Many people in the real estate industry frown upon wholesalers. In general, it seems that wholesalers have developed a bad reputation because many investors and sellers think they can find each other without an expensive middleman pocketing some of the profits.
But the reality is far more complicated than just that…
The truth is real estate wholesalers make everyone’s lives easier, helping sellers to actually sell their unwanted homes and connecting buyers with properties they actually want. In a way, they fill a gap in the real estate investment game that nobody else can, providing genuine value to both seller and the investor.
Still, not everyone thinks that and so we wanted to address the question: Are wholesale real estate transactions ethical?
Let’s take a closer look at the issue.
When Is Real Estate Wholesaling Unethical?
Here’s how we see it: Real estate wholesaling is only unethical if someone conducts their business for the wrong reasons. After all, real estate wholesaling is legal in all 50 states—although with many local and state rules governing it.
Here are two situations where real estate wholesaling becomes unethical:
#1 – Deceiving the Seller
If a wholesaler deceives the seller into thinking that their property is worth less than it actually does, they’re effectively tricking them so they can earn more profits. But if the wholesaler tells them the actual value of their home and is clear about the extra cost they’ll pay for their expertise, then everything is done ethically.
As a wholesaler, the goal is to convince the seller that your list of buyers and connections will help them greatly, so they can sell their homes as soon and as easily as possible. After all, most sellers have the following problems:
They don’t have access to interested investors or buyers.
They don’t have real estate knowledge to handle the transaction.
They don’t want to take care of the property anymore and would rather liquidate it.
They don’t have the time and finances necessary to repair the property.
They don’t have time to waste as the property is near foreclosure already.
Another situation is if the property is already in foreclosure and the bank just wants to liquidate it. A real estate wholesaler can then step in, offer their expertise and knowledge, and get the job done quickly and efficiently.
#2 – Deceiving the Buyer
Another example of an unethical situation happens when the wholesaler underestimates the repairs needed and oversells the property to a buyer.
Sure, the wholesaler will certainly gain a hefty profit, but that effectively pushes the problem to the investor—where they have to repair and renovate the property at a much higher cost than expected. With a bloated after-repair value (ARVs) and inaccurately estimated repair costs (ERC), they’ll have lower their profits and struggle to bring the home up to standards or find another exit plan before they sink too deep.
Unethical situations like these are what fuel the negative reputation wholesalers have today.
Instead, you want to be known as an expert deal finder. Give accurate ARVs and ERCs, and put in the effort to build your experience, knowledge, and reputation in the community. The more you do this, the more buyers will see your added value to their investments—becoming an irreplaceable asset to them.
Ultimately, it boils down to the quality of deals you provide. If you offer pathetic deals for hefty profits and push problems to other parties, you’re only fueling the negative reputation that wholesalers already have to deal with in this industry.
Wholesalers = Real Estate Pawn Shops
Pawn shops also have a bad name, but they also fill a niche in local economies. Someone in need of quick cash chooses to sell their item at a pawn shop, usually for less than they could get by selling the item on Facebook Marketplace, Craigslist, etc.
Doing Real Estate Wholesaling Ethically
Many real estate agents look down on wholesalers as predatory, when they should actually look at them as another avenue for a quick sale in certain situations.
As long as you conduct your transactions the right way, you’re wholesaling real estate ethically and shouldn’t have any problems. After all, when you can build trust and credibility as a wholesaler, you’ll get far more recommendations from other buyers and sellers as well.
And when it comes to real estate wholesaling—networking is more important in the long run than acting out of your own self-interest for short-term profits.
What else do you want to know about wholesaling? Drop us a comment below!
If you’re a real estate wholesaler, then you’re already aware that your success depends on the trust you build with potential sellers and buyers. Unfortunately, many scammers try to take advantage of people by misrepresenting their intentions or promising impossibly high profits.
As they’re on the way to the bank, the unfortunate wholesaler must deal with the fallout, which frequently involves unhappy clients and a ruined reputation. Nevertheless, there are things you can do to gain their trust, seal deals, and earn wholesale profits.
Here are 3 few things you can do to assure sellers and buyers that you’re a legitimate real estate wholesaler with their best interests at heart.
1. Know the common types of real estate scams.
Apart from posing as agents or homebuyers, some con artists go the extra mile by pretending to be home inspectors, lenders, or landlords. To protect your customers from fraud, familiarize yourself with common real estate wholesaling scams.
Besides protecting yourself and the people you’re working with, in-depth knowledge of common scams shows that you really know the ins-and-outs of the industry. Without a doubt, this will help build your reputation, where buyers and sellers will feel more confident partnering with an expert.
The Foreign Buyer Scam
In this real estate scam, the seller will usually receive an email from someone claiming to be a prospective buyer living abroad. Then they’ll say that they’re planning to move to the United States.
They’ll send a check for the down payment only to say that they accidentally paid too much and ask the seller to wire back the difference. Only later will the seller realize that the check is fake—they’ve received no money. By that time, the buyer will have vanished along with the cash that was “returned” to them.
The “Bait and Switch” Scam
This scam occurs when a prospective buyer makes an offer that’s above the property’s market value, its sale price, or both. The seller then excitedly accepts the deal, only to learn that the buyer isn’t signing the contract yet because of “delays”.
They eventually come back; although, this time with a much lower price and a list of demands. Unfortunately, the seller will have paid thousands in ongoing taxes, insurance, and utility bills by this time, and feel they have to honor the sale regardless.
The Duplicated Listing Scam
Scouring through websites like Craigslist may lead you to great properties with incredibly low prices—but be warned! Some scammers copy legitimate rental listings and re-publish them with altered contact details and price tags. Unfortunately, some innocent buyers are so excited to grab the deal that they immediately wire a down payment to secure the purchase.
Needless to say, the scammer disappears upon receiving the payment, leaving the poor buyer with thousands of dollars lost and no property to show for it. They can try approaching the authorities for help but sadly, they often never get their money back.
