Benefits of Selling to a Wholesaler
Hi everyone - I'm curious to get some opinions here.
It seems that one of the biggest keys to wholesaling is to be able to "sell the benefits" to a potential seller.
So when you're talking to a potential seller, and they ask you the question "what's the advantage of selling my house to you?" or "why should I sell my house to you?" ... how do you answer? Seems like there a ton of different paths you could take.
As far as I can tell, there are 2 main benefits that really rise up above the rest:
1. Close faster - get the process done quickly so they can move on with their life.
2. Paid in cash - reduced risk of the deal falling through due to financing issues, which really helps support #1 above.
I'm curious to hear what benefits other folks are using in your discussions with sellers...
Thanks!
all my marketing that goes out say it all.
That I can...
Close fast
Pays cash
Not a realtor so no commissions
Buy as-is
Pay closing costs
It also helps that I target people that need help. I don't send a letter to every body in the zip code. Other than that I get them to like me. Then I can say I'm freindly and easy to deal with.
No commission is a big one to emphasize and if you have a track record, that's definitely something to bring up.
Honestly there aren't much benefits to selling to a wholesaler. I am a wholesaler and I will admit that...
However, I market to find people that have a strong desire to sell.. If you are marketing and you get a "tire kicker" who wants full retail or more for there house its going to be near impossible to make a deal out of it... especially with the housing market being so hot. Yea I do let the seller know I pay cash which saves fees and I close fast and such, but deals come from problems... find out the problem and why they want to sell and base your whole pitch off how selling to you solves those problems.
- You don't have to carry around all of that icky "equity." Let us take it off your hands!
-Why does Grandma need a house, anyway? When you think about it?
-Look, we cannot continue to expand our "We Buy Houses" bandit-sign street art installation without some financial support.
-People need to eat, and not all of us have the skills and moral compass to go into hoity-toity professions like payday lending.
It's a good idea to run the numbers for them...because many times that simply compare your offer (say $50,000) to what the Realtor said they could get (say $80,000). Well, very few people actually get full list price, so let's say they buyer that comes through the Realtor offers $76,000. Well, a lot of buyers in that price range ask for closing cost assistance, which can be as high as 6%, or in this case around $4,000, which leaves you with $72,000. Plus you have to pay the standard seller closing costs (which I pay if I buy from you) which will run $2,000 or so for title insurance, etc...so now you're at $70,000. Then, after inspections, they find some outlets that don't work right, and some wood rot that has to be repaired, and it runs you a $2,000 to repair, and now you're at $68,000. And chances are, since you're listed at full retail, it will probably take 2-3 months to sell, and at your current mortgage payment of $800 per month, plus property taxes, maintenance, utilities, etc...you'll pay another $3,000 sitting here waiting for a buyer (hoping for a buyer), which brings you down to $65,000. And we haven't even gotten to the big real estate commission, which runs 6-7% in most towns, so there's another $5,000...bringing you to $60,000 (on our BIG $80,000 list price from Mr. Realtor). And that's just if everything goes JUST RIGHT. Here I am with $50,000 cash, close in a few days, and you're moving on with your life. It seems like it's worth a small price reduction to just be done with this mess, doesn't it?
That pitch isn't necessary for some sellers, who are desperate, and will give you a deal no matter what. But there are a bunch of sellers who are "motivated", and with a little help running the numbers will end up saying yes. It's that middle group that many wholesalers miss out on, because they're not willing to go the extra step to make it clear that their offer isn't nearly as low as it appears at first glance, when you compare apples to apples.
Best wishes to you!
@Mike Watkins @Andrew Syrios @Micah Copeland @Matt Robinson
Thanks for the feedback guys! This is super helpful. I really like the idea of customizing the solution to meet their specific needs, based on problems they're facing. I also love the idea of breaking down the costs they'll incur if they list the traditional agent route on the MLS.
Thanks again!
In California, I could net $10k on a wholesale and still save the seller money versus using agents simply due to the value of properties. It would cost them more to list and sell it.
