Undoubtedly the single most important thing in real estate wholesaling is finding a "motivated seller," if you can master this, your success is pretty much guaranteed.
There are many different strategies and lead types used for finding sellers motivated to sell their properties below market value, and this page should help you understand the basic methods so you can choose which best works for you.
First, I want you to understand the term "Motivated Seller" regarding wholesale real estate.
Motivated Seller: A property owner that, because of underlying reasons, needs to sell their house quickly or at a price below the current market value. These reasons can result from financial hardship, the frustration of ownership, relocation, an inheritance of property, and many other factors.
The key to finding out if you're working with a motivated seller is to ask questions to uncover their real motivation to sell. Once you reveal their reason for selling the property, you can ask yourself, do they want to sell or need to sell?
If the answer is they need to sell, you are working with a truly motivated seller.
Now that we've defined a motivated seller let's look at the best methods to locate them...
You need a website for several reasons if you are a real estate wholesaler. In today's world, almost every company has an internet presence, and you should as well.
It gives you instant credibility, and that's important, especially when you're working on a business transaction for tens or hundreds of thousands of dollars.
The second reason is it can generate Free Leads! And that's a cool thing! Let's face it if you opened up a clothing store, you'd need a building. If you're an Uber driver, you need a car; if you're a professional real estate wholesaler, you need a website.
Listen, I offer this training course at no cost because I want new wholesalers to be educated and have all the tools required for success. In exchange, I encourage you to take the money you saved and spend it on a wholesale real estate website for your business.
I strongly suggest an Investor Carrot, so please take a minute to check them out here.
Any new wholesaler with a limited marketing budget should start right here!
Driving for Dollars is one of the most effective ways to locate motivated sellers for anyone just starting in the business. The strategy is simple, pick a neighborhood, city, or zip code investors are buying homes in and drive up one street and down the next, looking for vacant houses.
When you find one write down the address and tape a note to the door telling the owner you would be interested in buying the home.
When I first started wholesaling, this was the method I used, and to this day, it provides outstanding results for me! Here's my theory on why driving for dollars works so well.
Many owners of vacant homes are marketed to regularly through the mail, but when someone drives to their house and tapes a note to the door, it's somehow different than a letter mailed to them.
It becomes more direct and personal, which seems to make them respond at a higher rate than they would to just another letter.
Also, some vacant house owners don't list a tax billing address with the county; what does that mean, you ask?
Well, it means no other wholesaler or investor can contact them by mail if they don't have another address to send a letter. So if you leave a note on the door, you are the only one getting to them.
If you're interested in finding motivated sellers this way, please take a look at my Driving for Dollars page, explaining how I did five deals in my first 30 days of wholesaling by driving for dollars.
Love 'em or hate 'em bandit signs make the phone ring if you consistently put them out, and they're a relatively cheap form of marketing if you're starting out.
Let's look at the numbers... the cost of sending one letter is roughly $1.00, give or take a few cents (envelopes, paper, ink, and postage).
Then you have the cost of the list of addresses (absentee, vacant, or whatever), so if you send out 1000 letters, it will probably cost you around $1,200 bucks, right?
The cost for 100 bandit signs is approximately $165.00, and if you were to place them at busy intersections, they'd be seen by thousands of people each day (until the city or county workers remove them). But some signs stay up for months or sometimes years, so you can see how bandit signs can stretch your advertising dollars further.
They're called bandit signs for a reason! Many municipalities will fine you for putting out bandit signs, so if you choose to use them, be careful where you place them. Here are a couple of helpful suggestions for you...
1. Place them where you see other people putting bandit signs for their businesses; chances are that the code violation officers are more relaxed in those areas.
2. Use a google voice number on your sign because there is no way to track that number back to you personally. Google Voice numbers are free, and all you need is a Gmail account to get one.
I absolutely love Vacant Property Lists! So much, in fact, that when I discovered how to source the USPS national vacant property list, I started this website to share them with other wholesalers around the country.
Let me explain to you why I love vacant property lists so much. As I started my wholesaling career, I quickly noticed that every house I was putting under contract happened to be vacant.
Not just the deals I was picking up from driving for dollars but from bandit signs, direct mail, and referrals as well.
They were often bought to be fixed up and flipped, but the owner ran out of money or found they had bitten off more than they could chew.
Sometimes they were probate properties, a few were fire-damaged homes, and others were tired landlords, but the one common denominator was they were all vacant.
The bottom line is that often, Vacant Houses = Motivated Sellers, so as you start marketing, I recommend focusing on vacant properties.
If you want access to all the vacant properties nationwide, check out the Vacant House Data Feed
Inevitably if I don't put absentee owner lists on this page, people will say, "Hey, you didn't mention Absentee Owners," so here it is...
But truth be told if someone tells you to market to absentee owners, they might as well ask you to flush 100-dollar bills down the toilet. Sure, if you send thousands of letters, you're bound to get a deal (even a blind squirrel can find a nut), but without some other type of motivating factor, absentee owner leads are worth your time.