2. Cultivate a robust online presence.
On the flip side, you want to show buyers that you’re not like the scammers we listed already. So, as a seller, you should establish a strong online presence is to convince buyers that you’re legitimate. After all, real estate scammers use fake names and likely won’t be as active on social media platforms.
Here are two ways to have an online presence:
Social Media: Create social media profiles on popular platforms like Facebook, Instagram, Twitter, and more to help prove your credibility and trustworthiness.
Website: Go the extra mile and build a website. Other than giving you a platform to display the properties you’re currently holding, you’ll also have a place to show past client testimonials, success stories, and positive reviews.
The more you cultivate your online presence, the more you can establish a strong brand and reputation. You also look more professional and differentiate yourself from scam websites that are often unorganized and hard to understand.
3. Avoid dominating the conversation.
As a real estate wholesaler, you’re probably aiming to grab all the opportunities you come across. There’s nothing wrong with this goal, but being too fixated on it could lead to being pushy or too eager when talking with buyers and sellers.
Instead, when speaking with buyers and sellers, stick to the basic facts—who you are, the name of your business, and how exactly you can help them. It’s completely alright to dig deeper and discuss their current situation and the property in more detail, but the key is to let them lead the conversation.
Constantly interrupting or talking over them will make you appear unprofessional and untrustworthy.
Build Trust, Land Sales, Earn Fortunes
Given how valuable an asset property is, buyers and sellers alike will only work with someone they trust. Therefore, if you want to land wholesale deals, you must focus on strengthening your brand and credibility. Only then will you find success in the real estate industry—one that’s largely built on trust.
We’ve been serving the Metro Detroit real estate market for more than two decades now and have everything you need to succeed in the area. We can help you with anything, from building an online presence to keeping track of your buyers and sellers.
It’s no secret: wholesaling can be a lucrative real estate investment method to earn a profit with minimal capital. On average, you can make around 5-10% of a property’s market value if you wholesale an undervalued home—that means you’re looking at a profit of $10,000 to $20,000 with a $200,000 home if you can get it under market value!
However, getting a slice of this pie does not come easy. Contrary to popular belief, real estate wholesaling takes a whole lot of skill, patience, and elbow grease.
For example, you need to find a property with a motivated seller, then find a buyer for it, coordinate all the paperwork required, complete the deal as soon as possible, and repeat everything again. You also have to simultaneously grow and maintain your buyer’s list so your business doesn’t come to a halt.
In other words, there’s a lot to keep track of when dealing in wholesaling.
But there is a solution to it: Make a list! Just like most projects in life, it’s easier to streamline the wholesale process if you have a checklist to guide you. That’s why we’ve written this ultimate checklist for wholesaling real estate—perfectly designed to help wholesale investors like you.
The Wholesale Checklist
Having a guide to the step-by-step requirements of a wholesaler can make the entire procedure easy as pie. But we do understand that not all of the things we’ll mention below will apply to you, so we advise that you focus only on the things that are most relevant to you.
Let’s get to the checklist!
A. Select a Market
Have you selected a market? Have you checked the trends of the current market?
Selecting a prime market can land you a hot deal. You want to find a market where there isn’t too much competition but is still highly coveted. In other words, try to find a balance—buyer markets that are on an upward trend without much competition to deal with.
Take for example Burlington, N.C. There’s a total of around 57 thousand brokers in North Carolina—far smaller than states like Florida with 212 thousand. But, the real estate market in Burlington, N.C. is booming right now. In fact, it is the 2nd most lucrative market in the US with listings only lasting an average of 35 days on the market.
You can only identify potential markets like these if you’re familiar with real estate market trends, so here is a quick jump-off point to get started:
Reference the MLS listings to get an idea of current trends in real estate prices.
Look for how long listings stay on the market. The less time on the market, the faster the turnaround for properties, and the better the situation for you.
Additionally, it’s important to know the median price of properties sold, so you know what you’ll be working with. For instance, in Burlington, it’s $295,000.
Once you’ve chosen your ideal market, you can move on to the next step in the checklist.
B. Build a Buyers List
Have you built your buyer’s list? Have you found any willing buyers in the area?
You’ll need a robust buyers list for a steady stream of good deals. Your goal is to continuously generate and follow up with the leads in that list so your wholesale investment becomes a growing business.
Create an online marketing campaign. Use social media and other platforms to get the word out on your name to build a potential buyers list.
Use customer relationship management platforms (CRM). Creating accounts on CRM platforms like Hubspot or Zillow can increase your reach to interested buyers.
Take note of buyer contact information and criteria. Make a note of the budget of your potential buyers and their contact info. When you find an appealing property, you can reference your list to see if the property coincides with the budget of one of your contacts.
By having an established and growing buyers list, you can increase the reach of your wholesale business which can lead to more deals and profits.
C. Look for Motivated Sellers
Once you’ve accomplished the first 2 steps, you can now enter the meat of the wholesale process: Finding a motivated seller with a property that coincides with the criteria of your interested buyers.
Now, in the industry, you’ll notice that distressed properties are popular for real estate wholesaling. There are 2 reasons for this: It’s easier to convince sellers to let go of their unkempt homes, and it’s easier to secure a larger discrepancy versus market price.
Use social media to create a marketing campaign for yourself.
Create a dedicated email address and/or phone number to screen incoming leads.
Once you’ve found a motivated seller. You then must hash out your wholesale contract.
D. Create the Wholesale Contract
Having found a motivated seller, you now need to finalize the wholesale contract. When creating the contract, you need to make it clear to the seller that you’re not buying the property.
You need to establish that you’re only finding an interested buyer for the seller.
Given that, be sure to establish the terms of what will happen if you fail to find a buyer. For example, you can set up an earnest money clause that will act as a guarantee. This clause will protect you and the seller in the event of failing to find a buyer. You will hand over an earnest money deposit that will act as a contingency that will be returned to you once the wholesale is complete.
Then, you need to find a buyer for the property.
D. Look for an Interested Buyer
Once the details of the wholesale contract have been decided, you then need to find a willing buyer. Be sure to thoroughly scope out the property to make it easier to find buyers.
