Months of Research - 1 Conclusion - No Risk No Reward

[Simona Potocar]

Hi There BP!

I first heard about wholesaling a little over two months ago, just randomly via a podcast hosted by Sean Terry.

As a realtor, I had never heard of this before! And to be honest, neither had my broker or any of the people I spoke to at my office. 

I took a deeper dive, and listened to may of the podcast episodes that Sean had put out, as well as the BP podcast episodes where the various methods of wholesalers were revealed in interview after interview.

I found many similarities among what I'd read and heard on the podcasts:

• Direct Mail is a very popular way to go
• You'll likely need to spend thousands in marketing dollars (most likely using yellow letters and postcards) to get the deals coming in to you
• Once you get one deal, the rest snowball
• Commit to one marketing strategy, bandit signs may work but they tend to be the least favored here on BP (due to their "uglying up a neighborhood" and the fact that many times they are illegal and get removed)

So I get the general gist of this but the questions I still have unanswered are:

• How does one know what is the right legal language to put on contracts?  For instance, I know you can assign a contract or do a double escrow, but how do I know what sort of language to put in the contract in order to make it work? Do I just pay a real estate attorney to draw those up for me or is there a less expensive way to go about this?
• How much, on average, does a person spend on direct mail campaigns and how many months go by before a call comes in that nets you a deal?
• How in depth do you go with your buyers? Do many wholesalers put together a mini appraisal or is that above and beyond that maybe doesn't need to happen until you're more established?

Thanks in advance - I know this is a wall of text!

[Matt Motil]

The loophole in wholesaling is in marketing a contract versus marketing a property you don't have any contractual interest in. It is tough to market a real estate contract without marketing the property. 

Aside from that, providing the seller a disclosure that tells them that they could get more for the property on the open market versus selling it to you helps from the legal standpoint. The question though that needs to be asked is: If you are a real estate professional and tell a seller they can get more to properly market their property then why would they agree to wholesale it? They do it because you have probably told them that you can close it quickly, for cash, at this lower price. The problem arises in the fact that most wholesalers (a) do not actually have the cash to close, and (b) have no desire to actually close, and (c) will kill the deal if they can't get a cash buyer before their contract expires, which will have left the seller hanging for the period of time that they had the property under contract. 

When this happens, it gives real estate professionals, and especially investors, a horrible name.