What if I have found a motivated seller, and I have the property under contract, and I begin to market the property to end buyers. Let's say I have the property on my website, Craigslist, and the newspaper. And it just so happens that the seller happens to see his/her property being advertise somewhere with the impression that I already currently have it under contract? How would I handle that situation if questioned by the seller?
I have zero wholesaling experience but I would think it would be best to be upfront with the seller. They should know you're wholesaling the property and where you stand to make money.
Interested to hear other opinions.
@Dwight Walker Jr I am a wholesaler in the Dallas market. Here's my take on it, it's something I picked up from Sean Terry (super wholesaler extraordinaire from Phoenix): when you are originally talking to the seller you are normally representing yourself as the buyer, and saying that "I'm not sure exactly what I'm going to do with the property: fix and flip it, buy and hold as a rental and sell it off sometime down the road, or whatever. The important point is that you (the seller) will get exactly what we agree on. On my side I am out to make a profit in some way shape or form, and I'm going to make sure you get what you need on your side. Does that make sense? "
The honest truth is that you really DON'T know exactly what's going to happen. If one of your buyers offered you the opportunity to go 50/50 with him on the backside if you waive your wholesale fee upfront, that is very well something you might do. Alternatively you could actually close on the property and then immediately resell it to one of your buyers (aka "double close" in which case you ARE the actual buyer for the seller, even though it is technically a wholesale). Or any other number of different outcomes to your "originally intended" wholesale route could happen.
Since you really don't know what's going to happen exactly, there's no need to tell the seller that you're not the actual buyer but you're going to profit by selling to your end buyer. You don't know that for sure. That definitely could work and being upfront with the seller about that isn't necessarily bad------it's just a more difficult route to take and because you really don't know for sure that's what's going to happen in that way, I think it's unnecessary.
Most even motivated sellers want to sell to the guy actually buying the property ----and you are the necessary facilitator. You bring your marketing and sales skills to the table to profit. Sometimes, you are actually closing on the property yourself. Sometimes, you're not.
I had a property I found through the preforeclosure list in Austin last year that I was originally thinking of wholesaling. I instead decided to partner with another investor on it, by going 50/50 on the closing and backend profits through rental/sale. Decisions can change. No need to pigeonhole yourself upfront with sellers when you know it's going to make getting the deal a little bit harder.
I am all for honesty in this business and being upfront. That's why you say, with all sincerity, "I'm not sure exactly what I'm going to do with this property right now. But I'm going to make sure you get what you need and what we agree on, and I'm going to do what I can to make a little bit of profit on my side".
I agree with Bryce, be upfront. Unless you have told them you are purchasing as owner occupant, there should not be an issue with you being honest about your intent. Prepaid programming and other media has made it known what RE investors do so most when dealing with an investor understand it is just that...investing, I spell out in contracts that I have the right to assign, market, sell, etc. and if Seller has an issue with any of it, I will generally compromise to a point of there comfort and it all works out. If I anticipate marketing before closing I discuss it then tie it into the contract stating such. It is okay if you don't want the Seller to know what you are trying to sell for and in that case I would recommend in your advertisements to omit asking price for the moment and just have them contact you via phone or email for more information. I don't think there is an exact answer as everyone deals with it differently and some elect to have a double closing if in an area where that is common place and others just close and care less if Seller knows that info. To me it never matters to me because it is all too easy after closing for Seller to see amount property did sell for. Only my opinion though. Good luck, hope potential buyers land in your lap easy.
Well, I'm surprised, really, wholesalers on here usually advocate all kinds of dodging tactics, schemes and devious methods, good to see honesty prevailing.
Inform the owner up front, they usually don't care what you do, they want their price and the place gone.
Another issue, your advertising a property for sale you don't own can get you hammered. You aren't selling the property, you're selling the contract so your ad had better indicate what it is you're offering.
Also consider aspects of previous advertising by the owner! What media did they use? You'll likely get some flak if they ran ads on CL or in the paper at X price and then Realtors and the public see the same house at a higher price by someone else. The assumptions are, someone bought it and are reselling it, fine, the other assumption by Realtors can be it's a wholesaler and they may start a ball rolling against you. Wholesalers need to keep a low profile in many (if not most) areas.
I know that in a couple of large RE brokerages and the BOR, that there are brokers whose unofficial job it is to communicate with the RE Commission and that includes keeping what they may see as rift-raft dealers or illegal operators out of their market area. Much of RE is "self regulated" by the licensees and other professionals involved in the industry. :)
I agree, being up front is the best way to go. My contracts actually have a line that states I intend to make a profit, and they must initial it right there. Yes, they might still get annoyed if they do the math and see how much you are making, but if you are honest from the beginning, it won't be as awkward when they call you up, and some of them will do that. Greed takes hold in a lot of people unfortunately, even if they knew exactly what you planned to do and they had no problem with it at the beginning.
Thanks for the responses from everyone. I must say it was very informative, especially just being upfront from the beginning with the seller and stating exactly what I am doing in the contract. Thanks again!
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing