As real estate wholesaling becomes more and more popular, many people want to know more about the process. Real estate wholesaling is the process through which an individual, the ‘wholesaler’, receives a contract from the seller of the property and assigns that same contract to an end buyer. Wholesaling remains one of the best short-term investment strategies because it’s one of the easiest ways for people to get into the real estate investing industry.
A wholesaler makes a profit by finding properties that can be sold under market value, making an agreement with the seller of the property, and assigning the purchase contract to another buyer. Wholesalers then make their money through a wholesaling fee that comes with the transaction- many times it’s a percentage of the overall property cost.
Real estate wholesaling sounds pretty good, right? Well those who are interested in real estate wholesaling often times wonder what a real estate wholesaler does. We figured it’d be helpful to share a day in the life of a real estate wholesaler.
The Wholesaling Process
Finding Motivated Sellers
The first step in the process happens to be the most critical step: finding a motivated seller. If you have a strategy in place where you can successfully find motivated sellers, you will always generate revenue and your wholesaling business will be a success. There are a few ways you can find motivated sellers. Here are some ideas:
- Direct Mail
- Billboard ads
- Cold Calling
To see the best results, we recommend using all of the different methods that will help you find motivated sellers. Direct mail, websites and billboard ads are all great ideas but this means you are relying on the motivated sellers to come to you.
Cold Calling is a highly effective sales strategy because you are having a conversation with the motivated seller. This way, you’re able to build strong relationships and have a better chance of finding a motivated seller. Not only will you have a better chance of finding new leads but by building strong relationships with the seller from the start, the closing process will go a lot smoother.
Cold calling is a new concept for many people, and often times, it can be intimidating. That’s why investing in a cold calling service can be helpful. Let’s face it, many wholesalers don’t have the time to make cold calls all day. When you work with a cold calling service like Call Motivated Sellers, we’ll take on all of the cold calls so you can focus on the tasks that really require your undivided attention: like closing the deals.
Several homeowners don’t even know that real estate wholesaling exists. For instance, we’ve found many motivated sellers that worked with a real estate agent for years and had no luck. The fact remained that they still needed to get out of their home (say for instance they can no longer afford the taxes.) Once we tell them about real estate wholesaling, they’re quick to say yes. Then, our wholesalers have a motivated seller!
Then, an appointment is set up with the seller and the deal starts rolling towards the closing table.
Negotiations and Getting a Contract
Many times, there will be some negotiating before signing a contract. This can be because the home needs some repairs. For example, the After Repair Value (ARV) on the home is 120k. Your cash buyer wants the deal to be less than $90k. After touring the home, you estimate that the home needs $20k in repairs. You then offer the homeowner $60k and after negotiating a bit, you settle on $64k. Once you decide on the final value, its then time to get your team in the house to approve the deal so you get a key to the vacant home.
Once the contract is settled and the value of the home is finalized, it’s time to get the property to buyers. Many wholesalers go online and post their deals. Let’s say you post the property for $70k. You then receive 5 calls from potential buyers that are interested in the property. Some buyers might say no right away while others will say yes but ask for some flexibility with the price.
Assigning the Contract and Closing the Deal
Most likely, you will have to do some more negotiations. With this deal, you and the buyer agree on the price of $69k. Once you agree on a price, it’s time to assign the buyer the contract by giving him the original contract and assignment contract, which is a different contract. You must show all of your buyers the original contract, so they understand the terms and conditions. The first contract you assign should have a non-refundable deposit. The buyer will then write a check to your title company or attorney. It depends whether your state closes deals with attorneys or title companies.
Once you have the deposit, contract and signed assignment, you will drop them off with whoever is doing the closing (attorney or title company) and they will begin the title work and determine the closing date. Closing takes about 10 or so days, but it might be a bit quicker or slower. When the title search is complete, and everything has been approved you will then have to “Clear to Close.” As a real estate wholesaler, it is not required that you show up to closing.
So, you made the deal with the motivated seller that the home will be sold at $64k and the buyer agreed to pay $69k. This means you made $5k off of this deal! Once you get this check be sure to keep your eye on the prize and reinvest this money back into your business!
Ready to get started?
Hopefully this gave you some insight as to what its really like to be a real estate investor. Keep in mind that the prices mentioned in this article were just an example and more than likely, you will make more than $5k off of a deal. Especially as you get involved in bigger deals.
Are you ready to begin your wholesaling business? Let our team at Call Motivated Sellers help find you the best motivated sellers out there!
Contact our team to learn more.