Virtual wholesaling question.
Member since 2022 · 27 posts · 26 votes
Virtual wholesaling question.
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Title Representative · Irvine, CA · Member since 2017 · 874 posts · 519 votes
3yYou can't post a deal on MLS that you are under contract for, unless you are doing a novation. Also, you can't post a deal on the MLS at all unless you are a real etate agent who is a member of that local MLS. Posting it on Craigslist is lazy and not a good idea since the seller and/or their neighbors will see that you tied up their property and are just trying to make an easy 25k off of it without really adding value. The experienced wholesaling companies spend a lot of time and money putting together buyer lists and they market direct to their buyers. It's important that wholesalers have integrity and care about sellers and do not waste seller's time. You need to find someone experienced who's willing to work with you, since I can already see from a mile away the problems you'll cause them by being so naive as to how the process works. Also, not anyone and everyone can wholesale or do real estate. Too many people see some videos and YouTube and think they can do it, too, and make money overnight. I can't become an attorney overnight, or doctor, or even barber or a chef. So again, please work with someone who knows what they are doing, and don't hurt a seller by wasting their time.
3 Replies
Quote from @Felix Lilly:
Hey BiggerPockets. I had a question here: I am newly getting into virtual wholesaling and I found a fixer-upper property in Idaho for $110k. If I called the landlord of that property and pitched a deal for around $90k, and he accepted, then I get the contract for his property. After that, I post the contract up on the MLS or Craigslist or wherever and put my new contract up for $120k for example. The difference between $95k and $120k is $25k which means I would pocket $25k. Who is it exactly who sends me the check for the difference?
The titling company Felix
- Title Representative · Irvine, CA · Member since 2017 · 874 posts · 519 votes3y
You can't post a deal on MLS that you are under contract for, unless you are doing a novation. Also, you can't post a deal on the MLS at all unless you are a real etate agent who is a member of that local MLS. Posting it on Craigslist is lazy and not a good idea since the seller and/or their neighbors will see that you tied up their property and are just trying to make an easy 25k off of it without really adding value. The experienced wholesaling companies spend a lot of time and money putting together buyer lists and they market direct to their buyers. It's important that wholesalers have integrity and care about sellers and do not waste seller's time. You need to find someone experienced who's willing to work with you, since I can already see from a mile away the problems you'll cause them by being so naive as to how the process works. Also, not anyone and everyone can wholesale or do real estate. Too many people see some videos and YouTube and think they can do it, too, and make money overnight. I can't become an attorney overnight, or doctor, or even barber or a chef. So again, please work with someone who knows what they are doing, and don't hurt a seller by wasting their time.
- 3yDon KonipolBusiness MemberInvestor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votesIt all works seamlessly inTHEORY. In reality, not so much.
Quote from @Felix Lilly:
Hey BiggerPockets. I had a question here: I am newly getting into virtual wholesaling and I found a fixer-upper property in Idaho for $110k. If I called the landlord of that property and pitched a deal for around $90k, and he accepted, then I get the contract for his property. After that, I post the contract up on the MLS or Craigslist or wherever and put my new contract up for $120k for example. The difference between $95k and $120k is $25k which means I would pocket $25k. Who is it exactly who sends me the check for the difference?
Seller’s rarely sell properties worth $125k for $90K, and almost never list it below market value. Most deals involving buying property, especially SFR under market value are MADE by “working the deal” and negotiating, not “found”. Almost all the properties I’ve been able to purchase below market value are the result of my being able to see value that others missed, or in times of difficult financing being able to offer cash for difficult or impossible to finance properties.
I don’t know of any Realtors anywhere that would be foolish enough to take a listing from someone who doesn’t hold legal title to a property. In the old days holding “equitable title” was sometimes enough, but to hold equitable title the buyer still needed to close the property purchase, albeit utilizing a “contract for deed” rather than transferring title via a warranty deed. However, putting a property under contract does not constitute holding equitable title; it is merely an “option” to purchase the property, and sometimes not even that depending on the exact wording of the contract.
IF a “wholesaler” has managed to place a property under contract, he will be limited in his ability to advertise the property for sale. First, many states have enacted rules, regulations and laws that consider this activity to be brokering without a license. If the wholesaler obtains a license, then wholesaling may subject him to a lawsuit by the seller for having violated his fiduciary obligations as a license holder. So it’s a catch 22, that’s only now becoming a major issue. So far most wholesale professionals have managed to operate without government interference, but the professional wholesalers who operate ethically are forever being tainted by those that are misled by the gurus selling programs that end up with consumer complaints and Attorney General actions.
As a practical matter, the major successful players in the wholesaling field operate one of two ways. Either they either have the financial capacity to close on a deal even if they can’t flip the contract before closing, or they are so close to their buyers that they know before making an offer with 99% confidence that they could flip the contract to their buyer relationships. If these two situations aren’t true, they will inform the seller upfront that they will only close if they can flip the contract and that they are not the end buyer, merely an intermediary, so that the seller will understand that by signing the purchase agreement they are actually only giving the buyer an “option” to purchase the property IF they can find someone to pay more.
There are basically two reasons people new to the real estate arena see wholesaling as desirable. Either they don’t have capital to purchase or invest, or they don’t want to risk the capital they have until; they “learn” more. The problem with this is (1) wholesaling is a business not an investment and takes business ownership and management skills, as well as capital for EMD, marketing, advertising, legal advice, etc. to be profitable (2) you’re operating in a gray area at best if you’re not licensed (3) you’re learning at the expense of the seller and may do him irrevocable harm, and (4) since you’re not under the direction of a competent teacher you’re not learning anything worthwhile.
IMO much better to put your entrepreneurial dreams on hold and apprentice to a successful real estate operator either as a full time position within the industry or as a part time endeavor with a successful operator/developer/investor.
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