For example, take photos of the property that shows potential buyers exactly what it looks like without having them visit the home. Additionally, take note of important details such as the number of rooms, the size of the property, and the overall condition of the property.
Once you’ve gathered all the necessary information, you should then do the following:
Send the property report to targeted buyers on your buyers’ list. Ensure that you send the property only to the buyers with the perfect criteria—or you lose their trust in the long run.
Like insurance, you can get in touch with local wholesalers to market to their own buyers. This expands your coverage, helps you grow your network, and makes it easier for you to sell.
Once you find a willing buyer, you can then move on to the contract turn-over.
E. Assign the Contract
With a willing buyer, you can then move on to assigning the contract. Here are the basic steps to remember when assigning a contract to a buyer:
Receive the amount necessary to purchase the property from the buyer.
Collect your earnest money deposit from the seller.
Turnover the buy and sell contract of the property to the buyer.
Enter into a new assignment contract with the buyer and collect your wholesale fee.
Contact an escrow company to complete the deal after the arrangements have been made.
Once the buyer has the contract, you can move on to the final step of the wholesale process.
F. Close the Deal
The escrow company will now oversee the process of transferring the property to the end-buyer. During this phase, you should keep in touch with the escrow company to get updates on the progress of the sale.
Once the sale is completed, the escrow company will turn over your assignment fee, and your wholesale will be completed.
Follow this Checklist to Make Your Wholesale Easy
Getting into wholesaling unprepared can be a recipe for disaster, and we don’t want that—not when real estate wholesalers already tend to have a bad reputation because of newbies making rookie mistakes!
But with the use of a checklist, you can avoid many of the pitfalls of wholesaling, increase your odds of landing a wholesale deal, feel less stressed with conducting your business and reap continuous profits from the many deals you’re scoring.
Take our list and make it your own! Good luck in your venture and feel free to comment on any other concerns you have in the comments section below.
When conducting wholesale deals, contract negotiations become an everyday occurrence in your life. This means that if you aren’t knowledgeable about the requirements and details of wholesale contracts—you can end up losing a deal.
You have to be exceptionally familiar with contracts to be a successful wholesaler, which is why we’re writing this article to dive deep into the key paperwork you’ll need. Nail these on the head, and you can navigate through the world of real estate wholesaling with ease.
What is A Buy and Sell Contract?
Otherwise known as a purchase agreement, this is the contract you enter with the seller of the property. It acts as a legally binding agreement and outlines the terms of the offer between a buyer and seller in real estate transactions.
Your job as the wholesaler is to act as a middleman and find a willing investor to buy the property. That means to need to know how this is the contract permits them to purchase the home. Once you find a buyer, this contract transfers from you—the wholesaler—to the buyer.
The content of the buy and sell contract should have the following:
The date of the agreement
The name of the seller/individuals listed on the property’s title
The buyer’s name
The earnest money deposit.
The total purchase price of the property
Closing date and transfer of title
Escrow and closing fees
The buyer can be assigned to pay the fees
Or it can be the seller
Or they can pay equally
Or they can pay their respective escrow and closing fees
Signatures of you and the sellers
Date of signature
This list isn’t exhaustive, but these are the most relevant things you should pay attention to in buy and sell contracts. As long as you have these covered, you should be good to go.
Note that your buyer will also thoroughly examine the agreement before getting into the deal with you. As such, it’s best that you know your way around these contracts well enough to answer their questions and successfully close the sale.
What Is A Seller’s Disclosure?
The State of Michigan requires a seller to complete and sign this disclosure to accompany any and all purchase transactions. It’s meant to protect a buyer from seller misrepresentation about the condition of a residential property.
Since most sellers aren’t aware of this form, you’ll want to keep a copy with your buy-sell contracts. Do NOT ever complete the form though, for a seller—legally they must complete it.
The next one to know is an assignment agreement.
What is An Assignment Agreement?
An assignment agreement is a real estate contract that transfers your rights and responsibilities listed in the purchase agreement to your investor—the new buyer. Often, this can also be referred to as an “Assignment of Real Estate Purchase and Sale” agreement.
After signing this contract, the buyer will take over the purchase agreement, and you’ll be awarded an assignment fee. Only you and the buyer will receive copies of an assignment agreement since the seller is not involved in completing an assignment contract.
An assignment contract needs to contain the following:
The agreed-upon assignment fee
The assignor’s name
The assignee’s name
The date of agreement on the purchase contract
The names on the purchase agreement
Location of the property
Assignee to pay the security deposit in escrow
Signatures of you and the buyer
Date of signature
Once the assignment contract has been signed and fulfilled, the investor will then take over the purchase agreement. After that, the buyer closes on the property and you’ll be awarded your assignment fee.
Wholesaling Contracts Made Easy
There’s a lot of paperwork that comes with wholesaling in the real estate business. If you get in over your head and gloss over every other contract you get into, you can end up losing your wholesale deals—or worse—alienating your potential buyers.
If you ask us, it’s just not a risk worth taking if you want to grow your wholesaling business.
With our help, you’ll have a good idea of how the contracts you’ll be dealing with regularly are done. If you need more help with wholesaling paperwork, feel free to reach out to us!
Have any questions about wholesaling contracts? Let us know in the comments below!
Most real estate wholesalers only focus on only one thing: Connecting sellers with buyers. So, they build a buyers’ list of flippers and buy-and-hold investors every day, manually turning the wheel and generating a consistent flow of income by sealing deals as often as possible.
However, while being the middleman is lucrative, it can also be very labor-intensive.
You’re constantly on the lookout, hunting for opportunities to get a house under contract at a workable price. Then you’re always trying to find buyers to sell it immediately after purchasing. As a result, you buy low, sell high, and repeat—because stopping means no income.
Eventually, you get to a point where you’re sealing more deals than you expected. You feel like you’re all maxed out, working 60 to 80 hours a week. You say to yourself, “I made it! I’ll just keep doing this to make more money.”