*** For those unfamiliar with the terminology, an absentee-owned property means that the tax bill for that property is going somewhere else; that's what makes it absentee owned.
It could be an elderly parent's house, and the tax bill goes to the kid's house. It could be a vacation property, and the tax bill is going to their primary residence. It could be a rental property, and the tax bill goes to the landlord's house. It could even market as an absentee owner because all the mail goes to a P.O. Box.
My point is just because it's absentee-owned doesn't mean they're any more motivated to sell, so do yourself a favor and market to a more motivated list and let other people waste their money on this type of lead.
Probate leads (like vacant leads) are one the best lead type, and surprisingly very few people get into this niche because they take a little bit of work to figure out how to obtain the leads. Statistics show up to 80% of probate houses sell within 18 months of the owner's death. Let that sink in for a minute...
Can you imagine if I gave you a list of 100 houses and you knew 80 of them would sell in 18 months? You'd work that list, wouldn't you? No, that doesn't mean all 80 will sell at a wholesale price.
Still, from my experience, many probate homes are outdated, and the heirs are motivated to sell because they don't want the hassle and expense of maintaining another home.
If that's not motivation enough to make probate your niche, here's a quick story. My wife's grandfather passed away a few years back, and we received only one letter from an investor inquiring about buying the home. Do you think he followed up with us?
Nope, we never heard from him again.
And in a highly competitive market like metro Detroit, it's shocking that we didn't hear from anyone else. My point is probate real estate investing is a great niche, it's a win-win for you and the seller, and there is practically no competition!
If you want to make probate your niche, check out my probate course.
I would imagine every county in the United States has a Delinquent Tax List, and it's a great way to find deals, especially when the tax sale is looming in the near future. Usually, the counties will let people slide a year or two on paying their property taxes, but things start getting serious when you get to three years.
A Delinquent Tax list is available from every county because of its public record, but some counties share the information a little easier than other counties will. If you want to start marketing to homeowners delinquent on their taxes, I recommend requesting a list of homes that are over two years overdue. (maybe three, depending on your mailing budget) and start sending out letters.
Delinquent Tax Lists are a super way to buy properties at wholesale prices, so I recommend looking into them. (side note: delinquent tax list differs from buying from the tax auction. If you market to the Delinquent Tax List, you're attempting to reach them before the tax auction) Check your county website or the tax accessor's office for the list.
If you encounter any resistance to getting the list, use the FOIA Form (Freedom of Information Act), and they'll usually comply with your request.
Code Violation Lists
Do you know if your city has a code violation officer? I would almost guarantee they do, and they spend their days driving through the neighborhoods looking for tall grass, unshoveled snow, debris in yards, people living in houses with no occupancy permits, and so on...
Needless to say, when I heard about code violation lists about six months into my wholesaling career, I hurried over to one of my local city halls to pick one up.
Imagine my disappointment when they told me they didn't keep a list like that. I shrugged it off and went to another city office, and they gave me the same story as the last.
I'm a reasonably intelligent guy, so I knew if a city was writing violations, there had to be a list of them, right? Not one to give up, I discovered the power of the FOIA form (Freedom of Information Act) and how this one piece of paper could make the most uncooperative city worker do just as I asked.
I went back to the same two city clerks' offices with my FOIA form in hand, and the same people that didn't know what I was talking about just a few weeks ago had a completely different response, "give us a couple of days, and will have it ready for you."
If someone can't afford the upkeep on their property, or if a landlord has tenants destroying their property, there is a good chance they might be motivated to sell, which makes the code violation list a great resource. If you're interested in targeting code violations, you can download the FOIA form and read more about it here
A Joint Venture (aka JV) is when you team up with another real estate wholesaler to do a real estate wholesale deal. One of you has a seller lined up, and the other one has a buyer for the transaction; you match the buyer and seller together and split the assignment fee (typically 50/50)
Two types of wholesalers should be open to doing a JV deal, brand new wholesalers and veteran wholesalers (ok, so basically all wholesalers)
I'd been in the business a while when I started joint ventures with wholesalers in another state. I market, get the lead and send it to them for follow-up, and if we got the deal, we'd split it 50/50! I love it because I generate the lead, and they do all the work; they love it because I generate free leads for them (win-win)
If you're just starting JV in your local market can be great because it gives you a chance to work with other wholesalers and have them teach you what they know about the business. If you live in the country or somewhere that doesn't have a big investor market, doing JV deals with people in other areas can be an option through virtual wholesaling.
I'm listing JV's on this page because it's an excellent way to get deals to send to your cash buyers list without... the cost of marketing, having to inspect houses, doing comps, estimating rehabs, or negotiating with sellers. If this sounds like something up your alley, check out my Virtual Wholesaling Page or the 10-Hour Wholesaler Program
Bird Dog: someone that finds deals for you and then earns a referral fee once you have successfully had the real estate closing.
Years ago, I played with the idea of hiring a few bird dogs to go out and find me deals, but I felt that if someone were motivated enough to do that, they would probably just end up wholesaling themselves. Now with that said, I'm sure there have been wholesalers that have used bird dogs successfully, so if it's something you think might work for you, do some research and try to implement it.
