no doubt sit there on the market for a very long time......unless it was just an AMAZING Deal of a lifetime.
There are or course ways to mitigate the number of tire kickers on the MLS, we ONLY provide a 5 day option period no fee, as well as ensuring the person has proof of funds before we accept the contract. And of course they are required to deposit their earnest money with the Title Company...which of course IS refundable, but even after all that I deal with MUCH more tire kickers wholetailing, than I would wholesaling with an established brand.
So even though I may get more money wholetailing, generally speaking it will take me more time to move the property. And if you have a seller who is demanding a quick close....you may lose that deal trying to wholetail it..... dealing with all the tire kickers you will find on the MLS.
Real Estate Investor · Houston, TX · Member since 2013 · 43 posts · 34 votes
12y
@George Wendt No I do not have real estate license. I use flat-fee MLS listing. I pay an investor friendly realtor I know $100 to list the property...then we take it from there. That way is a lot cheaper than going with the big flat-fee MLS, providers you will find online.
thanks so much for all the valuable info! One more question, is it safe to say that wholetailing is a good strategy if you can't get the seller down enough in price to cover the 70% rule? Let's say you can only get him/her down to 80-85%. Or do I just need to battle it out a little longer with the seller?:-)
@Stephen Brown What kind of contract do you use in order to sell this properties? Since you are not the owner of the property yet I am guessing you can't use a regular purchase and sale agreement with the cash buyer. Thanks in advance..