And that’s what you’ll do forever.
Is it really worth the time you’re spending on it? Personally, we think there’s another, smarter way to use your time and money. In this article, we’ll show you how to harness the money-making power of wholesaling real estate plus renting out properties to build a two-layer strategy within your portfolio. That way, you can generate both active AND passive income.
Wholesaling Real Estate is Short-Term Money – So, it’s a JOB
Wholesaling makes money at high volumes. But the biggest downfall with wholesaling properties is that there is a limit to your earning capability (i.e. the number of deals you can physically close each month) because it’s very hard to scale.
The reality is this: Wholesaling doesn’t build up wealth. It relies on your constant hustling it to earn a living. When you stop working, your income stops.
Let’s illustrate this point by going over your daily schedule as a wholesaler:
You wake up early to make phone calls and reach potential sellers and buyers before they go to work.
You continue those calls until lunchtime, because you want to catch them when they’re on break.
Then you crawl from courthouses to probates, scan divorce and bankruptcy rooms, do direct mailings, and drive around target neighborhoods to seek good deals.
You also stay in touch with sellers, agents, and buyers with follow-up calls, emails, or physical mailing lists.
You input all of this information in your tracking sheets and databases and continue tomorrow.
You’re doing the grind, trying to build a pipeline. Eventually, you’ll realize that there’s a ceiling to your earning capability because, at the end of the day, you’re trading time for money.
For example, you can’t physically do 500 calls a day to increase getting good deals. And while you probably feel ecstatic with learning how to improve your margins from one sale to another, you’ll eventually realize that $6,500 a month… just isn’t enough.
If you want to do something bigger but with less effort, you need something more scalable. You have to expand to other real estate investment strategies to gain more wealth.
Wholesaling Real Estate to Support Long-Term Wealth
Wholesaling is lucrative—especially when you use it as a feeder to a larger, wealth-building business.
Here’s the idea: Try to combine the active income you get from wholesaling with other investments that can give you passive income. That way, you’ll earn money in the long haul—not just that month.
Let’s see how this idea works.
Imagine if you buy one house for every seven that you wholesale. You turn that house into a rental and start earning monthly income from rent. The result? You’ll earn dollars that will help you pay an annuity forever. You’ll create a ripple effect, growing your portfolio with two strong streams of income—wholesaling fees and rental income.
Wholesaling vs. Rental Properties
By setting goals like the example above, you stand to gain advantages from both investment strategies. You can make quick money from wholesaling deals, channel a portion of your profits into rental investments, and achieve long-term financial freedom that’s not dependent on you working 9-5 as a wholesaler.
Wholesaling Real Estate + Rental Properties = Lucrative Portfolio
Make the most out of your time and money. You don’t have to stick to one real estate investment strategy. Instead, you can connect them to build wealth in your portfolio and surpass your previous income goals.
To wrap it all up, continue with your wholesaling plans, but set new goals for the long haul. You’ll find that it’s much more fulfilling to build a business that looks to the future. Treat wholesaling as a part of your overall investment strategy—instead of just a side hustle.
What is your goal in wholesaling real estate? What’s keeping you from scaling your investments?5
Like everything else, the real estate industry has drastically changed during the pandemic. The combination of people trying to avoid foreclosures and digital transformation allowing every real estate investor to tap markets nationwide has resulted in the rise of virtual real estate wholesaling—a trend that is likely to continue post-pandemic.
In fact, the National Association of REALTORS® said 51% of home buyers today found their home online—more than they do through real estate agents! This means there are many people out there who are willing to buy and sell homes online. Therefore, the virtual wholesaling process is an opportunity for you to take advantage of the digital transformation happening in the real estate industry.
Are you interested in becoming a virtual wholesaler? Here’s what you need to know.
The Benefits of Virtual Real Estate Wholesaling
Virtual real estate wholesaling follows the same idea as traditional wholesaling, except your involvement is completely done through digital means. Using digital technologies such as emails, digital signatures, and online databases, you can close wholesale real estate deals without showing up in person.
Here are the three biggest benefits of this arrangement:
Expand to Multiple Markets: You can venture into multiple new markets without increasing your costs, making your wholesaling business scalable. Operate in the hottest markets, grow your buyers list, and even use digital marketing strategies to expand your business.
Save Precious Time: It takes weeks to visit all the properties you want to wholesale. With virtual wholesaling, however, you can check out multiple locations in a day. Chat with motivated sellers and make blind offers in varied investment areas easily.
Build a Virtual Team: You can build a virtual network to operate your wholesaling business online. Bring in real estate agents, virtual assistants, contractors, and vendors to help you analyze and close deals in all the markets you want to sell in.
All of these real estate investing benefits sound great, but can you really operate without physical appearance? Let’s take a look.
The Steps to Virtual Real Estate Wholesaling
Here are the points in the home buying process when physical presence is typically required:
Scouting areas with real estate agents
Negotiating with motivated sellers
Inspecting and conducting due diligence
Estimating the repairs
Your goal is to turn these points into digital processes. How?
Use Websites to Find Profitable Areas: Use Mashvisor’s heat map for analysis. As they say, in the real estate industry, it’s all about location, location, location. You won’t need to meet with real estate agents when you can do initial research yourself.
Use Websites to Connect with Sellers: Instead of elbowing your way through the MLS, Mashboard provides homeowner data for you to contact the potential seller. Through this tool, you can get their property address, email address, and phone number to start negotiating.
Use Virtual Walkthroughs: Browse through Zillow and you’ll see properties that offer virtual tours. If the property you’re eyeing is there, book a digital tour to simulate a walkthrough and check the property out. If the property doesn’t have a virtual tour, you can tap your virtual wholesaling team to conduct due diligence.
Conduct Real Estate Analysis: Once you find a good deal, conduct real estate investing analysis to ensure that the after repair value (ARV) and estimated repair cost (ERC) is favorable to market prices. Run comps for the ARV through Zillow or Redfin, and use online calculators by Home Advisor or Kukun to get the ERC.
