Wholesaling, the MLS, and Realtors

[Bryan L.]

I see the same questions popping up again and again from newbies, so I'll take a stab at discussing the issue of wholesaling MLS properties and working with Realtors.

First, a little back-ground. I am an investor and also a Realtor. I've bought 30+ properties with most of them being MLS-listed properties. That may not seem like a lot, but I rehab most of my deals, so that's a pretty good number.

Second, there ARE deals on the MLS, and I am NOT going to tell you that you can't find deals on the MLS or that you can't wholesale MLS deals. I have done it (although I am primarily a rehabber) and others do it all the time.

But, here's my advice.

1. If you are going to be working MLS deals, do yourself (and every Realtor in the area) a favor and become a Realtor yourself. I can't emphasize that enough. No, you do NOT have to do Realtor work. You do NOT have to drive people around and show them houses. You do NOT have to sit in the brokerage firm's office and answer the phone. There will be some costs, but you will more than recoup them in commissions on your own deals. And spend some time in the brokerage firm's office anyway and get to know some of the Realtors. The networking is invaluable. And learn how to really use the MLS to it's fullest extent. Learn how to save searches and how to search based on key-words. Learn how to set up automatic emails to yourself when a good deal hits the market or has a price reduction. Learn how to evaluate the ARV and pull comps for yourself. Pay the small fees to get lock-box access to the properties for yourself. Get to know the termite guys and home inspectors in your area. And maybe even do a little Realtor work so that you will know what the retail buyers are looking for in a house - features and location. No, it is not essential to become a Realtor, but it surely is helpful. I almost forgot this one - as a Realtor, you can set your own showings to show the property to your end-buyer (especially if it's vacant).

2. Get some money partners and/or lines of credit. Many of the MLS deals (but not all) will be REOs (a.k.a. foreclosures). And these typically will not allow you to assign your contract or whatever. And they will require you to present proof of funds and an earnest money check with your offer. You may be able to do a double-close, and yes, you may be able to do the "sell your LLC thing", but it's a hell of a lot easier to just buy the blankin' thing and then sell it, especially with the REOs. I'm not saying that it can't be done otherwise, but still.

3. Some of you have such basic questions that I wonder if you've ever even bought a house at all (for you to live in, much less to flip). If you don't own your own home, go buy one. Buy a great deal, rehab it, fix it up, move into in, enjoy it, and get a line of credit against your equity (see #2 above).

Wholesaling MLS deals CAN be done, but it will often be difficult. Why? Because, while you're out trying to get a Realtor to work with and to show you a house and to set up your LLC so that you can make an offer at 60% of ARV (after you've waited for a week for your Realtor to determine the ARV), and then you include an inspection contingency to give you enough time to market it to your buyer's list, etc, etc, etc, - while you're doing all of this, I've already gone to see the house for myself and made the offer at 65% of ARV with no contingencies, cash offer with proof of funds, and submitted that offer two weeks before you because I didn't have to wait for my pre-approval letter, or for the Realtor to let me into the house, or for the Realtor to write the offer.

So, it's not impossible, but realize that you will be competing against experienced investors who already have done all 3 steps listed above. Sure, there are successful investors who are wholesaling MLS properties who have not done those steps. But look at their competition.

Another option for you is to focus your efforts on non-MLS properties. Put out bandit signs, send out yellow letters, etc. In my humble opinion, here's where a wholesaler really shines. I would LOVE to have a good wholesaler in my area working the non-MLS market.