Reverse Wholesaling Explained & Why It's The Best Way To Flip Houses...

I'd been in this business for several years before I heard the term "Reverse Wholesaling" and one day I decided to look it up to satisfy my curiosity, to my surprise I'd been reverse wholesaling all along. Since then I've learned a lot more about this business and I still believe reverse wholesaling is the best way and I'd like to explain why but first let me answer the question, what reverse wholesaling?

Reverse Wholesaling is similar to traditional wholesaling where you market for distressed houses and motivated sellers who need to sell their property quickly. But the way in which reverse wholesaling differs is that you spend time building your cash buyers list first and then only market for properties that meet their buying criteria. 

There are several huge advantages to reverse wholesaling especially if you're new in this business. So if you want to assign you properties quickly, make your sellers happy and keep yourself out of legal hot water keep on reading and I'll tell you why reverse wholesaling wins every time!

No Mortgage Denials 

I was in the mortgage business for years and I'll tell you nothing makes a seller more upset then when the buyer's loan gets denied right before closing. Having your cash buyers lined up completely eliminates this from happening to you and prevents you from having to make that dreaded call to them explaining why you won't be able to close on their property.

An experienced real estate investor can provide you proof of funds and will wire them to the title company prior to closing so you can rest a little easier knowing everyone will leave closing happy and you'll have a check for your assignment fee.

Avoid city and mortgage Inspections

Another advantage of selling to real estate investors is that often they don't need a city inspection prior to closing. Most investors are either going to renovate the home completely and flip it or rehab it prior to renting it to a tenant. They're not always concerned with having the inspection done prior to closing because they already know what work needs to be done. 

Reverse wholesaling also eliminates the need for a mortgage inspection because your investor will be paying cash for the home. If you we're selling the home to someone obtaining a mortgage an inspection would be mandatory from the lender and if they find the house to need any major repair or unlivable  the mortgage would be denied instantly!

Faster Closings

The things I've mentioned so far (mortgage approvals and inspections) don't happen quick by any means. Typically a mortgage takes 30 days to close if everything runs like clockwork, and city inspections have to be scheduled usually a week or two out. Then after the inspection is done any repairs listed will need to be made prior to closing and the city will need to re-inspect before issuing a certificate of occupancy (UGH)

Cash buyers on the other hand can often close just as soon as the title work is ready which can be in as little as a few days. This once again means things go smoother, your seller stays happy and you get paid much quicker​. Yet another win for reverse wholesaling!

Less ARV & Rehab Estimates

A big struggle with new real estate wholesalers is coming up with the ARV (after repair value) of the home and trying to calculate the rehab costs that are needed to the house. When you use the reverse wholesaling strategy and line up your cash buyers first often one of their contractors can meet you at the house to walk through with you. 

This not only is beneficial to your investor because they know exactly what repairs are needed but it also benefits you by exposing you first hand on what to look for when inspecting a property. The thing is rehab estimates vary dramatically because one investor might want to just paint and clean it up for a tenant, while another might want to do a total renovation. Bottom line is reverse wholesaling allows you to work closely with investors and their contractors so you can learn these skills.

Market The Property "Legally"

Ok I've saved the best for last! I have a big pet peeve with how a lot of wholesalers market their deals. I've personally been a licensed realtor in two states so I know a little something about what I'm getting ready to say... It's illegal to market real estate you do not own if you're not a real estate agent or broker, period!

Now with that said you can however assign your interest in a legal contract for a fee and that's exactly what real estate wholesaling is. Reverse wholesaling prevents you from having to list the property online looking for a buyer.

Many wholesalers and coaches will tell you just get a property under contract at a great price, advertise it and the buyers will "come a runnin" but I'm tell you flat out it's bad advice. Just imagine your seller sees the house listed online... What a mess that would create right? or worse yet the seller or a realtor reports your to the state attorney general for practicing real estate without a license.

Bottom line is wholesaling is legal and ethical but you need to use your head and do business the right way. I strongly suggest if you're currently wholesaling real estate or getting ready to that you follow the reverse wholesaling method and line up your cash buyers first.

If you'd like to learn more about building your cash buyers list I invite you to look at the "Building your cash buyers list" 
Page of Wholesaling University.