Use Digital Apps to Sign Documents: Got yourself a wholesale deal to close? Download Docusign and DotLoop to sign the real estate contract electronically, send it through email, and get the property under contract without any physical contact.
Lastly, collect your wholesaling fee either by including it as a line item on the settlement statement, or having the buyer send you a check. Either way, you can do this without meeting anybody in person.
Becoming a virtual wholesaler allows you to tap into lucrative markets with tremendous flexibility and agility. As our world evolves into a highly digitized system, virtual wholesaling is your opportunity to take advantage of digital transformation and get ahead of your competitors—expanding your wholesaling business in all possible locations.
Any other tips or tools for virtual real estate wholesalers?
While you might be tempted to cover areas beyond your local real estate scene, it’s possible that you’re already sitting on a wholesaling goldmine—and you just didn’t know it!
Here are the signs of a market that’s ripe for a booming wholesaling business:
Overwhelming amount of cash purchases
Abnormally fast sales
Houses getting multiple offers
Escalation clauses (to avoid getting outbid)
If your local area has all these factors, you’re in a great place to become a wholesaler.
Read along to find out the two-prong strategy that will help you dominate your local real estate market and build a successful wholesaling empire—right where you live.
Search-Optimize Your Wholesaling Business
Aside from doing offline marketing, there is also a world of possibilities online. Not only are geographic boundaries removed, but the internet also enables you to effectively target and reach your audiences with SEO (search engine optimization) tools.
Check out these online marketing platforms for real estate wholesaling:
MLS (Multiple Listing Service)
Online forums and auctions sites
All of these efforts hinge on the fact that we do practically everything online nowadays. Your customers are more likely than ever to search online for new properties.
Your goal is to be visible and easily accessible via an online search. This is where keyword research comes in. By knowing what keywords to target, you can also maximize your reach on search engines, gain valuable traffic, and generate qualified leads.
Do a simple test to see how your business currently ranks in search engines:
Search “real estate wholesaler [location]” on Google.
Look at the top results.
Does your name or business appear? Where do you rank versus your competitors? Who shows up before you do?
Well, you need to beat them.
Optimize your searchability by choosing keywords that your buyers will search for, then incorporate them in your blog posts, listings, and website.
All of these methods are effective in finding wholesaling deals, but networking is the most important strategy when trying to dominate a market.
The good thing is that all competitive areas have an REIA or two in the community – Metro Detroit definitely does.
REIAs are a great place to start making your presence known—the goal is to establish your wholesaling business to outshine other wholesalers and be the go-to property supplier for the local area. REIAs give you access to a whole group of people for:
Building an active cash buyers list
Developing strong and reliable connections
Boasting your overflowing housing inventory
You can also team up with Bird Dogs or acquisitions managers who are interested in the local market. The more properties they bring you, the more inventory you have to sell to cash buyers.
The key to dominating your local wholesaling market is good marketing—both on-ground and online. By networking closely with the community and optimizing your online presence, you’ll set yourself up for long-term success wholesaling in any competitive space. Ultimately, you want to establish yourself as an expert—and building your credibility with a great online presence and consistent quality service is how you do this.
To succeed even in these uncertain times, go through our wholesaling trends and insights that have surfaced during the pandemic. Get a good grasp of the present and future of wholesaling real estate to dominate the business in your local area—and beyond.
Need help in beating your local competition? Get in touch with us! Our team is more than willing to help.
Remember Carlton Sheets—that real estate guy who was always on TV in the late 1980s?
He was a legend in the industry, and one of the key influencers who popularized real estate wholesaling. He had a course on wholesaling that customers took through a toll-free phone number, where his iconic line encouraged people, “You can get started in real estate with no money!”
Sheets isn’t as famous nowadays, but the excitement he created for wholesaling is still alive and well. He inspired many people then and now to get involved in real estate wholesaling even if they didn’t have any background in it.
While the process can differ from case to case, the typical wholesaling procedure goes like so:
People get into wholesaling because it sounds so simple, but they don’t realize how difficult it is. While all beginners will face common pitfalls and inevitable challenges, our goal is to equip you with the knowledge to tackle them, head-on.
Read on to learn the seven things beginner wholesalers should know before getting started!
1. Generating Wholesale Leads is Harder than You Think
Most people read about real estate wholesaling and think it’s easy, as there’s little capital involved in the investment. However, research shows that most real estate agents fail in their first year because they can’t find enough good deals or buyers.
The reality is that generating wholesaling leads is difficult. And, like new real estate agents, most new wholesalers don’t have a network and don’t spend enough time building one.
Beginner wholesalers will typically call all their friends and family, get a deal or two, and immediately exhaust their options. Relying on friends and relatives isn’t a scalable strategy, so many wholesalers get through their first year and quickly fizzle out.
That’s why the most important thing to know as a new wholesaler is how to generate deals and build a pipeline that provides a consistent flow of deals.
Here are six of the ways you can generate wholesaling deals:
Make time to drive by neighborhoods and find distressed properties
Make your own website or Facebook page to get inbound deals
We’ve gone over the details of these methods in our article about finding wholesaling dealsif you want to know more about the specifics of each one.
Once you get some momentum going, you can also hire an assistant to help you make offers, find listings, and close deals.
With your deal generation system set up, the next step is to learn how to analyze the deals properly, because…
2. Analyzing Deals Correctly Will Make or Break Your Success
Wholesalers need to position themselves as expert deal finders who make buyers’ lives easier. Your goal is to build a good reputation for yourself and establish your business towards growth and expansion.
To do so, you’d need to learn how to properly analyze wholesaling deals and become a master in creating value for buyers and investors.
Here’s how to accurately analyze your deals:
Determine the After Repair Value (ARV): Run comparables (comps) in the area using websites such as Zillow or Redfin to see how a property will be worth AFTER it’s been fully renovated (AKA the “after repair value”). Comps are the properties within ¼ – ½ a mile of your property that are of similar size, type, beds/baths, and age, and have sold within the last 6 months.
