Why should I use a wholeseller to find good deals?

Question

Howdy! I am a Marine pilot stationed overseas and I am looking for a good SFR deals in the Bentonville, Ar / NWA area. I am actually about to close on my first SFR buy and hold deal in that area and did so by just combing the MLS with a realtor/ looking on Zillow. How will a wholeseller be able to find me a better deal than just using a realtor?

thanks

Aaron Mazzrillo · Answer

Okinawa. Nice! I was on special duty at White Beach for a while. Nothing at all going on there and I don't particularly remember a white beach. Many days, I think I was the only person at the place. The clubs in town sure were entertaining though. I think I used to patronize a place called New York. Of course, that was a LONG time ago.

Tough question you're posing. First off, neither of them have your best interest in mind. You need to know that. Seriously. The upside of working with an agent is that the majority of them are dumb and relentlessly faithful. Like mangy dogs on the street that you tossed your left over sandwich to. Now the dang thing is following you around everywhere looking for any scraps you're willing to part with. The downside is that dog might try to get you to eat a filthy sandwich just to get what you throw on the ground.

A bad wholesaler will put you into a crappier deal faster than.. I don't know what happens fast in the Marines. When I was in the Navy, it was a whole lot of 'hurry up and wait.' So, you can come up with your own analogy there. Just plug something fast in. Maybe how much time they give you to eat?

Wholesale deals are typically cash or hard money/private loans. I have no problem if my buyers use any of those three, but conventional financing is out of the question. If a buyer said they were going to do that, I'd hang up and call a real property investor. Now, there is nothing wrong with conventional financing. Interest rates sure are cheap and I'd take advantage of that all I could if I were in a position to do so. With wholesaling, things need to move a bit faster. That is generally why a seller is willing to sell at a price that makes sense for a wholesaler to buy it. Conventional financing just takes way to long. Also, the lender has tons of requirements they'll need satisfied or they won't fund. A hard money lender doesn't care if there is a hole in the roof and no carpet.

The upside of an agent, if you can find a good one, is pocket listings. I did a great deal with an agent on a pocket listing earlier this year. I used a private lender and flipped the property. A good agent will also comb the MLS looking for opportunities. Where an agent comes in super handy is when his/her office has lots of listings. Brokers love in house sales. That means an agent from his/her office gets the listing and another agent from the office finds the buyer. That's a double commission (double ending) and it means more money for the broker. There are lots of corrupt people in real estate even if it is only at a mild, white collar level.

If you have cash, or access to quick private funds, a good wholesaler can be a great connection. You'll essentially create an acquisition person who will hunt the types of deals you're looking for and get you decent discounts. An honest/mediocre agent will be competing with every other person who has access to the MLS. There are some great agents out there, but in a market where there are other investors, those agents aren't feeding their family with commissions from deals sold to investors.

There are pro's and con's to both. Why be exclusive? Work both angles and take down the deals that make sense.

Bob M. · Answer

@Carl Mccrory

Wholesalers usually market directly to motivated sellers (out of state landlords, pre-foreclosures, probates, etc.) to find properties offered at a discount suitable for investors (fix and flippers and buy n holders) to buy.  The properties they find often need some work, but the discounted price should reflect this and still leave some equity gain after repairs. MLS is a fine way to look for deals as well.

Deals can be found both ways.  Why not use both?  Sign up with a few wholesaler email lists (no cost) for your area and get deals meeting your criteria delivered to your inbox.

Definitely review the numbers and do your due diligence on deals for either approach. Wholesalers sometimes overstate After Repair Value and understate Estimated Repair Costs.