A successful real estate wholesaler works hard to build both a network of people who have real estate to sell, and people who are interested in buying it. This takes time, energy, insight, faith, and perhaps even a little bit of skepticism. The best networks contain buyers and sellers who are honest people of integrity, who have knowledge of the local wholesaling practices and laws, and who are actually serious about buying and selling pieces of real estate that have true potential. Successful wholesaling deals incorporate all of these elements and can be very rewarding both financially and professionally, but without the right network, wholesaling deals can also turn into a disaster.
A wholesaler needs to be realistic about determining an ARV (after repairs value) and not overinflate it, and they need to be familiar with all details of the property being sold and how much it will truly cost to fix and bring up to its market value. But a wholesale real estate deal is never finished until the right buyer is found. This needs to be someone with the actual funds to buy the property, and someone whose needs and goals are met by the type of property that is being sold.
Parties Involved in a Wholesale Real Estate Deal
The main parties who are involved in a wholesale real estate deal include the seller, the wholesaler, and the buyer. There are other parties who may be involved in some deals, like mortgage bankers or various lenders, property assessors, lawyers, accountants, contractors, and real estate agents, but these parties simply assist with the wholesale deal and are not usually the major decision-making parties. However, the smart wholesaler develops a network of such people so that they need not search for new ones every time they tries to close a deal.
Sellers of properties that are suitable for wholesaling are people who own some type of distressed property and who, for various reasons, are unable to keep, repair or maintain the property, so they wish to unload it without taking a devastating financial loss. Wholesalers are people who connect with sellers and who have a list of potential buyers that may be interested in buying the property, rehabbing it or repairing it to bring it to a fair market value. It’s important to note that in most cases, the seller will not know that their buyer is a wholesaler (this of course varies).
Where to Find the Buyers
Since the buyer is, so to speak, the end user of a wholesaling deal without whom the deal could never take place to begin with, it is crucial for a wholesaler to have a list of serious buyers to work with. These are not people who are just curious about the possibility of buying a pretty old house at a low price and then maybe later getting a cousin who's a carpenter to fix it up. True buyers are people who have the money to buy your wholesale property now, and who have some knowledge of what it will take for them to make it marketable. These buyers often have already bought many homes and know exactly what they are looking for.
A good place to start looking for potential buyers is online by creating a website and using Google AdWords in order to attract interest. Social marketing also is helpful in finding potential buyers. You can also attend real estate investor meetings or advertise on places like Craigslist. It's also possible to find out who has been buying properties for cash in the local area by reviewing public sales records. These records will show how the property was purchased and if a lien was involved. If not, the buyer paid cash, and that person may be someone who will also pay cash for the property you want to sell.
What Does the Buyer Want?
Different buyers of real estate tend to want different things, and there are buyers out there who develop buying habits that it's useful for a wholesaler to become familiar with. However, in general, all buyers want some of the same things. They want an accurate assessment of the cost of the repairs that will be needed on the house, and an ARV that reflects that. They also want to have access to the house so that they can see all the rooms and features, even if there are tenants, so you must at least provide accurate photos or set a time when they can view the property, inside and out.
Some buyers prefer certain types of neighborhoods for various reasons, perhaps because a neighborhood that was once blighted is now growing in popularity or because they has contractors that work in a certain area. Whatever the case may be, your transparency with your contracts, your way of approaching the buyer as an individual, giving him adequate time to consider the deal, and your willingness to help him understand the true characteristics of the property will go a long way to building the trust of potential buyers.
For a real estate wholesaler, building a network of buyers is as important as having good doctors and nurses is to a hospital. Without competent staff, the patients will not get well, and without buyers, a wholesaler can't sell the properties for which they are contracted on time. This will cost him his reputation as a wholesaler and will destroy the trust of those with whom they do business. It makes sense for a wholesaler to start slowly, and not overextend themselves with property contracts until they know the buyers are there.
A successful real estate wholesaler looks at the big picture...and that is a realistic picture of what's out there, in his working area. In other words, who is selling what, and why? Who wants to buy and for how much? Doing the homework and due diligence, building relationships with the appropriate parties and knowing the local landscape are what successful wholesaling is all about.
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