The 6 Most Common Newbie Wholesaling Questions, Answered!

by | BiggerPockets.com

Welcome to 2017. I’m sure most of us are excited about the new year, along with the new opportunities it will bring. Since it’s already the second week of the year, many already have their goals outlined. This is great. I took a little time over the break to read many of the post from newbies looking to start their career as real estate wholesalers, and I’ve found some recurring questions that often get asked.

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6 Most Common Newbie Wholesale Questions: Answered Now

I want to make sure you get off to a great start in 2017 by answering these questions. You will generally find these questions in the forums; however, they either go unanswered or the answers vary tremendously.

First, you maybe asking yourself — is Marcus legitimate enough to answer these questions? To remove any questions about my legitimacy, I will just say this: I’ve been where you are, and I remember the pressure I put on myself to get started. Still, I did not know where to start and who to depend on. I remember the anxiety when asking a question, thinking to myself, “Is this a dumb question? Why is no one willing to help? How can I put all the information I’ve learned from hours of YouTube education into practice?” I remember those feelings like it was yesterday. I am not here to tell you how many deals I’ve done or anything like that because it’s not about me. It’s about getting you started in the right direction.

Now, since we have all the preliminaries completed, let’s get started. Here are the 6 most common newbie wholesaling questions according to my research on BiggerPockets.com. These are in no particular order.

Question #1: Is wholesaling illegal?

This is normally the first hurdle we have to jump. You may think to yourself, this can’t be legal because it sounds too good to be true. To answer the question, YES, it’s legal. Many people question this because they say you are brokering a deal without a license. I am licensed now, but when I got started, I was not licensed. I will discuss the license in a later question.

Wholesaling is legal, but you will need to be strategic in your verbiage on your contracts. Remember, this is not legal advice so you should consult legal counsel yourself. It should be noted on your contract the buyer’s name as ABC Wholesalers and/or Assignee. Also, feel free to have an open discussion about this verbiage with your seller. Keep in mind, you want to do everything in the highest level of integrity. At no point do you want to hide anything from them. Your goal after having a fully executed (signed) contract is to then market your agreement to potential buyers.

If you are unclear about question #1, feel free to ask questions in the comment section. You have to have a clear understanding of this before you can proceed.

hire-a-contractor

Question #2: How do I find a mentor?

This question is asked so often that I believe it goes unanswered in the forums now, so let me help you with this. I’ll answer like this — in the Bible it says, “Ask and you shall receive, seek and you shall find.” Lao Tzu states, “When the student is ready, the teacher will appear.” You will only find a true mentor when you are ready. How do you know when you’re ready? When you’re taking massive action.

Many newbies are looking for mentors, but they are not looking for deals. A true mentor will not acknowledge your request unless you provide some value. You need to ask yourself whether you’ve been consistently driving for dollars (emphasis on consistently), whether you’ve started a small direct mail marketing campaign, whether you’ve put out bandit signs, and whether you’re knocking on doors or cold calling. What are you doing? If you are just trying to learn from YouTube, turn the computer off, beat the streets, and talk to people.

How do you find a mentor? Start taking action on some of the things you’ve learned. I swear to you, once you start doing this, you will find your mentor — or better yet, they will find what they are looking for in you.

Question #3: How do I find motivated sellers?

Reread question #2. I put some great actionable tips you can use to help you find sellers in there. Again, you have to tell everyone you know what you are doing — I know you may be ashamed to tell anyone because you haven’t done a deal yet. So what? You won’t do a deal because a lot of times, you find deals in the most unexpected places.

Here, let me give you an example to prove my point. I had someone refer a newbie to me. They knew I’d been closing transactions and could help sellers. This person gave the newbie my number, and we began to talk. He told me how he spent nearly $30K on one educational seminar, but still didn’t have anyone he could contact to help him navigate his way through a deal. To make a long story short, I asked him, “Who in your circle knows what you are trying to do?” He stated, “Just a few people.” I told him to go back and tell those people he was seriously looking to buy property. He did that — and I’m being honest — his brother said, “Well, why not buy my property? I want to sell it but have not told anyone.” We are under contract right now on both legs of the transaction, and he is finally getting hands-on training.

