Quote from @Stuart Udis:
@Eric Tullius I am still not seeing it your way. Putting myself in the shows of Mel as the seller this is the conclusion I am coming to:
1. How discreet is a wholesale transaction? I recieve countless texts, emails and calls each week from wholesalers. I am sure I am one of hundreds recieving the same communications. Why wouldn't prospective buyers approach the property the same if they recieve the lead through a wholesaler vs. it being listed on the MLS? If anything there's better control over what material and infromation is being transmitted if the property were to be listed. Also, there's new functions such as the "coming soon" category through the MLS which allows brokers to be notifed of upcoming properties without the property transmitting to zillow, realtor.com, etc. for anyone to see.
2. No broker fees vs. going under contract below FMV to induce the assignment seems like a wash, no?
3. Can't the condition and investment opportunity be described in MLS marketing? Plenty of investors purchase investment opportunites off the MLS (me being one of them).
4. Why does the buyer have to accept an offer with contingencies if listed on the MLS? Also, what exactly does it mean for the purchase agreement to be in cash? Anyone can elect not to use a mortgage contingency, and still obtain one, they merely waive the mortgage as a contingency. Also, most who will buy a home in the price point as a flip will likely utilize a construction loan to improve upon the rate of return. I personally would value the property at a higher acquisition number if I could use leverage. Even if the prospective buyer has the ability to settle with cash, why would they want to and incur additional transactional costs of then immediately originating a loan thereafter? If you were to conduct a market analysis of similar properties purcahsed with the intent to flip, I bet most were acquired with construction financing. If not financable, this would likely eliminate qualified buyers and drive the pricing down.
I've certainly come across plenty of wholesalers who conduct their business with the same integrity as a good sales agent. I've also encountered plenty of sales agents as well as wholesalers who conduct business poorly. Here, I am not seeing any benefits to going under contract with a wholesaler over the opportunity to be well represnted MLS listing.
I understand the outlook you have on it. Being a licensed agent myself I have no problem admitting there are benefits to an MLS transaction, but wholesaling absolutely has its benefits as well. As I mentioned in the first post there is a lot more that goes into a deal like this than a typical wholesale transaction.
Great wholesalers have buyers they work with directly to get a deal like this done. A higher purchase price deal is not one that is going to work by spam emailing anybody you can get onto your buyers list. As far as privacy you could list the property on MLS as a one time showing with a highest and best bid price, but no matter what you are going to come across people who say cash, but attempt to come to the table with a conventional, FHA or DSCR loan (personal experience).
The assumption of below FMV is not necessarily accurate either. FMV would be completely dependent on the condition of the property. Mel mentioned it needs around $450k in work, but is in livable condition. I know contractors who will quote $100 a sq ft on a rehab, but can get the project done themselves for significantly less than that. So if the rehab is estimated at $450k and a contractor who flips can get that done for $200k that leaves significantly more margins on the deal to offer a fair market price. Not to mention on an MLS transaction he is going to pay commission out of pocket which based off the $875k number i've seen thrown around can be upwards of $35,000+ for just the listing agent he would have to pay out of his proceeds.
In short Mel has no shortage of options with a property like this, but it is better to work with some form of representation than to go at it alone (depending on experience which he never mentioned). Whether that means a GOOD wholesaler or a good agent either way based off the numbers this would be a great investor friendly deal.