Here’s the formula for determining your ARV:
Evaluate the Estimated Repair Costs (ERC): As properties for wholesaling are often distressed, you need to understand the rehabilitation costs to know whether or not a particular property is really a good deal or not.
Here are some quick tips for estimating the repair costs accurately:
Finalize the Ideal Purchase Price (The 65% Rule): After determining your ARV and ERC, you’ll now calculate the ideal purchase price for your investment property. You can use The 65% Rule to compute this, where the formula is as such:
The 65% Rule is the wholesaler’s adaptation of the flipper’s 70% Rule—a rule of thumb that tells the flipper to purchase properties at a maximum price of 70% of its ARV. As a wholesaler, you can have a 5% difference that enables you and the buyer to make a profit—especially when you’re selling to flippers. Investors are likely to steer clear from a price that is more than 65% of the ARV (minus the ERC).
Keep in mind that the opposite is true: if you don’t know how to analyze properties and offer great deals, you will struggle with building your reputation and growing your network of buyers and investors.
3. Having the Right Documents and Contracts is Key
Wholesaling is basically buying and selling contracts, so getting this part right is pretty important! However, a LOT of new wholesalers don’t even have the appropriate paperwork in place before getting started, and that can lead to them getting burned.
Let’s take a look at the key factors a wholesale contract needs to have:
The Wholesale Real Estate Assignment Contract: This is the legal document that makes it possible to transfer the right to purchase a property from the wholesaler to an end buyer. Once you and the seller enter an equitable conversion (making the eventual buyer the owner of the property once they sign the contract), you need to draft an Assignment of Real Estate Purchase and Sale Agreement:
The Assignment of Real Estate Purchase should have a copy of the original purchase and sale agreement between you and the seller, informing the end buyer of all the terms, contingencies, conditions, and payment terms involved in the deal.
The Sale Agreement should say that the buyer will purchase the home from the seller and assume property ownership—effectively absolving you from all responsibility.
The Wholesale Real Estate Purchase Agreement: There are many components in this agreement. The Wholesalers Toolbox have shared their templates to get you started on your contracts and agreements. There are also other sources you can find on the internet, just make sure that include the parts highlighted in this sample:
Make sure you have all of this in place before finding your first deal so you don’t waste time or end up scrambling to pull the documents together when an opportunity comes along.
4. Keep Your Profit Margin Private by Following the Double Closing Technique
The double closing technique in wholesaling is a popular strategy, because it allows you to keep your wholesaler fee private. In other words, it lets you hide your profit margin. You won’t have to explain to potential buyers about the price differences between your contract and the seller’s, thus saving you the headache of being cut out of the transaction.
This method contrasts with contract assigning because you won’t have to purchase the property—you only facilitate the transferring of contracts. In a nutshell, the technique is closing two independent deals that happen almost simultaneously, sometimes within a few hours or weeks. One of them is with the property’s original seller, and another is with the end buyer.
As the wholesaler in both these transactions, you need to treat them as individual deals with their settlement statements:
Statements with the seller are referred to as HUD-1, and outlines the purchase price you have negotiated and settled on. HUD-1 includes any prepaid interest charges, homeowners’ insurance fees, title insurance, property taxes, and closing agent fees.
Statements with the buyer identify the final purchase price you have agreed to sell the property. This deal is contingent on the first closing with the original property owner.
For more information on this technique, you can visit here. But simply put, the process goes like so:
It’s not rocket science, but it does take a lot of leg work. There is also the stress of indecisive parties, people backing out suddenly, and aligning the schedules of everybody involved in the deal.
The double closing technique is a good alternative to contract assigning, especially when used as an exit strategy. Of course, you would need to put “more skin in the game” by taking legal possession of the property for all of five seconds, but if contract assigning doesn’t work, double closing can increase the chances of a deal transpiring.
5. How to Turn Any Lead Into a Deal
Now, how do you handle “imperfect deals” or deals that seem tough to profit from?
The good thing about real estate investing is that there are many ways in which you can still make a profit. As long as the seller is motivated, you can find a way to make money off the property.
For example, if the seller owes more than the house is worth (i.e., upside down in the mortgage), you could find a lender that will agree to wholesaling the property as a short sale. These deals are rare but entirely possible.
Here are two nontraditional ways to wholesale a short sale property:
Buy in a Land Trust: This agreement is where a Trustee agrees to hold the property title for the benefit of other parties, known as the Beneficiaries. The name you’ll put in the purchase contract is the Trustee (the primary buyer). The buyer will then submit copies of the trust documents to the bank, as lenders will require the buyer’s LLC documentation to be submitted along with the offer. Once you get to closing, the beneficial interest of the trust gets assigned to the end buyer for a wholesaling, assignment fee.
Create an LLC: You can also create an LLC with the end buyer (typically costing anywhere from $100 to $500), buy the property as an LLC, and sell it to the end buyer. The LLC’s name on the short sale approval letter will not change when the buyers change hands, and you’ll still charge a wholesaling fee.
Alternatively (and, if you ask me, the better way to earn money from real estate long-term), you can take ownership of the property and turn it into a cash flow generating rental. Thus, you’ll extend yourself into becoming a rental property investor—and still make money off the property.
6. Adapting to Shifting Markets is How to Scale & Sustain Your Wholesaling Business
Just like any other business, you need to stay updated with market shifts that affect your business. Real estate is a dynamic industry that requires you to spot market trends early, collect relevant insights, and adjust the way you conduct your wholesaling business constantly.
Take the recent pandemic, for example, that changed the industry for years to come. We noticed four trends for wholesalers to keep watch of to stay successful in 2021 onwards:
Work-from-home Becoming Mainstream: Many office workers move out of dense cities and into residential areas with more freedom and space. Wholesalers, therefore, need to pay more attention to the rural areas where buyers are now increasingly interested in.
People Upgrading Their Current Homes: With the pandemic forcing people to stay indoors, people are now willing to invest in comfortable homes with larger rooms, backyards, bigger patios, and more. Wholesalers need to pay attention to the evolving preferences of homeowners and their heightened attraction to certain home features.
