I just finished reading Mark Evan's book on Virtual Real Estate Investing (i.e. wholesaling) and am am puzzled about one thing. Mr. Evan talks about having a homeowner sign an option agreement, preferably for three years. What would the motivation be for a homeowner to sign a three year option? What do they get out of it? Wouldn't they be better off just listing with a realtor?
Also, I am wondering if a real estate license is needed to wholesale. Or, does holding an option on the property negate the need for the license. Does it work differently in different states? I am in Indiana.
I can't speak to why a seller would sing a three year option. (that makes no sense to me). But normally the way you get a wholesale deal is getting to the person before a realtor. The benefit for them is no out of pocket expenses, not paying 6% to a realtor, and normally all cash/fast closing. In several instances the property may need work to get it up to par that the owner simply cannot afford. It's all about salesman ship. You sell the person on how you can solve their problems. You then sell the property to investors on how far below market value it is and the great deal you are offering. If you do it right you will form lasting relationships with investors who may snatch up your properties before you even list them. (A buyers list). Hope that helps.
You do not need a license to wholesale. As long as you have the proper paperwork and contracts relating to your state then you should be fine.
Was the book talking about lease-option wholesaling?
Similar to straight wholesaling where you get a motivated seller under contract and find an end buyer, lease-option wholesaling works the same way but usually involves longer termed contracts because you are dealing with tenant-buyers that have large down payments but can't get financing right now. For those types of deals, a seller will usually agree to that if they are having a hard time selling their property. You can convince them of the benefit (usually financial) of getting someone into the property that will pay a nice rent for it, maintain it and then hopefully take the option to buy it at the end of the lease term (hopefully over the term of the lease the tenant-buyers credit improved enough to get financing).
If the tenant-buyer chooses not to exercise their option to buy at least the seller had cash in their pocket for the lease term and ideally the house was taken care of.
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