Not always does it benefit to use us but most cases where a wholesale deal works out, its because we are a good option.
Originally posted by @Matt Robinson:
It's a good idea to run the numbers for them...because many times that simply compare your offer (say $50,000) to what the Realtor said they could get (say $80,000). Well, very few people actually get full list price, so let's say they buyer that comes through the Realtor offers $76,000. Well, a lot of buyers in that price range ask for closing cost assistance, which can be as high as 6%, or in this case around $4,000, which leaves you with $72,000. Plus you have to pay the standard seller closing costs (which I pay if I buy from you) which will run $2,000 or so for title insurance, etc...so now you're at $70,000. Then, after inspections, they find some outlets that don't work right, and some wood rot that has to be repaired, and it runs you a $2,000 to repair, and now you're at $68,000. And chances are, since you're listed at full retail, it will probably take 2-3 months to sell, and at your current mortgage payment of $800 per month, plus property taxes, maintenance, utilities, etc...you'll pay another $3,000 sitting here waiting for a buyer (hoping for a buyer), which brings you down to $65,000. And we haven't even gotten to the big real estate commission, which runs 6-7% in most towns, so there's another $5,000...bringing you to $60,000 (on our BIG $80,000 list price from Mr. Realtor). And that's just if everything goes JUST RIGHT. Here I am with $50,000 cash, close in a few days, and you're moving on with your life. It seems like it's worth a small price reduction to just be done with this mess, doesn't it?
That pitch isn't necessary for some sellers, who are desperate, and will give you a deal no matter what. But there are a bunch of sellers who are "motivated", and with a little help running the numbers will end up saying yes. It's that middle group that many wholesalers miss out on, because they're not willing to go the extra step to make it clear that their offer isn't nearly as low as it appears at first glance, when you compare apples to apples.
Best wishes to you!
A little google search and my question, same as the OPs question, is answered!
Thanks @matt! See ya Tuesday. 😉
No need for showings.
No need for repairs.
Just to add to previous posts.
I actually sold one of my own through a wholesaler last year because he had a buyer in DC that I couldn't find on my own. And I'm an agent who has also done flips! A large buyer list is added value in itself. I was happy to get what I got and the buyer was happy to pay $10k more. Win-win.
I found this forum through a Google search. I'm hoping that someone can give me some peace of mind. Here's my situation:
My mother died a little over 2 months ago. She lived in South Florida and owned her home. My sister and I both live out of state. The house hasn't had any maintenance in years. Needs new electrical, central air, etc. Sister is Executor of Estate and arranged to sell the house to a "We buy houses in any condition" company for $145,000. Recent comps in the area have sold for around $200,000. The estimate on necessary repairs on the house is $30,000. Since we do not live nearby, my sister had no interest in trying to oversee repairs to sell on our own. I found the house listed on the agent's site for $179,000. It was also found on a wholesaler website for $189,000.
So the first company is going to buy the house for $145,000 and immediately turn around and resell it for $179,000 having done nothing to it. Is this a normal deal or is this a mistake on our part?
Thanks!
Originally posted by @Jessica White:
I found this forum through a Google search. I'm hoping that someone can give me some peace of mind. Here's my situation:
My mother died a little over 2 months ago. She lived in South Florida and owned her home. My sister and I both live out of state. The house hasn't had any maintenance in years. Needs new electrical, central air, etc. Sister is Executor of Estate and arranged to sell the house to a "We buy houses in any condition" company for $145,000. Recent comps in the area have sold for around $200,000. The estimate on necessary repairs on the house is $30,000. Since we do not live nearby, my sister had no interest in trying to oversee repairs to sell on our own. I found the house listed on the agent's site for $179,000. It was also found on a wholesaler website for $189,000.
So the first company is going to buy the house for $145,000 and immediately turn around and resell it for $179,000 having done nothing to it. Is this a normal deal or is this a mistake on our part?
Thanks!
Both. It is normal, AND a mistake on your part.
This is what "wholesalers" do. That is why there is no reason at all to use a wholesaler for the vast majority of properties and situations.