Referral Partner: someone in a related business that gives you leads (not always for a fee)
Way back in my mortgage days, I built a fantastic relationship with many of the people that worked for the title company where I was sent all my business. They became one of my best sources for referrals. While other mortgage people were practically begging realtors to throw them a bone, I had people referring me to businesses to left and right. (less than 5% of my business was from realtors)
Surprisingly, in my wholesaling business, I get referrals from realtors. Often they knew I would make more on a wholesale deal than they would in commission, so that they would give me the lead, and I'd make them a JV partner. Contractors that work on investment properties have also given me plenty of leads, so my point is to make connections anywhere you can because you'll be surprised where your leads might end up coming from, and the best part is, very often, they'll be free.
Posting "We Buy Houses" ads on Craigslist and other online classified sites is something I see many wholesalers do, and I've done it, too, with only limited success.
Like any marketing, I believe it must be consistent and part of your entire marketing plan to find motivated sellers. Implementing this is easy; make a note on your calendar to place an ad that reads something like this every day or two.
★★ We Buy Houses For Cash! **Quick And Easy **Any Condition **
Looking for Fixer Uppers and FSBO properties in the Metro Detroit area. We will buy your home - CASH. That's not even the best part! YOU PAY NO FEES for selling with us!! AS-IS, no repairs or upgrades are needed. No closing, no commissions, no surveys, appraisals - NOTHING.
There is absolutely no cost to use my service. I buy houses without any fees to you, the seller.
!!--We Buy Houses For Cash! **Quick And Easy--!!
The ad above I just grabbed off Craigslist, and you want to avoid copying it word for word, but you get the point. Just make a point to list, and I would venture to say you will get some calls; even if you were to do a couple of deals a year from it, I'd say it's worth the time.
I'll be the first to admit things that work for some don't work for others, which is true when it comes to houses listed For Sale By Owner (FSBOs). Again I'll reflect on my days in the mortgage business when I called on FSBOs as a marketing strategy. My approach was to say that I'd help them with marketing materials and mortgage options to entice potential buyers to purchase the home.
What I found was that many people that tried to sell their house "by owner" felt their home was worth more than it was, and they were doing it because they felt as if they didn't need help from a realtor (or any professional) and they were determined to go it alone... The bottom line is I found them extremely hard to work with, so I've stayed away.
Does this mean you shouldn't call on houses for sale by the owner?
Absolutely not! As I said, something that works for others might not work for me. Whether you're in real estate, mortgages, automotive sales, horse-trading, or anything else, you have to do what works best for you. Find your niche and make it work!
Sheriff Sale Properties
A sheriff's sale occurs when a homeowner defaults on his mortgage, and the house is sold at a sheriff's sale. Now, as a wholesaler, you shouldn't be going to the sheriff sale and bidding on homes (although you should go to watch and meet some local real estate investors). What you should look into is whether or not your state has a redemption period after the sheriff's sale.
In Michigan, where I wholesale real estate, there is a six-month right of redemption for homeowners who have been foreclosed upon. Which means I can go to the homeowner after the sale and offer to buy it.
This works out great for the homeowner because they get the debt paid off and get some money for their moving expenses, and I can pick up a profitable wholesale deal!
Another good aspect is that not many wholesalers and investors go after houses in the redemption period (in my experience), so it might want to be a niche you explore and check out the right of redemption laws in your state.
My mindset on pre-foreclosure was if someone had equity in their house and was facing foreclosure, why wouldn't they list it with a realtor and cut their losses? Don't be like me and assume that people know what to do when facing foreclosure.
They often stop opening letters from the bank, put their heads in the sand, and hope the situation will disappear. But that leads to someone coming to the house to post a sheriff's sale notice on their door.
That's when they need a savior, and it's too late for a realtor; they need someone to buy the house quickly... They need you!
Some excellent wholesalers around the country help out homeowners by approaching them during this rough period in their lives. Now don't be surprised if some are still in denial, but don't let that deter you; as a real estate wholesaler, you need to have tough skin and not take it personally when someone gets upset at you because they didn't make the house payment.
If you want to try your hand at this niche, many companies will provide pre-foreclosure data, but I'd say Propstream is your best choice.
My investors work with real estate agents, and some are even real estate brokers themselves, so they see every MLS property that fits their criteria.
That's why I don't mess with houses listed for sale; it's just not my forte. However, many wholesalers will find distressed homes on the MLS and make low-ball offers on them.
They might make offers on fifty of them before they get an accepted offer, but like with everything, it's a numbers game. If you can find a wholesaler-friendly realtor to team up with (try finding them at your local REIA Meeting), it might be worth your time to see if this method works for you.
Note: Banks will not accept an assignable contract on one of their properties, so if you try wholesale REO properties, line up some Transactional Funding.
With transactional funding, you can close on the property in your name and then have another closing on the same day to sell the property to your end buyer.