The aim for most entrepreneurs is to use leverage to maximize profits while working on projects that give them purpose and passion. As a wholesaler, this is accomplished by leveraging others’ time, talents, and resources to accomplish your goal of closing more transactions.
There’s nothing more rewarding than closing a transaction without leaving the comfort of your home. This may seem unrealistic to some, but by utilizing leverage, the end result could mean another satisfied client and another closed transaction for you. This is exactly what flipping contracts can do for you.
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I’ve recently learned working hard for 100 percent of the commission or wholesale fee is not always the best result. Without a team and systems, you can easily find yourself running around your city day after day, week and week, and even month after month to close a deal. I recently stumbled upon flipping contracts because of my inability to make it to an appointment because of my schedule. I’m currently working to build a team, but until that time, I’ve been using this strategy to close deals without leaving my house. I stumbled upon this, and now it’s becoming a common occurrence in my business.
The last few deals I’ve done, I had to be extremely resourceful in bringing them to close. This is a result of years of networking and years of talking with sellers on the phone, and I’m so thankful for starting out birddogging to build that solid foundation.
Flipping contracts takes a serious level of skill that need to be developed over time. As stated, this was not something I learned to do immediately, and the first few times, I failed miserably and considered never trying it again. Thank God for persistence and tenacity.
In this world of internet and telephone scams, people have a natural inclination to be defensive — and rightfully so. However, if you want to be successful at flipping contracts, you will have to work hard to break down that barrier and fight through other objections to effectively use this strategy.
The Seller Conversation (Positioning)
The initial conversation with the seller is similar to your normal conversation when wholesaling; however, the rapport building process is a lot longer and the trust level has to be a lot higher. So this is normally not done in 2-3 conversations with a seller. On average, I speak with the seller 10-12 times before we getting to the nuts and bolts of the contract terms.
This is a very slow play, but it works. I call it the “pen pal approach” — you do not know each other, but during these conversations, you are like pen pals writing and getting to know one another. This does not work with all sellers. You have to be able to evaluate their personalities because some people are bulls, and they only want to know the price you’ll pay and move on. This is ideal for out-of-state absentee owners or in-state absentee owners who live a slight distance from the rental.
Secondly, after rapport is built and the trust level is at a 6 or 7 (on a 10 point scale), then you can begin discussing the dynamics of the tenant or whoever is residing in the property. This is done because eventually you are going to facilitate access of the property with them. You will need the owner to allow you to talk with the tenant to gain entry. This entry is not for yourself but for your buyers.
I’m sure you’re thinking, “Well, what about the pictures of the property?” Great question. If your numbers are rock solid and you negotiated a great deal, you will have your first interested buyer to gather those pictures for you. I’ll get to that next.
At this point, you and the seller have agreed upon a price already, so that is firmly established. This is without you viewing the house. Yes, without you viewing the house yet.
The Buyer’s Responsibility
So now you have gained the trust of the seller and the trust of the tenant, and you have solidified the contract with the seller. The next step is critical. You will contact one of your premier buyers and inform them you have a deal that will be exclusively for them. Then let them know that you do not have the pictures yet and that they can go and view the property and take the photos for you. Once the buyer agrees, then you can inform the seller and the tenant one of your representatives will attend the appointment on your behalf to finally lock everything down.
Remember, all of this is done from your house. Sweet, right?
In the event the property is in worse condition than your seller explained, then you renegotiate the contract below the price your buyer is willing to pay, then you assign the deal — i.e. flip the contract — and finally close the deal. Many landlords are willing to renegotiate the deal if you present it right. Normally, I explain to the seller the condition the property is in and that willing to provide them with pictures confirming what the buyer saw. Especially in cases with landlords who live a great distance from the property, they are often simply eager to be done with the situation.
For the sake of time, I did not mention how does the seller gets your contract. This is done by electronic (DocuSign) means if they are tech savvy or overnight mail with a return addressed envelope enclosed if they prefer traditional means.
Here are a few takeaways to remember:
- You will have to give up a portion of your wholesale fee/commission.
- You will save time by leveraging the time, talents, and resources of others.
- You will need to focus on developing your phone etiquette.
- You will need to be able to understand and evaluate the seller over the phone.
- You will need to have your premier buyers in place.
- You will need to be extremely patient and resilient.
Flipping a contract takes a level of communication skills that many people are not willing to develop. I have spoken with thousands of sellers, and those conversations were the development ground for what I do now. Work on your phone etiquette and rapport building skills, and you can add this strategy to your business.
Do you see this as a successful strategy? Do you thing you can evaluate a seller over the phone? Can you image how much more productive you can be with this strategy?
I’d like to hear from you!