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Wholesaling Houses 101
​
A step by step guide to wholesaling houses 


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​Step 1 - What is Real Estate Wholesaling?

The wholesaling process involves finding houses you can buy at a discount, typically because the house needs repair or the owner is motivated to sell quickly. Once you've located and negotiated a contract on a discounted home you'll assign the purchase contract to another buyer. Typically the buyer is another investor that is going to fix up and either rent or resell the house. The best buyers are cash investors as they can move quickly and make the wholesale transaction go smoothly because they have experience working with other wholesalers.​
​If you don't understand the basics of wholesaling completely I suggest you buy some books specifically on wholesaling houses. I've listed several of my favorites on our Real Estate Books Page. Once you have a good understanding of the principles of wholesaling come back and jump right in, For those of you that have an understanding of real estate and the wholesaling process let's continue...
Step 2 - Marketing For Motivated Sellers 
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The first step involved in any wholesale deal or flipping project is finding a motivated seller. I remember my first few months wholesaling, I took to the streets Driving for Dollars and I thought if I just had a list of all these Vacant Houses I wouldn't have to drive all day looking for them. After some research I discovered the United States Post Office actually compiles a list of vacant properties... The problem is they don't make it available to the public, but that didn't stop me! So as a result of my never give up attitude I unearthed access to the list and now make it available to everyone. Just click here to visit the Vacant Property List page.

​Privately and corporate owned vacant houses account for roughly 95% of all my wholesale deals so its always been my main focus. Truly in my opinion its the best source of motivated sellers. Now there are a couple other places you can gain access to the vacant property list and one of the best options is Cameron Dunlap's System. which also gives you plenty of other perks so check it out if you're working with a bigger marketing budget.

There is one other type of lead I love and that is the Probate Lead. I use to offer probate leads nationwide but the source I had dried up so now I get them locally from the courthouse. Here's a few facts about probate leads that might encourage you to market to them if you're not already...

Fact # 1  - Up to 80% of all houses in probate are sold within 18 months. No other lead source even come close to that. Fact #2 - The large majority of probate houses are owned either free & clear or have very high equity, and as a real estate wholesaler I love that!  Fact # 3 - Almost nobody markets to probate. While absentee owners get bombarded with mail the probate house market goes virtually untouched. If you'd like to become an expert on finding the deals in the niche market visit our Toolbox Page for access to the Priority Probate System. This isn't available to the public any longer so take advantage of this access if you're interested in probate marketing.

​Not long after I started my wholesaling career I strolled into a local city hall to ask for a list of properties that had Code Violations. Believe it or not they told me they didn't have a list... What? how could they not have a list of the property owners they had issued a code violation to? I went to a another city to try my luck and encountered the same unfriendly treatment. Again not being the guy to take no for an answer I found the solution! The FOIA Form (Freedom of Information Act). Turns out any government agency (including local governments) has to provide all information to the public, and yes that includes code violation lists. If you are having problems with a city or county giving you the information you need I invite you to use the FOIA Form I created. Go to the Code Violation Page, scroll down to the bottom (please read the page on you way down) and click on the Download Form Link.

​Full disclosure, I haven't used Bandit Signs very much. I don't like putting them up, it makes me feel a little sleazy.  I've had a few city ordinance officers that weren't very happy with me, and honestly I think the signs make the intersections look trashy. BUT I know a lot of wholesalers that use them and get deals from them so.... If you're one of the bandit sign rebels that use burner phones and hang signs in the dead of the nigh to evade the bandit sign police I recommend using either Dirt Cheap Signs or The Yard Signs.com...   Stay safe out there!

​Finding deals online... I have two preferred methods of finding deals on the internet and the first is having a good website. There are
A LOT of options when it comes to buying a website but luckily the hard works been done for you by hundreds or probably thousands of real estate wholesalers and investors. They've chosen Investor Carrot because of their great designs and SEO capabilities. If you want a website that looks good, and will get good search engine rankings (with your help) Visit Investor Carrot and see what they have to offer.

