First, for anyone not familiar with a “real estate wholesaler”, I want to clarify what it means: Someone who specializes in finding real estate deals, getting them in contract, and assigning (or double closing) the contract to a cash buyer at a discounted rate.
NOTE: Wholesaling is frowned upon in some markets and downright illegal (Based on Real Estate Law) in other markets. For instance, in my market, Columbus, OH, the division of real estate has essentially stated that if you have a real estate license, you can legally wholesale. Now, this is still a grey area in some markets, but that’s the responsibility of the wholesaler.
As my real estate business has grown, every year I buy more properties from wholesalers. The more they see me as a steady and able buyer, the more deals that get brought to my attention. I try to keep a good rapport with these real estate professionals, and in turn they bring me more deals before anyone else sees them. I wanted to put together a few tips for buying from wholesalers and also staying at the top of their list!
Step 1: Build Rapport
Active wholesalers finding good deals can be a great resource - treat them accordingly. Take them out to lunch, for coffee, or a beer. Get to know them. Let them know your situation, how you can close fast and what criteria you’re looking for. You want be the first buyer they think of when they a deal in contract.
When making initial contact, keep it casual and be respectful. If you are making the initial contact and requesting the meeting, go to them, wherever that is. This will set the stage right away that you are going out of your way to make the meeting convenient for them. Pay for the meeting. Again, you are the one requesting the meeting, you should pay their meal or drink as a thank you for meeting.
Step 2: Don’t wait for deals to come to you; reach out to wholesalers regularly
This is something I do consistently and usually gets some hits. I’ll send out a text or email to all of the wholesalers in my area reminding them that I’m looking to buy soon and if they have anything to give me a call. This is kind of like reverse marketing. I usually get a few of them who are currently working on deals, and a lot of time they’ll share them with me before they bast them out to their list.
Step 3: Make the closing as smooth as possible
This takes some practice if you haven’t done a ton of closings, but there are some things you can do up front to make the closing go well.
- Ask all your questions up front. It’s a challenge for everyone when you start asking questions about the property, tenants, owner, etc the day before closing. It is your job, as the buyer, to do all your due diligence before you commit to buying.
- Close on time. Don’t be the reason for delays whether that’s a late inspection or delay in wiring in the money.
- Don’t back out. If you do back out on a deal last minute, you will probably be taken off that wholesalers list, as well as get a bad reputation among everyone they know as someone who backs out of deals. This is not a good situation.
Step 4: Don’t sweat the non-refundable security deposit
A lot of people get all hung up on the non-refundable security deposit, but that’s standard practice. Usually wholesalers have a limited time to sell a property so they ask for a non-refundable deposit to help with the risk in case you bail on them. You get to do your comps and evaluate the property before you buy, so if you’re ready to buy, what’s the big deal with a non-refundable deposit?
Step 5: Realize not all deals will fit your model
Typically wholesalers will price their deals at the absolute top of the market. Sometimes they have room to negotiate and sometimes they have tight margins. The challenge is you don’t know which is which. Some wholesalers can get a little salty if you send them an in depth analysis of why their “deal” is not worth buying. They may know this or they may have a different buyer in mind.
Simply put, if it’s not a good deal to you, then don’t buy it. No need to ruin your relationship for no reason. You can ask them if they have room on price, or tell them your ballpark and if that doesn’t work then it’s not a win-win and that’s fine. If you offend them with your analysis they may just take you off the list because they don’t want to deal with you, and that doesn’t help anyone.
We work with wholesalers all the time and I can tell you that they are a crucial part of my business. Finding and building a good relationship with wholesalers can you help you grow your business and possibly lead to new and different business opportunities!