December 11, 2016
By Denisse Rey
When it comes to wholesale deals, it is important to keep a buyer's list to easily point out potential clients. It is also essential to price the property within a reasonable range to ensure that you can close the deal faster. If you fail to consider these two factors, it might become harder to find a buyer for your wholesale deal. In addition to this, we will also discuss other factors that can result in failing to find a buyer for the property.
The first reason why wholesalers cannot find a buyer for their wholesale deal is because they do not have an updated buyer’s list. Everyone who works in the business of wholesale real estate knows the value of having a buyer’s list. The wholesaler will be in a daze if he intends to find a buyer of their wholesale deal without a buyer’s list.
There are several ways to build a buyer’s list and the Internet has become a place where wholesalers can find potential clients. Once the wholesaler has built the buyer’s list, they can easily categorize the preferences of the buyers so that it becomes easier to find a buyer for the wholesale deal. They can sort through their clients in terms of their preferred area, the amount they are willing to spend, and similar categories.
Categorizing the clients according to their needs is just as important as building the buyer’s list, since the wholesaler should not send mass campaigns to the wrong people as the clients will begin to disregard the e-mails if they continuously receive campaigns that are not beneficial to them. Moreover, the clients can mark the messages as Spam e-mails if they realize that the wholesaler does not filter the recipients of their campaigns.
The buyer’s list is the first step that the wholesaler will take towards their goal to find a buyer. Once the buyer’s list is updated, the wholesaler can now send e-mail campaigns to potential buyers. After this, the wholesaler can just wait for the wholesale deal offers to come.
The buyer’s list can be updated accordingly and can be categorized efficiently, but if the wholesaler would not utilize it to find a buyer, the buyer’s list will have no use. The initial marketing strategy that each wholesaler should do is to send out e-mail blasts to the right clients. Once the e-mail has been sent and the wholesaler is waiting for offers from those on the buyer’s list, the wholesaler can do other marketing strategies that can help speed up the selling process of the wholesale deal.
First, the wholesaler can post advertisements around the area since this can also be a way to find a buyer around the area. Nowadays, the real estate market has been steadily going up again and there are several investors who are willing to purchase a real estate property. Moreover, the wholesaler can also pinpoint clients from the Internet. There are several sites that cater to those clients who are looking for real estate investments. The wholesaler can use sites like Craiglist.com to help them find a buyer of the wholesale deal.
Another reason that a wholesaler cannot sell a wholesale property is due to their pricing strategy. The pricing for wholesale deals is rather simple since there is no need to invest a huge sum of money. However, there are wholesalers who take advantage of the low price tag attached on wholesale deals and they end up adding a large markup on the price of the property to maximize their possible profit. When it comes to pricing wholesale deals, the wholesaler should consider the potential repair cost, the after repair value, the incidental costs, and the potential profit from the wholesale deal.
Since the wholesaler would not be flipping the house, they can often end up neglecting and underestimating the cost of repairs and incidental costs in their pricing strategy. However, the potential buyers of the wholesale deal will easily factor in this cost because this will have a large effect on the overall value of the property.
In the eyes of the buyer, the price of the wholesale deal is not the only price attached to the deal, since the buyer will also consider all the potential costs that are added to the totality of the final property price. Underestimating the repair cost will cause difficulty in finding a buyer since this will cause an imbalance between the actual selling price and the estimated selling price.
When the seller underestimates the repair cost, it is also possible that the seller will overestimate the ARV of the property. Incorrect estimation of the ARV can lead the seller to believe that they can price the wholesale deal at a higher price. This can make it more difficult for a wholesaler to find a buyer who is interested in purchasing the property. For wholesale deals, it is safe to price the property at around 60% – 70% of the final ARV.
The wholesale real estate business is a profitable venture if the wholesaler realizes that they are not investing any major capital. This means that any profit that the wholesaler makes on this deal is still profit. If the wholesaler asks for a very high profit, it will be difficult to find a buyer who is willing to purchase a property that is supposed to be sold below its market value. Wholesale deals are appealing to potential investors because the property is sold below its market value, so it is important that the wholesaler would not treat the difference between the actual market value and the selling price of the wholesale deal as their profit.
Wholesalers profit from acting as a broker between the seller and the buyer. This means that if there is no non-disclosure agreement between these parties, the seller and the buyer can go behind the wholesalers back and seal the wholesale deal themselves. The wholesaler might be able to find a buyer, but if he cannot protect himself from the possibility of being bypassed from the transaction, the wholesaler would have no benefit from the said transaction.
If you want to know more about the importance of a non-disclosure agreement in real estate deals, you can refer to this article: The Importance of Non-Disclosure Agreements in Real Estate Deals
The key to the success of wholesaling is ensuring that you can close the wholesale deal as quickly as possible. However, if the wholesaler sets an unrealistic timeline, it would be harder to find a buyer and the wholesaler would keep on asking for an extension from the seller.
On the contrary, if the wholesaler has been assigned a wholesale contract, he should work as quickly as possible and find a buyer immediately because the seller can still assign the contract to another wholesaler.
There are other common wholesaling mistakes that a newbie wholesaler should avoid, if you want to read more on this topic, you can click this link: Common Mistakes That Real Estate Wholesalers Commit.
In conclusion, wholesaling properties require the right preparation from the wholesaler. There are several other reasons that can arise and it will cause difficulty in finding a buyer, but the wholesaler needs to be prepared in finding solutions to these common problems.
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Writer at AssetColumn.com
I have made several mistakes when I started investing in real estate properties, but luckily, I learned from each one of them and you can learn from my mistakes, too. Read about how I recovered from the errors of my way and how I successfully transformed myself into the Real Estate financial guru that I am today.
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