​The other way I find deals online (with zero effort) is with a software program called the Classified Searcher by Cubix Solutions. After you download the software you tell it what ads to look for on craigslist. Pick your city and category, let's assume you pick the real estate section, by owner. Then you put in your keywords "handyman" "fixer upper" "motivated" and press go. The software will scan for ads that match your criteria and when it finds one it will reply with your email expressing interest in their home. It's also a handy tool if you're looking to build your buyers list... The possibilities are endless!!! Well maybe not endless but nevertheless its a great tool. 

​Now you have all these great leads and I suppose you want to mail to some of them. I'm a postcard guy myself, they're cheap and with the Hand Written Postcard System I can print them at home and send them out for about 39 cents each. The other favorite mailing method seems to be yellow letters. There are quite a few yellow letter companies but I've always used Yellow Letters Complete. and they're always done a great job.

​This covers the marketing methods I've used wholesaling houses but I'll be doing some blog posts about other techniques my associates use to find deals in the near future. 
Step 3 - Find A House... That's Truly A "Deal"
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The biggest mistake I see wholesalers make is wasting their time looking at houses where there is no chance of making a deal that will work as wholesale. The investor you sell to will typically want to buy the house at no more than 70% of the retail (fixed-up) price.
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You'll need to buy at that price LESS what you want to make for a wholesale fee and what the repair costs are. Let's do the numbers...
  • ​Retail Value (fixed-up) $100,000  (this is also known as ARV, or After Repair Value)
  • Repairs Needed $10,000 (If you're unsure of cost's let your investor determine this number)
  • ​Assignment Fee $5,000 (what you want to get paid, this fee is up to you)
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​70% of $100,000 is $70,000 - $10,000 (repairs) - $5,000 (assignment fee) = $55,000 Maximum Allowable Offer (MAO)
 
Please don’t waste your time or the seller’s time by going and looking at houses where the seller isn't motived to sell at a reduced price, or owes too much for you to be able to buy at the price you need to buy at. Of course, you won’t know how much the repairs will be until you look at the house, but you can work the rest of the equation and get a good idea if a deal is possible.

​One more time because this in important....  If it's not a deal, don't try to make it a deal
Step 4 - Going To See A House
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Once you've identified a potential wholesale deal that meets the criteria laid out in the last step it's time to go look at the property. There are some important things to remember when you get there that we need to cover. The first thing is of course to introduce yourself and ask if they mind if you take pictures while you're there to show your partner and contractor.

​Taking a lot of pictures is crucial and something a too many wholesalers don't do. I've inspected 100's of houses and taken ten's of thousand of pictures for myself and other investors so I know a thing or two about the subject. When you go to see a property you want to take 80-100 pictures. Yes I know that sounds like a lot but let me tell you why it's important...

​If you're new to wholesaling and don't want to try and calculate the rehab costs in front of the seller having tons of pictures showing every angle of the house lets you get back to the office and take your time crunching the numbers. Take multiple angles of the exterior front, sides, back, garage, roof, driveway, sidewalk and a couple of the street view each way. On the interior you'll want to take different angles of each room of the house. In the basement or utility room in addition to multiple angles you'll want t take pictures of the furnace, electrical panel & hot water tank. Basically take a picture of anything and everything including damage.

​Also while looking at the property ask the owner as many probing questions as possible, try to find out their motivation for selling the house. Any information you get will help you in your negotiating the deal. When you're done inspecting the property and have determined it meets your buying criteria tell them you'll get back to them by tomorrow with an offer. (when you're more experienced you might decide to make an offer on the spot) Now its time to head back to the office to calculate your offer!
Step 5 - Coming Up With An Offer
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​If you don't have experience calculating rehab costs I strongly suggest you get the Wholesaling Spreadsheet to help you come up with your offer amount. You can find comps at Redfin.com, FindCompsNow.com or Zillow.com.