You find motivated sellers by taking action, by cold calling, starting a direct mail campaign, putting out bandit signs, and calling “for sale by owner” listings. You have to get out there and beat the pavement.

Question #4: What should I say to a seller? (I have no money to buy their house.)

You are absolutely right — you have no money to buy their house, but you will have the money by the end of the inspection period. Stop second guessing yourself. You have to speak to sellers with confidence. A seller can smell rookie fear. Before speaking with the seller, build your confidence. Whatever you need to do to become a bulldog, do it.

When speaking with a seller, you need to do more listening than talking. Ask the necessary questions, such as:

  • Is there any particular reason you’re looking to sell?
  • If everything was perfect, how would you want the sale of your house to go?
  • As a buyer, is there anything I should be concerned about with regard to the house?
  • What are the repairs that are needed?

Always ask open-ended questions and then shut the heck up and let them talk.

Again, you want to find out about the house, but more importantly, you want to find out as much about the situation as possible. What are the motivating factors that drove them to speak with you about selling?

Question #5: How much do I offer for their house?

OK, now this is a science, and it varies from market to market. Most people use the rubric ARV x .70 – Repairs -Wholesale Fee = Max Offer. This is a great starting point, but again, each market is different and some markets are more aggressive, so you can push the envelope a little. Please use that as a starting point.

Normally, the next question is how do I estimate repairs? I discuss that in another post, “Wholesalers: Having Trouble Estimating Rehab Costs? Try This!” When making your offer, be confident. Even though you may be shaking in your boots, kick those boots off and make the offer. Who cares if they don’t accept make the offer? Studies show that only 1% of those you market to respond, and only 1% of those may lead to a deal. So the the numbers are stacked against you regardless.

Question #6: How do I find buyers?

There are two ways to answer this question:

  1. If you have the property under contract, work with a local wholesalers that have experience. You can find them by Googling “sell my house [your city]fast.” They will have a buyers list, and they will be able to handle the disposition for you. It is my experience that finding a buyer is not the issue because as long as you have a nice deal, anyone will either buy it or help you sell it.
  2. Now, if you’re looking to build your buyers list and you do not have any deals, create ghost ads on Craigslist. Also Google your city again with the same verbiage because a lot of cash buyers are trying to find houses like wholesalers. There are also products out there to help find cash buyers. You can review all the real estate sales in a certain area that sold for cash, and there is your cash buyer. Send them a letter letting them know you would like to offer them off-market properties first.

Bonus Question: Should I get a license?

My suggestion is yes, if you are looking to become an investor with longevity, you need to have a license. It opens up other avenues for income. You can do traditional sales and property management, you’ll have access to the MLS, and it provides a level of credibility.

Conclusion

I wanted to write this post because I see these questions go unanswered. Please, if you still do not have your questions answered, feel free to ask. No question is dumb if you don’t know the answer. I’m sure there are many other questions I could have attempted to answer, but again, if you have questions about contracts, assignments, or anything else, please ask.

Any other wholesaling questions?

Ask them below!

About Author

Marcus Maloney

Marcus Maloney G+ is the Executive Officer of Equity Realty & Investments as well as 3rd Generation Management & Holding LLC, both are family owned and operated real estate investment firms. The firms' goal is to provide affordable solutions in real estate while providing exceptional opportunities for community redevelopment for the residents of Phoenix, Arizona and Chicago, Illinois. You can follow Marcus on Twitter

60 Comments

  1. Sam White

    Marcus, for mail campaigns, can you elaborate on where you buy your lists, what date filters you use, and how many letters must be sent to generate workable results.
    My experience in sales tells me 1% rule. 100 letters = 10 call backs = 1 closed deal. But I am not sure if my B2B sales is the same formula.

    • Sam White

      Marcus, for mail campaigns, can you elaborate on where you buy your lists, what data filters you use, and how many letters must be sent to generate workable results.
      My experience in sales tells me 1% rule. 100 letters = 10 call backs = 1 closed deal. But I am not sure if my B2B sales is the same formula.

    • Marcus Maloney

      Sam,

      You are right Sam when it comes to direct mail you will get similar results to B2B sales with your results. However in some markets you may even less than a 1% response rate. It all depends on the market because some are more competitive than others.