More People Purchasing Homes: Interest rates hit an all-time low in 2020, and the forecast for 2021 reflects similarly. With these low mortgage and interest rates for properties, people want to own homes more than before. While wholesalers will have a harder time finding properties, determined wholesalers that do secure homes will sell faster and at top dollar.
Decrease in Housing Inventory: Given the ongoing transmission of COVID-19, people have put off selling their houses to minimize contact with strangers. Competition within the housing market then increases—decreasing the chances of wholesalers getting properties at a discount. Nevertheless, it also makes exiting deals much easier and at a higher profit—where supply is low, demand is high (due to low mortgage rates), and home prices are soaring.
The pandemic might be a one-time thing, but disruptions and changes will always happen in the industry. The only thing constant is change—which means wholesalers should stay updated!
Wholesaling real estate is deceptively easy… And it is if you know what you’re doing.
With these in your back pocket, you can be just as excited as Carlton Sheets about real estate investing. You’ll have the knowledge required to truly become a successful wholesaler and “start on your own path toward financial independence” today.
Real estate wholesaling often gets a bad rap, but is it fair to call this an illegal or shady form of real estate investing? How did it get this reputation in the first place?
The problem is, wholesaling is usually chosen by first-time investors as a way of getting into the industry with little or no upfront capital required – which is great. But it also means that newbie investors get into this field and make a lot of mistakes, and that has led to some serious misconceptions about wholesaling over the years.
If you’re an investor who’s excited to get started as a wholesaler but is hesitant because of things you might have heard about it, this article will pull back the curtain on five of the most pervasive wholesaling myths.
Wholesaling real estate is not outright illegal, but it’s governed by specific laws that require you to have certain contracts and documents before you can proceed. Wholesaling gets its bad rap largely due to the illegal practice of unlicensed brokering, which isn’t the same as wholesaling.
1. “It’s illegal to wholesale real estate.”
To ensure full compliance with local real estate law, here are some steps to take when wholesaling properties:
Have a bilateral contract with the seller that stipulates your acquisition of the equitable interest.
Have a proof of funds letter to prove your intent to purchase.
Wait until the house is under contract with the original seller before finding new buyers.
In the event of needing to defend your wholesaling activities in real estate commission hearings, having everything documented is essential for proving you’ve acted within the law.
2. “Wholesaling is only for beginner investors.”
Just because it takes minimal capital to get started with wholesaling, doesn’t mean it’s easy. For example, since you’re the middleman in deals, a buyer or seller can easily get rid of you to avoid paying an additional wholesaler’s fee—effectively taking you out of the equation altogether.
Secondly, while there is a low barrier to entry, wholesaling has a high barrier to sustainability. People tend to think that wholesaling fulfills a need in the market, where investors are looking for people to help them find their next deal. In reality, the investors themselves are already good at finding deals themselves. This makes finding good deals extremely hard. Plus, investors don’t want to subcontract finding deals to wholesalers, and those who do certainly don’t want to pay top dollar.
Wholesaling can be a stepping stone for beginners to get into real estate investing, but that doesn’t discount the fact that it’s highly lucrative for experienced wholesalers. Mastering the skills and acquiring the connections for a steady flow of good deals enables you to earn as much as other investment strategies.
3. “Wholesaling is inferior to house flipping.”
Let’s put the two investment strategies side-by-side for an accurate comparison:
Depending on your reason and goals for investing in real estate, you might choose one over the other. Either way, based on these key differences, wholesaling isn’t inferior to house flipping at all, it’s just a very different approach with a lot less maintenance required.
4. “Focus on buyers who’ve already bought from you.”
Often called the “easy button buyer” mistake, this refers to the tendency for beginners to send future deals only to the buyers that were willing to close on earlier deals. This is a common myth that wholesalers believe to be effective, but in reality, limits your potential returns.
Think of it this way: businesses thrive on supply and demand. After closing a couple of deals, you now know the area, the numbers, and what features attract more particular buyers. In other words, you have the supply to meet the demand in more than a couple of markets.
Position yourself as an opportunity to as many potential buyers as possible, and you’ll ensure you have a scalable wholesaling business for years to come.
5. “A buyer’s list is necessary to be successful.”
Many investors will say that you need a buyer’s list to be successful in wholesaling, but this is not exactly true.
The typical buyer’s lists are full of investors who do a lot of deals on a regular basis, meaning they’re serious buyers who can close with cash in 10 days. This is exactly what you want as a wholesaler, but you don’t need to have a buyer’s list to do this.
Instead, new wholesalers should focus on finding quality deals, rather than quality buyers. If you can find a great property, serious buyers will follow.
We’ve written elsewhere on how to find buyers for your wholesale deals, should you need further tips.
All these myths surrounding wholesaling real estate may give some the impression that this investment strategy is shady and unsustainable. However, with these common myths easily debunked, you can see there are actually many solid reasons that prove why wholesaling is an excellent way to invest in real estate.
If you want to learn more about wholesaling in the current market, we’ve also written an article that explains the top five insights you need to successfully wholesale real estate after a year of COVID-19.
Wholesaling real estate appeals to many investors, because it allows you to invest in properties without any upfront capital of your own, or the headaches that come along with owning and maintaining a physical property.
Now, with work-from-home seemingly here to stay, more and more people are searching for ways to get into property investments (while they can still hopefully secure a good deal on a home from a motivated seller) – only they want to do it 100% remotely.
But can you wholesale a property completely online, without ever seeing it, or meeting your buyer or seller, in person? Let’s consider why or why not.
What is wholesaling real estate?
Wholesaling real estate is essentially matching sellers to buyers, and taking a fee for your troubles. There are a few different ways to carry out the process, but in general, it works like this:
A wholesaler finds a motivated seller and negotiates to purchase their (often distressed) property at a below-market-value price.
They sign a purchase agreement.
The wholesaler finds a buyer and signs an assignment contract, assigning to the buyer the right to buy the house at a slightly higher price (the amount specified in the initial purchase agreement + the wholesaler’s “assignment fee”).
