Wholesaling - 5 questions! Please Read

[Shawn Ryken]

Hey BP!!! Happy to be here and have access to the info. I have a couple questions about wholesale deals with seller agents involved. I am an agent myself and have watched several videos (youtube, etc etc) on concept of wholesaling and rehab/flips. Little background - avg 7-9 million in sales a year in standard real estate but wholesales and/or rehab/flips is a new adventure I want to take on.

Anyone followed or heard of Alex Martinez program with wholesaling MLS? His concept (offer as much as you can via on-market deals from MLS) - This strikes me as the most cost efficient way to start to limit $$$ for leads as I have all the access to MLS. With that being said you have a seller's agent to deal with. Couple questions I wanted to know for wholesalers who deal with on-market listings:

1 - EMD on standard contract on most deals in DFW metro are 1% of sales price (with using a sales agent but obviously any fee is negotiable). With that if a property is purchased at 150k = 1500 EMD (general rule) for contracts. Buyer has 2-3 days to deliver EMD to title company. What if you do not have a buyer in place or agreed to yet. Is this a general fee the wholesaler pays out of pocket and if cash end buyer is found is reimbursed from them? Or do you account for this in your assignment fee?

2 - Option fee is typically $50-$200 depending on location, price, and amount of offers. This time frame is negotiable but you would want your time to be as long as possible to allow your buyers to inspect. I assume that this fee is paid by wholesaler and not credited back once deal goes through?

3 - Proof of funds (since inked as a cash deal). Starting to market to cash buyers in the area - but what is the best way to get a POF document/letter if wholesaling. (I know I always ask for POF when selling a property and a cash deal comes across).

4- Is it wrong to ask cash buyers or hard money lenders their buy formulas since I have watched HOURS of videos and read HOURS of material to see that the (%ARV - repairs - wholesale fee = purchase price)? Lots of literature says this varies per market - with hotter markets the % ARV increases OR if the cash buyer is a legitimate cash buyer and not a hard money lender.

5 - Wholesaling a deal that is a buy & hold (just a good deal as is). Most interested parties for these type of transactions I would assume are actual cash buyers and not hard lenders correct? Ex. House is worth 250k (as-is with no repairs or updates needed) sells for 230k with a 10k assignment (220k under contract) - this would take away any investor using hard money loan concept. Wouldn't a true cash buyer still be of interest if its +20k equity sitting there as is? (not many wholesale videos explain this concept).

Thanks to all the help and look forward to being a reliable source of info one day on this new adventure!

[Don Konipol]

@Shawn Ryken,  sounds like you intend to make offers and then utilize the termination option should you be unable to 'flip' the contract.  If so, be prepared for A LOT of negative feedback, complaints, etc. from the Realtor community.  Even the successful flips will encounter negative feedback since you will be accused of using your superior knowledge for personal gain at the expense of the consumer/seller.  

I personally don't like the 'wholesale' model when used by realtors also acting as agents for buyers or sellers. Seems like doing both is an inherent conflict of interest.  How can you tell a seller/buyer that you operate in their best interest when you also try to get the lowest price from a seller and highest price from a buyer when acting as a middle man?  just seems to muddy the message.  You may find that wholesaling leads to a decline in the agent side of your business.