      Check out this blog post https://www.biggerpockets.com/renewsblog/direct-mail-wholesaling/ it should help clarify your mailing list concerns. I am doing a small A/B test for the year I am currently doing a 2000/month testing to check my letters and envelopes to see what is pulling the best. I normally do about 6000-8000 pieces a month. If you have additional questions PM me and we can discuss it. Hope this helps

      “Enjoying the Journey”

  2. I’ve been wholesaling RE for about 4+ years now. Some of your suggestions are right on and things I do.
    However, I don’t advise anyone to become a realtor. Dealing with the laws and restrictions and all the BS is not a good way to enjoy your life. I’ve had a lot of bad experiences with know it all realtors that have ruined my deals by telling sellers what I was doing was illegal. Most are know it alls and believe they have the equivalent of Real Estate law degrees because the did a 3 day class and got a re license.
    I also wonder why newbies believe they need a mentor, because they don’t. I got my education by reading a few books and taking action. Wholesaling RE is so easy a monkey could do it.
    Selling my deals to my surprise is the easiest part of wholesaling. If you have an insane deal at 40-60% of ARV a simple ad on Craig’s List will have hoards of investors calling and that’s how I got my cash buyers list.
    I have done a lot of deals and made a ton of money. I get my deals from direct marketing to absentee owners, bandit signs, door knob hangers, partnering with other wholesalers and my favorite, I recruit bird dogs and pay them $2,000
    I actually wrote a book called “Big Buks Junk Houses” It’s on Amazon Kindle. It’s only $2.99
    It is all you need to know how to make some serious money wholesaling Real Estate and change your life.
    Rando

    • Denise Brown-Puryear

      Great article Marcus! But I also agree with RANDY PHILLIPS regarding licensing. I’m a licensed RE Broker in NY and am investing in NC where I now live. I’ve looked at the licensing requirements in NC and find that too much liability is on the realtor. Plus, the realtors that I’ve used to do my 1031 purchases were not as competent or on top of things as I felt they should have been. However, I do find that in NC it is easy to do assignments, wholesaling, etc. as compared to the NY where an attorney is required to close on any deal.

      Which is why I’ve jumped into the wholesaling aspect of investing at this stage of my RE life. Again, thanks for such a clear and simple article without the ego! :c)

      Thanks.

      • Marcus Maloney

        Denise, thanks for your input regarding the license. I know this is a split topic for many wholesalers however I have found it to be a benefit. Many times I speak with sellers and they inform they’ve spoken with other investors that were not licensed and they did not feel doing the deal with them even though they were offering more. It provides a level of credibility and comfort for the skeptical sellers.

        As I stated in response to Randy it also gives you another strategy to close the deal where you can list the property and still gain a commission versus not gaining anything and it becoming a dead lead.

        You are absolutely right there are some horrible Realtors in the industry but you’re normally not working with the Realtors you’re working directly with the sellers. I do know there are times when you do have to work with Realtors and during them times there is a mutual level of respect. Again its up to each individual, I rather have another tool in my tool box. Thanks again for your input.

        “Enjoying the Journey”

    • Marcus Maloney

      Rando, Thanks for reading. The reason why I’m an advocate for getting your license is because it gives you an opportunity to diversify your investment strategy. Yes there is additional rules and guidelines you have to follow but as long as you’re doing everything according to the letter of the law you should not having any issues. It does make a big difference what brokerage you get with. Similar to finding a investor friendly title company this is the same with a brokerage.

      If you have the license you can provide an additional option for the sellers. If they do not accept your offer you can offer to list the property and still gain a commission versus not closing the deal.

      Thanks again for your input. “Enjoying the Journey”

    • Marcus Maloney

      Randy, Thanks for reading. The reason why I’m an advocate for getting your license is because it gives you an opportunity to diversify your investment strategy. Yes there is additional rules and guidelines you have to follow but as long as you’re doing everything according to the letter of the law you should not having any issues. It does make a big difference what brokerage you get with. Similar to finding a investor friendly title company this is the same with a brokerage.

      If you have the license you can provide an additional option for the sellers. If they do not accept your offer you can offer to list the property and still gain a commission versus not closing the deal.