The wholesaler hands over the paperwork to a local title company, the buyer and seller close on the deal, and the wholesaler receives their fee.
How can real estate wholesaling be done online?
Wholesaling digitally is not impossible. In fact, according to the National Association of REALTORS®, more than half (52%) of homebuyers in 2019 found their home through the internet. And, because of the pandemic, shifting to online viewings is only going to become more common.
Nowadays, you can use 3D tours, video calls, and Google Street View to get a feel for the property and its surroundings, no matter where you are in the world.
However, there are some definite cons to wholesaling without ever viewing a property in person:
You’re limited to what’s listed online. Many wholesalers find the best properties by driving around target neighborhoods and looking for distressed houses. If it’s already advertised online, chances are you won’t be able to negotiate as good a deal, since there will be agent commissions to pay (although you can still find some deals this way, and by focusing on FSBOs). The other option is to have an awesome inbound marketing strategy – more on that below!
You can’t catch hidden problems. 3D tours and video calls will never completely make up for seeing a property (and the area it’s located in) for yourself. You can work with a local inspector or field agent on the ground, who will give houses a once-over for you, but you’ll have to ensure you trust them to spot any potential problems with a discerning eye.
You won’t be able to negotiate contracts in person, which can make it a lot harder to read the seller and build a rapport with them.
That being said, lots of experienced investors do buy houses sight-unseen. So, if you want to know how to wholesale online, here’s what you need to consider next:
Building a cash buyers list
The goal of a wholesaler (once they’ve negotiated a Purchase Agreements) is to find a buyer for the property. To do this efficiently, you need to build a list of contacts—either owner-occupiers, or individuals/companies that are looking to buy distressed houses and flip them at a profit.
Typically, you build this network by sending out mailing lists, taking out ad placements, or attending in-person events. The goal? Make distressed sellers come to YOU. Just keep in mind that, for every 100 ad impressions you get or emails you send out, you’re probably only going to get 1 response – maybe up to 3, if you’re really lucky. So it’s a numbers game.
Fortunately, though, there are also lots of ways to develop your cash buyers list completely online, by:
Joining real estate groups in MeetUp.com or Facebook
Running ads on Facebook, Google Ads, or other social media platforms
Setting up a website and gathering emails through a signup form – then sending out regular newsletters to your mailing list with details of all your available properties
Ideally, you’ll want to get the contact information and purchasing criteria of these buyers, and keep a simple database of their requirements and preferences, like:
How can I contact you for real estate deals?
Which area do you want to invest in?
What kind of properties do you prefer? What do you want to avoid?
What type of investment are you looking for? Is it cash flow, house appreciation, flipping, or do you want to live in the home yourself?
How quickly and often can you close deals?
Negotiating the Purchase Agreement
Once you’ve found some properties and have a cash buyers list, you need to evaluate each deal based on the following:
The market value of the property
The cost of repairing/renovating the property
The Assignment Fee you’ll be taking as part of the wholesale deal
Keeping these three things in mind will help you calculate your maximum allowable offer (MAO).
Then, you have to negotiate with the seller to agree to a price that leaves room for you to make your profit as a wholesaler. This is where working online becomes potentially tricky: at some point, you’re going to at least have a phone conversation (or several) with the seller, and without meeting them face-to-face, you need to have some pretty great skills as a salesperson to seal deals consistently over the phone.
Except, of course, if you’ve done a great job advertising your wholesaling business online, and motivated sellers are beating down your door trying to sell you their houses. In that case, the sales calls should be pretty straightforward!
For more wary sellers, you can try using video calls, but many won’t be used to Skype or Zoom, and many others won’t bother giving you the time of day. A lot of homeowners balk when they hear you’ll be putting in an offer without viewing the property in person – however, if you have a local agent going to view properties on your behalf, this isn’t usually a problem.
Once you’ve signed the Purchase Agreement, the next step is to start advertising the deal to your buyers list – and for that, you’ll need marketing photos. Even without visiting the property, though, you can get these relatively easily, either by asking the owner to take some for you, or getting your local representative to do it.
Closing the deal
Another common concern when wholesaling (even in person) is that, once the buyer and seller both see the amount you’re receiving from the deal as your Assignment Fee, they’ll want to back out, because they think it’s unfair that you’re making a profit from the sale.
When wholesaling real estate online, this can be even more of a danger. All they have to do is stop replying to your emails, and work out an arrangement between themselves in person. For that reason, a double closing may seem like the better option for online wholesaling.
In brief, the difference between assignment and double closing is:
Assignment of Contract is when you have the property under contract and you transfer those rights to another party (without ever owning the property yourself).
Double Closing is when you buy the property yourself, then immediately (often on the same day) sell it at a higher price to another buyer.
You’ll still need to have a representative attend the closings on your behalf, but it is possible to close on a house remotely, using e-signatures.
Closing wholesale deals online can therefore have several benefits, like:
You don’t have to wait long for physical documents to be signed, making it faster and more convenient.
The back-and-forth requires less energy than driving to in-person meetings.
Distance is a non-issue, so you can work with buyers and sellers who are out-of-state, or even out-of-country.
Everything is documented properly, with a digital paper trail.
You can access all of your essential documents in one place using cloud storage.
So, can you wholesale real estate 100% online? Yes, you can.
Should you wholesale real estate 100% online? That’s another question.
Most forms of real estate investing are not a way of generating passive income – unless you’re investing in a REIT (real estate investment trust). Typically, even with wholesaling, you want to view the property in person to make sure you’re getting what you paid for (and not taking on any nasty, expensive surprises which will prevent you from re-assigning the contract to a potential buyer).
However, if you have trusted partners on the ground who can meet with buyers and sellers and attend viewings and property inspections on your behalf, then wholesaling online becomes a lot less risky.
And, with our world becoming increasingly driven by technology, virtual wholesaling will probably only become more popular in the coming years.
That’s because now, with just a working laptop and fast internet connection, you can: