A real estate wholesaler is a SOURCE OF REAL DEALS for other investors who have the cash to close on those DEALS. The wholesaler collects their “assignment fee” from the investor who actually steps in and buys their DEAL. They are like wholesalers in any other industry-middle men who source product for their client.
“Assignment Fees” get their name from the way the agreement of sale is structured in a wholesale DEAL.
A wholesale DEAL goes like this:
1. Wholesaler Contracts the DEAL -The wholesaler negotiates the deal with a seller and puts the property under contract-they sign an agreement of sale with the seller with their name (or company) as the buyer. Their name appears like this, “Wholesaler name, and/or assigns” as Buyer-giving them the right to “assign” their rights in the agreement to another “Buyer.”
2. Wholesaler Assigns the DEAL-When the wholesaler finds the end buyer willing to pay their contract price + assignment fee, the wholesaler and End Buyer complete an “Assignment of Contract.” The “Assignment of Contract” assigns all the rights to the original DEAL & agreement with the Seller over to the End Buyer.
3. DEAL goes to Closing-The Seller and End Buyer go to settlement directly and the wholesaler receives their fee at closing. When I assign my contracts, I collect my assignment fee “off the sheet”-which means I receive a check that is not listed on the HUD 1 and the Seller is never aware of my assignment fee.
The reason the word DEAL is displayed in CAPITAL LETTERS is to highlight the word. Investors are always in the market searching for the next DEAL. There is a BIG DIFFERENCE between a “house for sale” and a legitimate DEAL. Everybody in the business is seeking a DEAL-not just a house for sale. Many would be wholesalers with little experience often “shop” “houses for sale” hoping to collect an “assignment fee” on houses that are NOT DEALS.
Why are Successful Wholesalers SO VALUABLE to You as an Investor?
A successful wholesaler will provide you with a steady source of OFF MARKET DEALS that are usually the LOWEST PRICED-HOTTEST DEALS you can find.
Once you buy your first deal from a successful wholesaler, they will continue to call you with future opportunities.
How Can You Keep Wholesalers Working Hard for YOUR Investing Business?
Most wholesalers keep a mental “VIP” buyers list in addition to any email buyers list. The VIP Buyer (this should be You) receives the phone call about the deal the first day it is available-in order to maintain your VIP Buyer status, go view the DEALS immediately and give the Wholesaler either a “Yes”, “No”, or “Offer to Purchase” the same day they call. Do this and you will always receive first shot at their deals.
Do You Want to Become a Successful Wholesaler? Master these 3 Skills:
1. Negotiation-Your job as a wholesaler is to BE THE SOURCE OF REAL DEALS. You’re success is built on your ability to negotiate and contract DEALS that are SO VALUABLE that other investors don’t even think twice about paying your assignment fee.
*Keep in mind that investors are seeking DEALS that are 65% of the Retail Value MINUS Repair Costs. You need the contract DEALS for LESS than that number to account for your assignment fee.
2. Marketing-A successful wholesaler needs to have a continuous source of leads on which to make offers. Master marketing for motivated sellers and you will develop a continuous source of opportunities to negotiate DEALS.
3. Sales-Everybody says it is all about the numbers-although my experience has proven different.
In order to be successful you will first need to sell the Seller on accepting your offer. You are not brow-beating them into submission but finding ways to present the facts in such a way that they understand their best choice is selling their house “as is” to you.
When you are presenting the DEAL to an investor you will present the facts in such a way that highlights the opportunity. You should give them all the information you have which will help them make their buying decision-comparable retail sales, square footages, market rents, renovation estimates, etc.
Let’s face it; people do business with people they like. They buy with their emotion and back up their decision with logic. It is a lot easier to decide to sell you the house at such a bargain if the Seller likes you. It is also a lot easier for an investor, your end buyer, to not beat you up on your assignment fee if they like you.
How Do You Separate the Wheat from the Chaff?
As in any business, not everyone is equal. There are good and eh-not so good wholesalers out there in every market. How can you tell which wholesalers are good?
A tree is known by its fruit. A beginner wholesaler may bring a few mediocre deals in the beginning before figuring out how to make DEALS. Good wholesalers are like Diamond Mines, they will keep turning up the unfinished gems for you to buy and polish up. Good wholesalers bring good DEALS, while the others don’t know the difference between a “house for sale” and a DEAL.
The best wholesalers I know actually buy houses themselves. Once you go through a few DEALS from start to finish you have a better understanding of construction, property values, and the risk associated with buying and building out a project.
Coper is highly experienced in creating engaging content that adds real value to a blog, website, or brand.