      Thanks again for your input. “Enjoying the Journey”

    • Melissa Guthrie

      Hi Randy,

      I am going to check out your book on kindle but can you give me the names of the other books that you read as well? I am very new to this I just learned what wholesaling was last night and am SUPER interested in making my first deal I just don’t know where to start. I almost signed up for a 1000 dollar program but stumbled on this site. I’m glad I read your comment because I was actually considering becoming an agent. Do you have any tips for someone who is starting off like me I basically have zero dollars to sink in to this to start as I am a single mom but am looking at changing my life with wholesaling! From what I understand wholesaling IS legal as long as in the contract you add verbage that you can assign the contact to someone else is that correct? Do you have tips on how I could draft my contract? Thanks so much for your help!!

  3. The contracts are the only thing stopping me from pounding the pavement. I have a contract to purchase I got from myriepro. I have access to assignment contracts threw the software as well. My only concern is are these legal to use in CA? Every one say ask a lawyer. I don’t exactly have the cash to do that.

  4. Alex Montgomery on

    Hello Marcus,

    Great Article! I have many questions as I am just getting started, and am very new to real-estate. I have been doing a lot of research from youtube videos to reading lots of blogs and checking out websites referenced in articles just to see what they look like. I have contacted a couple of listing websites to get a quote on yellow postcards and such.

    1) Before buying a home as is, what does the inspection process look like? Is there one? And how involved do I get to be in that inspection?

    2) How do you go about selling the house before you have to make your first payment on the house? In other words in case you can not find a buyer right away?

    3) How reliable are those “sell fast” websites? any recommendations?

    4) Can I find a wholesale agent at my local realty company?

    Those are just a few questions I have for now. Always looking for someone to talk with to further educate myself in real-estate investing reading blogs and listening to youtube videos only gets you so far. Thank you for any feed back.

    • Marcus Maloney

      Alex great questions,

      1) As a wholesaler the inspection period gives you the opportunity to market the contract you have on the property to find your end buyer. This inspection period is used to inform your seller that you will have your contractor or partners (Cash buyers) come through to view the property to see if they are interested in purchasing it.

      2) Your basically getting the property under contract and then assigning that contract to your end buyer so there isn’t any payments to be made.

      3) Sell fast websites are good for finding other wholesalers to jv agreement. Those sites are good to market for motivated sellers if you are on the first page of google or if your doing google adwords. I’m not following why this is important at this moment especially when getting started.

      4) When wholesaling the name of the game is marketing, using a Realtor is normally not the way you want to go. You need to do some marketing directly to the sellers and cut out the middle man (Realtor)

      Check out this video https://www.youtube.com/watch?v=YG5AAWk78pU

      • Alex Montgomery on

        Thank you Marcus for the timely response and feed back!

        One more question if you do not mind? If you cannot find a buyer for your contract before inspection period is over can you just as easily back out of the contract and suffer no loss? Making it very little risk?

  5. Tiffany Dumond

    Marcus, great reading. I am currently working on my first flip which I hope to have on the market next week. I also want to get into wholesaling because I want to get better deals for myself but also be able to diversify and get income from wholesaling on deals I can’t or don’t want to rehab. I also have gone back and forth on whether or not it makes sense for me to get my real estate license. I took the classes but have not taken the exam yet as I have read that a license can hurt you when wholesaling. My question is, if you are a wholesaler and also a licensed realtor, are you sending out drip campaigns similiar to a wholesaler or are you sending out marketing material as a realtor to get the cash deals you sell to investors? How does your marketing change or play a role since have gotten the license? Or if anyone else has insight on my question….
    Thanks!

    • Marcus Maloney

      As a Realtor you can do the same campaigns as a non-licensed wholesaler. You only need to comply by the laws of a Realtor which you want to do regardless. For marketing you can do drip campaigns you just have to make sure at the bottom of the letter you add that you are a license agent and you need to have legal info such as your brokerage, and all picture insignia.

      This has never stopped me from marketing directly to sellers.