One of the biggest lies that wholesalers tell people is that you need to make repairs in order to sell with an agent. This is absolutely untrue.
I heard about one today, where the seller had just listed their house and they found a house that they wanted to buy before it hit the market, as this area is hot and generally homes sell in the first week. (sandbagging on realtors part?) So their realtor wrote up a purchase agreement that she(realtor) is buying the house, that she listed, so that the client can show that to the mortgage person and get a loan for the new home. Their original home for sale had only been on the market for a few days, and the realtor got it for $20k less than listing price. My first thought was that she will be wholesaling this deal and selling at original price. The home needs no work and is in a hot area for under $140k. If indeed the realtor gets this house sold in a week, does she even get a mortgage or is she just part of a contact where title cuts her a check for the overage?
I wholesale and there are no benefits. Anyone could easily list their property on craigslist and get more. Unless you have to sell in less than 30 days, there is no benefit.
Maybe 1% of property owners will sell to wholesalers. Nevertheless, I stay in business.
Thanks for this. I'm new and trying to get a better sense of the process and language for buying from people in a few situations. Situation 1. divorce - any tips on approaching these? bankruptcy? I kinda thought that these legal processes would get in my way.
Originally posted by @Matt Robinson:It's a good idea to run the numbers for them...because many times that simply compare your offer (say $50,000) to what the Realtor said they could get (say $80,000). Well, very few people actually get full list price, so let's say they buyer that comes through the Realtor offers $76,000. Well, a lot of buyers in that price range ask for closing cost assistance, which can be as high as 6%, or in this case around $4,000, which leaves you with $72,000. Plus you have to pay the standard seller closing costs (which I pay if I buy from you) which will run $2,000 or so for title insurance, etc...so now you're at $70,000. Then, after inspections, they find some outlets that don't work right, and some wood rot that has to be repaired, and it runs you a $2,000 to repair, and now you're at $68,000. And chances are, since you're listed at full retail, it will probably take 2-3 months to sell, and at your current mortgage payment of $800 per month, plus property taxes, maintenance, utilities, etc...you'll pay another $3,000 sitting here waiting for a buyer (hoping for a buyer), which brings you down to $65,000. And we haven't even gotten to the big real estate commission, which runs 6-7% in most towns, so there's another $5,000...bringing you to $60,000 (on our BIG $80,000 list price from Mr. Realtor). And that's just if everything goes JUST RIGHT. Here I am with $50,000 cash, close in a few days, and you're moving on with your life. It seems like it's worth a small price reduction to just be done with this mess, doesn't it?
That pitch isn't necessary for some sellers, who are desperate, and will give you a deal no matter what. But there are a bunch of sellers who are "motivated", and with a little help running the numbers will end up saying yes. It's that middle group that many wholesalers miss out on, because they're not willing to go the extra step to make it clear that their offer isn't nearly as low as it appears at first glance, when you compare apples to apples.
Best wishes to you!
I am new to real estate investing and found this while trying to learn about ways to find good deals. I have a question about the above breakdown.
When you mention the closing costs "Plus you have to pay the standard seller closing costs (which I pay if I
buy from you) which will run $2,000 or so for title insurance, etc..." and you say you will pay the buyers side of the closing costs, how do you go about doing that?
I would assume that the closing costs are all calculated into your offer to the seller and therefore it is not actually being paid by the wholesaler. I don't really understand that part, could you please explain?
Well, you should be honest that:
1) They're not selling to you, but someone you hope to find AND
2) The reason you can close so quick is because you're offering 60% of FMV.
@Jessica White you should start a new thread about this situation. The house doesn't need to be fixed up to list on the MLS with an above-board Realtor. There are plenty of investors/home buyers looking for a fixer-upper who will buy it as-is. A Realtor would list it for retail value (~$180k apparently) and take a 5-6% total commission (split between buyer's agent and listing agent). You'd probably save about $20-30k or more listing the property with a legit Realtor rather than a wholesaler. Just tell the Realtor to market it "as-is".