​Remember when determining your MAO (Maximum Allowable Offer) you're going to take 70% of the ARV (After Repair Value) minus the rehab cost, minus your desired assignment fee and you'll know what your offer should be. Wholesaling is a numbers game... Generate a lot of leads, look at a lot of houses and make a lot of offers.

​ALWAYS make your offer by filling out a purchase contract, not putting your in writing means you're not a serious buyer. You can email it to the seller or if you're comfortable doing it drive over and present your offer in person.
Step 6 - Accepted Offer!!
​
As soon as you get a wholesale real estate deal accepted you need to send if t your "Wholesaler Friendly" title company so they can get a title search done to make sure there's no problems with title. They'll also order any mortgage & lien payoffs, final water bills and anything else that needs to be paid in full at closing.

​If you don't have a title company track down an established wholesaler or investor in your area and as them who the recommend for title.
Step 7 - Find A Cash Buyer
Wholesalers need to constantly be working on their cash buyers list so when they do get a property under contract they can assign it fast, close quickly and get paid. It's not fun going back to a seller and asking them for more time to close because you can't find an investor to assign your deal to, so do yourself a favor and build a nice big cash buyers list.

​You can place ads on craigslist looking for buyers. You can purchase a system that includes a cash buyer lookup. In the worse case scenario you can call an established wholesaler in your area and offer to co-wholesale a deal with them if they can bring a buyer to the table.

​Once your buyer is lined up you have a couple options     
Step 8 - Assignment of Contract or the Double-Close
Depending on your deal there are a couple different ways you can close:

​Assigning the contract
is by far the most popular approach. It requires very little work, limits your liability, saves you money & headaches. The reason being, when you find a cash buyer for your deal, you simply assign the contract to them. The form to use for this is called an assignment of contract and can be found on our Wholesale Real Estate Contracts Page.

Once assigned, your cash investor is responsible for everything in the contract that was assigned. They are the ones that are closing on the house, not you. You won’t ever own it. You are simply selling your agreement that you made with the seller of the house. When the new buyer closes the deal at the title company, your assignment fee will be paid to you. (unless you got the end-buyer to give you your entire assignment fee upfront as a deposit for the deal).

The Double Close is different than the assignment of contract because you need to fund the purchase (A) transaction and then sell the house to your end buyer. Transactional Funding can be used for this purpose... For a fee, a lender will lend money for the A transaction and be paid back on the B transaction, but of course they charge a fee for this service which will come out of your proceeds. All of these add a lot of cost to the deal, so you need to make sure there is a lot of room (good-sized wholesale fee) to cover the costs and still allow you a profit.

The main reason you would do a double close is to avoid letting your end-buyer know how much you are making. When you assign a contract, they can see what you are making. When you double-close, you are signing a separate agreement to sell to them and they have no idea what you are paying for the house. This is done usually for deals where your wholesale fee is considered substantial (usually $10,000 or more). Some investors will just not like this and try to beat you up on price. Once you build a relationship with some seasoned investors, this will become less of an issue as long as the numbers work for them.
Step 9 - Getting Paid $$$You've found a cash buyer, the title work in back and you're clear to close! An good title company handles the closing and if you're working with an experienced investor don't sweat it. Follow the title companies lead and when the closing is done grab your check and get back to work.

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  • Home
  • Wholesaling University
  • Wholesalers Blog
  • The Toolbox
    • The "Toolbox"
    • REI Trifecta
    • DealMachine Review
    • Real Estate Photography Pro Review
    • My Private Toolbox
    • Vacant Property List
    • Vacant House Data Feed
    • Cash Buyers List
    • Cash Buyer Data Feed
    • Probate Leads
    • The 10 Hour Wholesaler
    • Investor Carrot Websites
    • Code Violations
    • Probate Real Estate Marketing Letters
    • Driving for Dollars
    • Mobile Wholesaling
    • Loan Signing Agent
    • Investor Friendly Title Company Directory
    • Mobile Home Investor Websites
    • Virtual Driving For Dollars
    • Capital Syndicate
  • YouTube
  • About