      Hope this helps….. Enjoying the Journey

  6. Jennifer Webster

    Marcus – Very nice article. I’ve been trying to wholesale for about three months now. My focus has been on probate leads, but I’m finding that all of my incoming calls are from people who are just trying to find out how much money they can get from a cash offer. They are actually not motivated enough to sell for my offer price, even though they have a house they need to get rid of. I feel like I’ve wasted a lot of time visiting properties and talking to people with no results. My question is – do you recommend cutting to the chase while on the phone with these folks and letting them know your offer is only going to be in the 30 – 60% of ARV range before going out to meet them and see the property, so as not to waste both their time and yours?

    • Marcus Maloney

      Jennifer,

      I vet the sellers by finding out what they absolutely have to get for the property to get a gauge on what they need. After having a conversation with the seller and getting the dynamics of the situation. I inform them I will do a desktop evaluation and then present them a verbal offer over the phone. I make sure I inform them this is a ballpark and i can sure up my numbers AFTER viewing the property. If you make the ballpark figure (60-70% ARV) and the conversation is still engaging then go view the property. This means they are truly motivated because they know your ballpark offer and still entertaining the offer then this is a hot lead.

      I do not view all the properties only those who I’ve vetted and are entertaining the offer. If they are not interested in the offer I make sure I follow up with them next month

  7. Alex Montgomery on

    Thank you Marcus for the timely response and feed back!

    One more question if you do not mind? If you cannot find a buyer for your contract before inspection period is over can you just as easily back out of the contract and suffer no loss? Making it very little risk?

        • Marcus Maloney

          Becky,

          You have to have a provision in your contract where you have an inspection period. This will give you an out clause if you have in the contract where you have 10 business day inspection period then you can back out of the deal. We normally have the IP (inspection period) contingent upon partners approval. Also you want to have in your contract as the buyer: Company and/or assignee. This allows the provision for you to assign the contract to another buyer.

          You can get a copy of the contract we use for our out of state deals at equityrealestateblog.com let me know if it downloads we’ve been having some glitches due to the high download demand.

  8. Geoff R.

    Great info! I’m exploring all of the avenues to RE investing and wholesaling has been a mystery until now, thank you so much for the detail. I think the big catch is really, how do you have those convos and not sound like you’re trying to scam someone but from this info, its a pretty simple situation to work with it sounds like.

    • Marcus Maloney

      Geoff,

      Thanks for reading, the conversations are fairly simple. You have to focus on what problem you will help them solve. Keep your view on solving the problem for the seller and you shouldn’t have an issue.

      “Enjoying the Journey”

    • Marcus Maloney

      Ade,

      I’m not sure about the laws in Washington you may want to ask a wholesaler that works that market, but I know its possible but I’m not sure if you need a license in Washington to wholesale.

      I’ve had success with both tax and divorce both are time sensitive. I market to both list and so far I would say that divorce is a little more profitable for me. However again tax is time sensitive and if the seller receives your marketing during property tax season you may find you’ll have better results.

      Hope this helps. “Enjoying the Journey”

  9. Randy Phillips

    My most recent deal with a realtor.
    I met the seller at his burned house & after a walk thru we agreed on a price of 37K He was a friendly guy about my age, I took the time to hear his story and we had a good rapport. I handed over the purchase contract for his signature and he then informs me the house actually belongs to his wife who is a realtor but works at the local hospital as a nurse. I told him I’ve done a lot of deals and they always go smooth unless a realtor is involved. He promised there wud be no problem and said he wud have the contract signed that night. I had a bad feeling and I almost grabbed my contract and ran for the hills screaming like a banshee.
    Soon his wife emails me the contract and it had been completely butchered and re written.

    Now I couldnt assign, I had to have a $3,000 earnest deposit and I cud not do an inspection & had 5 days to close & I had to use her Title company.
    I emailed this crazy woman back that I needed to assign the contract to my partner and I had to get my partners into the dwelling to do their inspections and 3K earnest deosit and 5 days was ridiculous & I had my own Title company.
    We went back and forth for almost 2 weeks and I admit I was losing my cool.
    Finally she sends me my original contract back and it’s signed. I think her husband must have somehow got her in line.
    I was still being harassed by this woman while in escrow asking why I hadnt deposited the 1K earnest deposit we had agreed on and why it was taking so long to close. It only took 3 weeks & I never did deposit the funds.
    I got a check for a $6,000 assignment fee, I paid out $2,000 to my bird dog.
    I felt like taking a shower afterwards to get the realtor funk off of me.
    But it really wasn’t that bad,I enjoyed going toe to toe with this bossy know it all realtor and it made for a good chapter in my book.
    Let’s make some Money….
    Rando

  10. Sarah Bessler

    Hi Marcus, My question is about selling a wholesale deal through an agent. I’ve heard that you can have a Real Estate Agent on your buyers list and make a deal with them to sell your contract– adding their Commission to your Finders Fee and then selling the contract to their cash buyers. Do you have experience with this type of transaction or know how to go about something like this?

