Wholesaling: Convincing seller to work with you versus an agent

[Brandon McCadney]

Hey BP fam! 

I just had a very successful cold call today with a lot of potential. I'm still fairly new to the process and I just started making calls last week. 

To make a long story short, the seller is definitely motivated, however, he's considering working with an agent because the agent said that their property would be worth about 250k (definitely makes sense for the area), therefore, that's the least he's willing to expect from it. It may need about 20k in cosmetic repairs. He's also somewhat familiar with the wholesaling process (I didn't tell him that's what I do, but he knows I'm trying to get it for a discount). The thing is this: he wants as much money as he can get from it, but he's also worried about paying for realtor costs.

Has anyone experienced this type of situation? If so, what ways did you get the seller on your side?

[Gabe Waldrep]

From a wholesalers perspective, you need to emphasize the repairs needed and costs that may come up if a buyer gets a home inspection. Breakdown the realtor fees and closing costs. Let the seller know that with you he doesn't have to pay either of those. So make a net sheet showing his bottomline for each option. Remind him that if he goes to market, he will have to deal with multiple showings, a 30 day escrow, the potential of a buyer backing out after inspections, financing that may fall through, appraisals, etc. Paint a picture that selling to you eliminates much of that headache. You will only have "contractors" coming through during your inspection period. 

[Brandon McCadney]

@Gabe Waldrep Thank you. That makes a lot of sense. That's where my thinking was going after I sat with this for a while. I think if the seller sees that information up front, it can make him more reluctant to work with the agent. I'd hate to let it go simply for that reason because it's in a very prominent, desirable area in St. Louis.

Just out of curiosity, have you created a net sheet with similar information? I'd love to see an example. 

Thanks again Gabe. I'll be visiting the property next week or the week afterwards once his current tenants move out.

[Jay Hinrichs]

Originally posted by @Gabe Waldrep:

From a wholesalers perspective, you need to emphasize the repairs needed and costs that may come up if a buyer gets a home inspection. Breakdown the realtor fees and closing costs. Let the seller know that with you he doesn't have to pay either of those. So make a net sheet showing his bottomline for each option. Remind him that if he goes to market, he will have to deal with multiple showings, a 30 day escrow, the potential of a buyer backing out after inspections, financing that may fall through, appraisals, etc. Paint a picture that selling to you eliminates much of that headache. You will only have "contractors" coming through during your inspection period. 

 how does eliminating the commission help the seller.. the wholesaler needs to deduct resale commissions for his buyer plus his fee so this is why sellers get LESS money by far on the wholesale route.. plus wholesalers are going to march buyers through the house just like a realtor would and wholesalers don't close quicker than 30 days either.. the only thing would be maybe they have cash buyers.. that's it.

unless its a hoarder house or wont pass a lending inspections.. no way wholesale is a benefit to a seller that knows market.

I always chuckle how the wholesalers hammer on no commissions I guess these sellers are really uneducated to plain dumb.. LOL

[John Thedford]

This doesn't take into account the fact that MLS listings propagate out of thousands of potential buyers. The typical propaganda that unlicensed brokers use is just that. Not true. Slanted to their side. They prey on unsuspecting sellers. These guys are skirting rules to broker real estate.

[Gabe Waldrep]

@Jay Hinrichs sometimes eliminating commissions and closing costs on a cash sale can make the deal more appealing to a seller. This can easily be a $8000 swing. Not all sellers know the market. Personally as an agent and a wholesaler, I pitch both sides to a seller and let them decide. If I think the benefits of listing the home on the market truly outweigh an off-market sale, then I tell the seller. I try to suggest what is best for them and their situation. Some sellers only trust the agent or wholesaler they are working with and don't want strangers in their home unattended even if that means they are with other agents.

I fully agree that often selling off-market is not the best thing for the seller. But many houses will not pass inspections or qualify for a loan due to condition, and many sellers do not have the cash to make the repairs. 

Also when selling off-market, there is less of a chance that the contract will fall through. Most wholesalers who run their numbers correctly can find an end buyer before their contingencies expire.

Every seller has a unique situation, and it is our job to figure out what works best for them.

[Brandon McCadney]

@John Thedford @Jay Hinrichs Hey! I just want to say thanks for your responses also. Like I said before, I'm very new to the wholesaling process, let alone REI as a whole. One thing that I have learned is the difference and credibilities of a wholesaler versus an agent. I see the differences, the pros, and the cons, the good, the bad etc. Maybe the seller is in a position to get whatever they can get for their house and not have to deal with working with an agent OR maybe the seller wants to work with an agent because that's what they're comfortable with and they feel as it would be less of a hassle than someone like me.

At the end of the day, I truly believe that all of this falls on the integrity of the person. Sure, wholesalers can be seen as "those guys are doing everything they can to get people out of their houses", and agents can be seen the same way but in different situations and contexts. All of it is relative honestly. We're all here because there's money to be made (just being real), and there are people interested in selling their homes for whatever reason. If we look at it like that, and understand that this is a people's business first, then it doesn't matter if you're a wholesaler, an agent/broker, rehabber, etc. And 

Just help make differences in people's lives and make their lives easier using what you know and the resources you have. We're all different. That's what, I believe, makes REI so interesting.

