There seems to be a lot of confusion from people getting into wholesaling as to where they should start with a buyers list. Do they need a massive list? Do they just need a handful of buyers? The short answer is both have their place — but a mixed and balanced approach is the best path forward.
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The Select Few
Once you have been in business for a while, you will likely find a small handful of buyers from your database will end up buying the vast majority of what you put out there. For instance, I have a go-to buyer in a specific section of Southwest Fort Worth (between a few major roads) who will always buy homes in rough areas. The last house he bought wholesale from me was a 2/1, 1,100 sq ft property located in not the best part of town — and the house had a strange floor plan, to boot. But as you do more and more deals, you will start to build strong relationships and trust with your buyers, which will make it easier to do deals as a result.
Casting a Wide Net
Even though most of my deals are done with a handful of buyers, I still continue to build my buyers list. It’s simple to do; just go to a local real estate meet up, stop by a rehab that’s in progress, etc., and start collecting cards and adding them to your database. I very rarely send out a mass email blast at this point, but there is definitely some value to it. I have another colleague who solely relies on this method to have as many buyers look at the house under contract as possible. His reasoning for it is 1) to increase competition amongst buyers to drive up the price and 2) to have other interested parties for backup contracts if the original buyer falls through for some reason. Personally, I would rather work with a few buyers and not mark up the contract price so much, but it’s up to you on how you want to do this.
Cultivating a Relationship
There is always a small amount of risk as a wholesaler when you assign your contract to a buyer and it’s your first deal with them as a buyer. You are trusting them to do what they say they will on the contract. And even though it’s “legally binding,” it doesn’t mean things can’t or won’t go wrong. I have had contracts fall through even after I already had non-refundable deposits down, and I have had buyers attempt to contact the seller and cut me out of the deal. All sorts of things can happen. Most buyers are not like this, but there are a few bad apples out there that can really throw a wrench into the transaction.
Whenever I am acting as a wholesaler in a transaction, my concern is always to take care of the seller. It’s not always the case, but many of these sellers are not in the best situation — maybe a family member died, they are under financial duress, or whatever the case may be — and they usually have several pressing, motivating factors that made them decide to sell the house at a discount. So for me, it is very important that the transaction goes as smoothly as possible and is stress-free for them.
Vetting New Buyers
Make sure if you are thinking about adding someone to your database that you vet them. If I haven’t done business with them before, you should ask for proof of funds — bank statements if they are paying cash, and if they are using a hard money lender, a proof of funds letter and a call to the lender to check in will suffice. No one ever takes offense to it, and if they do, you probably don’t want them on your list anyway.
The end result in having buyers like this is a sense of confidence. You can confidently lock up a contract and not think twice about if you will have a buyer. Not only that, but you can be confident that the contract will be closed smoothly and that the seller will be taken care of.
It also makes it easier for my escrow officer because she gets to know how my regulars buy their houses and already has all the relevant contact information. Whenever you are dealing with a new buyer, if they are using financing such as hard money, sometimes it can involve a lot of phone ping pong for your escrow agent trying to get all the documents they need and getting all parties on the same page. And if they are not used to it, that could delay the closing date on the contract, which isn’t a fun situation to be in if the seller is selling on a time sensitive timeline — and they usually are.
Let’s just say I had an experience trying to close out a file with a buyer whose lender was in California, and with my escrow officer in Fort Worth, we just barely got it funded in time. The seller would have been furious if we didn’t close out and fund that day by 5:00 p.m. Luckily it worked out, but it was very close.
There are multiple ways to go about building your buyers list. You can have as few or as many as you personally like. There is no right or wrong answer — rather, it is about whatever works best for you.
What does YOUR buyers list look like? Do you normally sell to a select group of buyers, or do you like to cast a wide net?
Let me know with a comment!