    • Marcus Maloney

      Sarah,

      That is true you can have a Realtor bring you a buyer. When you market make sure you have what ever your price is NET to the seller. So is you have the property under contract for 100k and you want to make 10k, then you market the property as 110k NET to the Seller. Let the Realtor know that you expect 110k net to the seller and they can add their commission on top. So they may send it to their buyer for 113k.

      “Enjoying the Journey”

  11. SERIOUSLY?!?!
    That’s the best way to start, is to start finding properties?!? Why do some investors find it so necessary to hmm & haw around rather than just being honest. “Find me a money making deal & then we will talk!” Thank you for finally providing a direct, no bullshit answer. I can’t even begin to explain how helpful you have been!

    Thank you so very, very much!

  12. Lauren Brown

    Great article, Marcus! You have put a great deal on my mind. I was considering becoming a real estate agent in my state (TN). I just started researching the issue. I will definitely take to heart your comments as well as others in this discussion. Does anyone have knowledge or experience with being a licensee and investor in TN?

  13. Randy Phillips on

    Guess who Made 10 Frikin Grand today? I did, only because I sent a cheap ass 37 Cent post card to this seller saying I wanted to buy his house.
    How Insane is that? But yet I’ve done it many times. This house is a rat hole near Belmont and Cedar..
    This house has been completely gutted to the studs.
    The seller said a half dozen people have looked at it and all took off and never called back.
    Congrats to Patrice, who is making 2 Grand for finding it.
    That only leaves 8 Grand for me, damn. Can you imagine how motivated Patrice will be to find more.
    I’ve offered a few of my finders a 50/50 split and they still wont get motivated.
    If you people only knew how easy this is. You might partner up with me.
     

  14. So for question #4, I’m still a bit confused. Am I supposed to straight up tell them I have no money to buy their house? Also, what is the inspection period and who determines how long that period lasts? Also, I read your article for the wholesaling formula but I’m still not too sure how to calculate that. Please help, I’m so eager to get started!

    • Vadim Zhenar

      You are the one who should ask all the questions and set the inspection period. Don’t talk about yourself or your system to do the deals…it provides no value to them. What’s important to them is the result, the amount you agree upon in your contract. Ask the questions about their property and their situation, then shut up and listen. Try to establish that you are not the final decision maker and your business partner does the finances if they really ask (even though you might not have a business partner, it’s necessary to build trust between you and the seller)

      • Just wonder how I approach a broker looking to get sponsored as a person who just finish my RE coursework/state licensing but have no desire to pursue a RE agent career. The purpose of getting licensed was to help my investing career.

        I have approached six brokers already and have been completely transparent as I feel is always best. Offered to pay a monthly fee etc… I don’t want to be dishonest with my potential sponsor.

        How can I establish this arrangement? To be honest I never though this would be a issue as I never really see this issue pop up in BP

        Thanks in advance for the feedback.

        • Marcus Maloney

          Charles, being transparent is always the best practice. Most brokerages only have a few rock stars and the majority of the agents only do a few transactions a year. You are aware the average income for a full time Agent is only 10k. You can approach most brokers and inform them you are interested in working primarily in the investment arena and they should not have an issue.

  15. When answering question number one you added in comments about how a contract should be written. I’ve also found contracts written up under the tools tab. Could you give a sample of a good contract or use one that’s on the site and break down the meaning so that it’s helpful in our process of explaining it to a seller?

  16. Thang Nguyen

    Hey Marcus, I was wondering what do your contracts and/or assignment contract look like? Is it a purchase agreement that you can get from being a realtor in the state you live or do you have a specific contract that you use? Thank you for taking the time to write this article!

    T

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