[Gabe Waldrep]

@Brandon McCadney I only have an MLS Net Sheet that I use for normal listings. I compare this with a quick verbal or hand-written rundown of a cash sale.

Since I am a real estate agent, I present both sides to the seller and let them choose what is best for their scenario. If I think one direction has more benefit to their bottom line than the other, I be sure they understand that. If you are only wholesaling, then your strategy is one-sided.

[Jay Hinrichs]

Originally posted by @Gabe Waldrep:

@Jay Hinrichs sometimes eliminating commissions and closing costs on a cash sale can make the deal more appealing to a seller. This can easily be a $8000 swing. Not all sellers know the market. Personally as an agent and a wholesaler, I pitch both sides to a seller and let them decide. If I think the benefits of listing the home on the market truly outweigh an off-market sale, then I tell the seller. I try to suggest what is best for them and their situation. Some sellers only trust the agent or wholesaler they are working with and don't want strangers in their home unattended even if that means they are with other agents.

I fully agree that often selling off-market is not the best thing for the seller. But many houses will not pass inspections or qualify for a loan due to condition, and many sellers do not have the cash to make the repairs. 

Also when selling off-market, there is less of a chance that the contract will fall through. Most wholesalers who run their numbers correctly can find an end buyer before their contingencies expire.

Every seller has a unique situation, and it is our job to figure out what works best for them.

end of the day though Seller does not benefit.. we buy listed non financeable properties all the time.. so does networth or what ever other big wholesale RE brokerage in your area they are right off of MLS..

whats the difference of you bringing a wholesale buyer through the house as opposed to a retail one off of MLS.. answer NO difference..

my thought Is sellers in these instances think they are saving commission but the sales price is lowered to reflect it and many times wholesalers just rip the pants off of sellers leaving them with 10s of thousands less than they could have gotten with a property open to the market not just a wholesaler who has his own best interest at heart not the sellers.  No way anyone can convince me that wholesaler bring any value to a seller..  I fund a ton of distressed assets as a lender and have for going on 4 decades.. so I see the HUDs.. its not my place to get involved at that level.. but its reality.. wholesale really has double commission if not more not less.

[Gabe Waldrep]

Originally posted by @Brandon McCadney:

@John Thedford @Jay Hinrichs Hey! I just want to say thanks for your responses also. Like I said before, I'm very new to the wholesaling process, let alone REI as a whole. One thing that I have learned is the difference and credibilities of a wholesaler versus an agent. I see the differences, the pros, and the cons, the good, the bad etc. Maybe the seller is in a position to get whatever they can get for their house and not have to deal with working with an agent OR maybe the seller wants to work with an agent because that's what they're comfortable with and they feel as it would be less of a hassle than someone like me.

At the end of the day, I truly believe that all of this falls on the integrity of the person. Sure, wholesalers can be seen as "those guys are doing everything they can to get people out of their houses", and agents can be seen the same way but in different situations and contexts. All of it is relative honestly. We're all here because there's money to be made (just being real), and there are people interested in selling their homes for whatever reason. If we look at it like that, and understand that this is a people's business first, then it doesn't matter if you're a wholesaler, an agent/broker, rehabber, etc. And 

Just help make differences in people's lives and make their lives easier using what you know and the resources you have. We're all different. That's what, I believe, makes REI so interesting.

 Well said sir. If you stick to this philosophy you will do well and sleep well knowing that you are helping people in need. The point is to solve their problem.

[John Thedford]

Originally posted by @Gabe Waldrep:

@Brandon McCadney I only have an MLS Net Sheet that I use for normal listings. I compare this with a quick verbal or hand-written rundown of a cash sale.

Since I am a real estate agent, I present both sides to the seller and let them choose what is best for their scenario. If I think one direction has more benefit to their bottom line than the other, I be sure they understand that. If you are only wholesaling, then your strategy is one-sided.

I see cash sales frequently for MLS listed properties. Price brings buyers regardless if wholesaling or listing the property. My last property went under contract in less than two days. I was the buyer and the property was MLS listed. Many sellers are uninformed that they are getting FAR LESS than going the traditional listing route. Besides that, most of these unlicensed brokers are doing the EXACT same things an agent would do, except without a license and oversight. They ARE skirting laws and often breaking laws. Unlicensed brokers CANNOT get the exposure a MLS listing does.

[Jay Hinrichs]

Originally posted by @Gabe Waldrep:

@Brandon McCadney I only have an MLS Net Sheet that I use for normal listings. I compare this with a quick verbal or hand-written rundown of a cash sale.

Since I am a real estate agent, I present both sides to the seller and let them choose what is best for their scenario. If I think one direction has more benefit to their bottom line than the other, I be sure they understand that. If you are only wholesaling, then your strategy is one-sided.

 YUP and 99% of the time not sided with the seller.. 

but I get it in certain areas especially low value areas were houses are selling for 5 to 50k  wholesalers really do most of the business because they can rip 5 to 10k or more out of the deals.. 

My point is there Is no way with everything being equal that a wholesaler puts more net dollars in a seller pocket.. they will take for themselves first.. LOL