Will a Wholesaler sell to me if I use conventional financing?

Question

Hello,

I'm in the market for some rental properties and I'm hoping that a wholesaler will have a property that will be suitable so I can get a better price.

I'll be using traditional financing for my first few, will a wholesaler still sell to me in general or are they cash only buyers? I'll be prequalified, but they'll have to wait the underwriting time.

Ryland Taniguchi · Answer

The problem with buying from a wholesaler is that no lender (even portfolio lenders) will lend on an assignment contract. The wholesaler is likely not licensed to sell real estate for the seller and so the assignment contract may be the only way that they can legally sell the contract (versus the property for the seller).

As a licensed broker, I have done it where we renegotiated out of our contract with the seller and sold to a buyer with traditional financing simply as an agent. In other words, I just got paid an agent commission versus a wholesale fee.

Jim Viens · Answer

@Zack Carlson - You may want to try the same techniques a wholeseller would use to find those deals (if you have the time/money/inclination). Use yellow-letters/postcards to absentee owners/tired landlords. See if you can negotiate a price that works for you and get it under contract with the understanding you're using conventional financing. Then just get your ducks in a row with the bank and go to closing to get your rental/s! Once you get that first one, if there's enough meat on the bone you could cash out and use the proceeds. At that point you can decide if you like marketing for deals yourself or you could check the local wholesellers (now that you fully understand what value they add to the process having gone through it yourself.)

Shawn Mcenteer · Answer

Ask around you may have some luck but it is my understanding that the main sales point for getting someone to wholesale their house is a quick close.  conventional financing will slow the process down because of appraisals, underwriting, etc.

Zack Carlson · Answer

Good point,

The brokerage is Citibrokers.

I don't really want become a wholesaler per se. I just want to get at least a house a year for my rental portfolio. With being an agent I may be exposed to enough deals to get them through normal course of business.

Ryland Taniguchi · Answer

The challenge becoming an agent is that many motivated sellers contact you specifically because they do not want to work with a real estate agent. I have both a real estate agent company and a wholesaling business. In the wholesaling business, I have two negotiators that work with the sellers and they are not licensed. That way when they answer the phone, they can say they are not an agent. Although I have to disclose that I (as the buyer) am a licensed agent and that the intent of the purchase is to make a profit.

Also, what broker are you planning to go with? I am just now leaving Keller Williams, which is a great company but is riddled with politics and not investor friendly from my experience. I am opening a 100% commission investor friendly brokerage with a high-end brand and agent training (been coaching agents for 3 years). I would stay away from the big name brokerages as they won't like you wholesaling.

Steve Babiak · Answer

To build on @Ryland Taniguchi's post, there is a less known technique that is "conditional release from contract" that you would use to avoid having to assign. Does not always work with all sellers though ...

Zack Carlson · Answer

Hi Ryland,

I'm exploring becoming an agent myself. My broker I used to purchase my primary residence has told me I could hang my license there. Does that make my situation easier or harder?

Zack Carlson · Answer

@Jim Viens That's EXACTLY what I was thinking beforehand but my biggest fear was throwing all the leads away that don't work for me. I guess I could work with another wholesaler to feed my leads that don't work for me. I'd hate to just see them go to waste.

I had figured it'd be easier to just work with a wholesaler since they already had the leads but your plan may be my best bet. Thanks!

Glen Andrews · Answer

Hi James, go down to your local real estate investors association and let wholesalers know the type of property you're looking for and your price point. If a wholesaler knows your situation (tradition financing) they will structure their contract so that it works for everyone.

Good luck James!

Zack Carlson · Answer

Thank you! So in that case is my only real option to use hard money or private money in the short term and hope to refinance to conventional after seasoning?

Will a Wholesaler sell to me if I use conventional financing?

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