At ListingSpark, we work with a lot of real estate investors. Many of them are flippers and wholesalers. With several thousands of investors properties sold, we have seen and learned a lot. Many of our investors purchase their deals from wholesalers. Real Estate wholesaling is an integral part of the real estate investment ecosystem.
For those of you who do not know what wholesaling is, here is a quick synopsis. Real estate wholesalers are often great marketers or are willing to put in the leg work and grind to track down great deals and negotiate favorable contracts. In most cases the wholesaler has no intention of being the actual end buyer, rather they “assign” or sell the contract to an end investor for a fee that can range anywhere from a few thousand dollars to tens of thousands of dollars.
This is a great resource for the end investor, because if the numbers work, they will gladly pay an assignment fee for the convenience of the deal coming to them, rather than spending the time, energy and marketing dollars to find the deal themselves. Creating a “win-win” situation as long as the deal is right and has enough meat on the bone.
Then why do wholesalers often times get such a bad rap in the investment real estate world?
Here are a few tips for all you wholesalers out there to present a clean deal and hopefully shave some time off finding that end buyer.
- Pictures: Investors hate seeing deals in their inbox with no pictures. How can you properly analyze a deal if you have no idea what you are working with?
- Provide a Realistic ARV: ARV stands for After Repair Value. It’s basically the value of the house after all of the work is done and the house is ready to hit the market. This is a biggie on the list of gripes investors have with wholesalers. When the ARV is inflated way above the true market value, nobody will take the deal seriously.
- Provide good comps: Comps are comparable sold listings in the area. Comps should fall within these parameters
- Close proximity: preferably in the same neighborhood. Values vary greatly from neighborhood to neighborhood, so you lose a lot of credibility if you are pulling comps from areas with higher values.
- Like kind properties: If you are selling a deal that is for a 1 story craftsman, the comps reflect sales of 1 story craftsman. A 2 story modern home would have a completely different value
- Recent: Pull comps from within the last 3-6 months. Comps older than 6 months could show values fluctuating beyond the normal range.
- Similar Finishes: The comps should reflect the level of finishes most likely to be installed in the house for the prospective budget.
- Estimates for Repairs: This one can be tough. If your not experienced or don’t have the help of a contractor to give you bids, accuracy on the total scope of work can be a challenge. But most wholesalers should be able to walk a house and put together a reasonable ball park for repairs. The end buying investor will almost certainly be able to sniff out a deal that has an unrealistically low repair budget estimate listed on the deal.
- Justify Your Price!!!!!!: Last but not lease, the comps should justify your asking price and put the buyers mind at ease that if they buy this property, it will be worth it in the end. If the comps are all over the place, you will have an uphill battle from the get go.
- Showing Window: Like retail buyers, investors want to be able to see a property without being rushed to analyze the deal. Make sure you have worked out times for the house to be shown with the current seller. Ample time for showings helps you sell the property to the largest pool of qualified buyers.
- Who is the Ideal End Buyer: Not all deals are created equal. Some are better for a buy and hold investor looking to build their rental property portfolio, some deals are better to fix and flip, while some need to be scraped to build new construction. By identifying the most likely end buyer and including that in the deal, you are more likely to sell quickly to the right buyer and limit the “tire kickers” that won’t be in the market for the type of deal you have.
- Make Sure there is Clean Title: If you have a deal under contract, you should get the file opened at an investor friendly title company that can quickly pull title work and review Schedule C to ensure there are no issues that could cloud title. If there are, they can work to clear them and give you an accurate timeline to get the deal closed. At Spark Title, ListingSpark’s sister company, we have a team of experienced escrow officers and assistants that know what they are looking for and can guide you through the process.
As always, reach out to us if you have any questions. We are always happy to hop on a call and see if we can help you get your next wholesale deal sold and cash that check!
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