Approaching a Wholesale Deal
As every wholesale deal is different, every deal may require a different approach and way of doing things. Some of the factors you will need to think about include:
The property itself: Is the property currently occupied, or is it vacant? Are there problems with the house, or is it a case of a homeowner struggling to keep up with mortgage payments?
The homeowner: Depending on why you consider the property distressed, the homeowner’s motivations can vary. They may already be eager to have the house taken off their hands. Or, they may be seeking a way out of a difficult situation but not know where to turn.
Your knowledge of the property and homeowner: Depending on what information you are able to find about the potential wholesale property, you may or may not know the specifics of the situation. You may have contact info for the property owner, or you may have to do some detective work.
What to Do When the Wholesale Property Is Vacant
A vacant, distressed property may require more work on your end before you can begin negotiating a wholesale deal and contract assignment.
To begin working a deal on a vacant wholesale property, you will first need to research the property and get in touch with the owner. If the homeowner has left the property while it is on-market, you will simply need to work with their real estate agent.
Working with an agent tends to be more straightforward. But be ready to act as an educator. Not all real estate agents are investor or wholesaler-friendly. If the agent has never worked with a wholesaler, they may not understand how the process works or have even heard of it before.
However, another possible scenario is that the property has been more or less abandoned. In this case, you will need to figure out who owns the house and how to get in touch with them.
Finding the Owner of a Vacant House
If your potential wholesale property is vacant and is not currently on-market or represented by a real estate agent, you’ll need to track down the owner yourself.
There are several options available for finding a wholesale property’s owner. These include publicly available data, such as property, tax, or sale records. If the house has been listed for sale in the past, you may be able to get in touch with the real estate agent who handled the listing. The agent could then possibly connect you with the homeowner.
There are also paid options, such as skip-tracing services. A skip-tracing service is often used by creditors trying to locate debtors. As experts in using both public and specialized information, skip-tracing services also work with real estate investors and wholesalers seeking more detailed information on property owners.
A skip-tracing service is especially useful in the case of distressed properties whose owners are hard to find.
Another option when a potential wholesale property is vacant is to reach out to the neighbors. Here, a more direct approach may pay off. Knocking on a neighbor’s door and being upfront about what you want may get you the information you need, even if it’s just a phone number.
When approaching a distressed homeowner’s neighbor, keep in mind that they may be friends or acquaintances. Be clear about your intentions, but also emphasize that as a real estate wholesaler, you can contribute to a win-win solution for the homeowner.
If the neighbor sees and understands the help you are offering, they can act as a bridge for initiating a conversation between you and the owner. While not everyone will be comfortable providing contact info, they can pass yours onto the property owner.
Approaching a Homeowner as a Real Estate Wholesaler
If your wholesale property is occupied and the homeowners are living in it, you can take a more direct approach.
Depending on your wholesaling marketing strategy, owners of distressed properties may come to you. Direct mail, bandit signs, and social media postings can yield promising wholesale real estate leads.
But you may find a potential wholesale property that is occupied by an owner who hasn’t reached out to you. In that case, simply knocking on the door may again yield quick results.
Meeting With the Owner of a Distressed Property
Whether you are approaching the owner directly or have gotten contact information from a neighbor, that first meeting is a vital and important step.
- Prepare, and expect the unexpected: By the time you meet with the owner of a possible wholesale property, you should already have a good amount of information about the home. But be ready to adapt as you learn more. There may be unexpected issues with the home or the owner’s personal situation. Flexibility is key.
- Don’t pressure: When you approach the initial conversation, position yourself as a contributor and educator, not a salesperson. Ask questions, and really listen to the homeowner’s answers. This will both build trust and ensure that you fully understand the homeowner’s situation.
Remember that this may be an emotional discussion for them. As a wholesaler, humility and sensitivity will serve you better than a slick sales pitch.
- Be honest and upfront: Be clear with the homeowner about what wholesaling is and how it works, your role in the process, and how you’ll make your money. Clearing up any questions or ambiguity here will help to lessen the chance of issues farther along in the wholesaling process.
- Emphasize value and solutions: The person you talk to is likely facing some kind of stressful situation — unemployment, illness, or costly problems with the house. In general, these circumstances cause the homeowner to feel trapped and unsure of what to do.
As a wholesaler, you are in a position to offer a solution to their problems. Be sure to emphasize how you can help.
- Remember that reputation matters: As a wholesaler, your ability to land and close deals depends on your reputation. You need to keep in mind how you are seen by both the property owner and the investor who will take over the contract.
Successful wholesalers are known as both honest and effective. The homeowner needs to trust you and your ability to help them. And investors — the people you sell to — need to know that you are an honest business person capable of seeing a deal through to completion.
Next Steps After Meeting with the Homeowner
Depending on how your first meeting goes, you may secure a sales contract from the homeowner right then and there. But they may need time to consider your offer, too. That’s okay — remember that selling a home can be more than just a business transaction. Emotions will often play a role in any decision.
As the wholesaler, part of your role will be to keep the process moving forward. So, be sure to emphasize that sooner is better than later. This is true for you, of course, but also for a homeowner falling behind on mortgage payments. Make sure the owner sees the value in moving quickly and be ready to take the next steps in the wholesaling process.
Communication With the Homeowner Is Key
However you leave that first meeting, whether with a sales contract in hand or with the homeowner needing more time to think things over, maintaining contact is important.
If the owner needs time to consider your offer, plan to follow up within a few days. Time is money, and this is especially true of real estate wholesaling.
Communication between the wholesaler and the property owner is important as the deal moves forward as well. Remember that you don’t get paid until the sale to the investor is complete. A lot can — and often will — happen before you get to that point.
Maintaining open and consistent communication with the owner will set you up to deal with any issues that arise as you work the wholesale deal from start to finish.
Inspection Contingency Period
A sales contract will almost always include a contingency period. This is the time when you will have the house inspected. This is a standard clause in any real estate contract, and wholesaling is no exception. During this period, you will be able to exit the deal. That means you would lose whatever earnest money you’ve put down. Sometimes, this may be the smart decision, depending on your wholesale business model.
The contingency period is important for two reasons. First, you need to have the house inspected. This will help to uncover any issues or problems that you didn’t already know about. Problems uncovered by a house inspection can range from minor issues that will slightly increase the rehab costs to major blockers that make the wholesale deal financially untenable for you.
Whatever the results of the inspection, maintain open communication with the homeowner. It may only require changing plans on your end. But if the results mean you need to lower your offer price, you’ll need to have a clear and frank discussion with the owner to negotiate.
The second thing you’ll need to do during the contingency period is to find an investor to take over the contract. As a wholesaler, your goal is not to actually buy the house. You will assign the contract to a buyer who will be the one to pay the seller. This will include a wholesaler fee, which is where you make your money.
If you are unable to assign the contract, your next steps will depend on our own finances and business model. Some real estate wholesalers will complete the deal and take possession, then continue looking for a suitable investor. Others may decide to walk away from the deal at that point.
But no matter what, communication remains key. The homeowner should understand where you are in the process and what is happening next. This will help to ensure that they remain committed and will see the wholesale deal through to completion.
Tying It All Together
The process of finding, approaching, and working with the owner of a property with wholesaling potential is not always easy or uncomplicated. It requires the right mindset — consistency, discipline, and attention to detail.
Speaking to and working with a homeowner of a distressed property is different from a typical sales job or real estate negotiation. You must approach the process with humility and sensitivity. Try to be someone who can educate and offer clear solutions.
With due diligence, honesty, and expertise, you can offer a win-win solution to the owner of a distressed property and be well on your way to successfully working a wholesale real estate deal.