To put wholesaling real estate in simple words, the process involves looking for promising deal from interested investors for which a wholesaler gets paid. Of course, the intricacies of paperwork add to the legality and acceptability of this process. If you are new to this strategy, the biggest problem that you will face is convincing a seller to sign your wholesale contract. After all, the seller will want to get their hands on as much money as possible, and on the other hand, buyers will want to make as little payment as possible. This is the most challenging part of the job. The following lines will guide you in understanding better how you can convince a seller to sign a contract that will allow you to profit from wholesaling real estate.
Getting The Seller To Sign The Wholesale Contract:
As soon as you have identified any property that you think will work as a good deal, you have to start thinking of the best way to convince the owner of the property to sell you their property by signing the contract. The importance of this step cannot be undermined as it will determine how you can profit by securing properties for wholesaling them in the real estate market.
So, how do you convince a property owner who has no intention of lowering the selling price, while you have a limited price to bid? The answer is simple; you have to look for the most appropriate strategy that will motivate the seller to sign the contract.
While money is the biggest factor that motivates any seller, you can also play other tricks to win the game. There are some creative ideas that you can try to convince the seller, some of which are listed below:
Focus On Selling Benefits
If the property owner agrees to meeting with you in person, you have the benefit of talking to them about the advantages of selling their property to you. You can consider focusing on the fact that selling the property to you will help alleviate all the problems that are associated with the property. For example, a seller can avert a mortgage default by selling you their property if they cannot afford to pay the mortgage any longer.
Alternatively, you can also try to emphasize on the fact that you (the wholesaler) will actually be handling all the paperwork related to the sale, including the contract, the inspection of the property, the appraisal as well as the closing procedure. This way the seller will be spared of any extra stress involved with selling their property. There are several wholesalers who don’t hesitate to highlight that the property owner will not have to face any upfront expenses.
Know What The Seller Actually Wants
All you have to do is ask the seller what they want out of the deal. Experts opine that as a buyer you need to get proper education on what the needs and goals of the sellers are so that you can make the required contract clauses or arrangements that would prove helpful to the sellers. For instance, there are some sellers who would prefer a shorter escrow period, while there are others who require a longer escrow period. Knowing what the seller wants will help you to accommodate such needs of the seller.
When you know what the seller wants from the deal, whether they are looking for a quick sale or a befitting price or both, it will become easier to motivate the seller. This will help you get the seller to sign your wholesale contract on their terms or price (which may be profitable for you).
Cover The Renovation Expenses
One of the important things to do while talking to the property owner about the real estate deal is telling them about the repairs and renovation that must be done for reselling or renting their property. This is crucial as it will justify your offer, especially because of the amount that will have to be spent to get the repair done.
Assessment of the renovation will allow you to get an idea about the expense so that you can accommodate the costs in the deal to make it profitable for you. In case of a distressed property, the need for renovation will imply that the margin for any investor (who will buy the property) will go higher. The higher the margin, the more you can profit from the deal.
Talk to a contractor to find out the estimated cost of the repair, and forward the details to the buyer. This will ensure that the buyer does not make a deal that is low-priced by overpricing the repair costs (as you already will have knowledge about the repair costs). Knowing the repair costs will prove valuable while negotiating with the buyer, as well as your total profit from the deal.
Also, if the repair expenses are covered by the buyer the seller will not have to be bothered about repairing the property. Try to sell this idea to the property owner, and once you make them understand how they will profit from the deal, you can rest assured that the seller will want to sign the contract for sure.
Put Cash On The Table
As mentioned earlier, a good way to convince a seller to sign the contract is to offer cash sale. This will also improve your chance of having the seller to readily accept the below-asking-price offer that you put forward to them. According to property specialists, sellers don’t usually turn down cash buyers.
However, in case you have to take out the home mortgage, you need to get a preapproval letter from the lender. Most sellers tend to accept strong offers rather than high ones. You need to know which deal will surely close and which one has a chance of failing through. It is best to submit a straightforward, well-written offer including the loan preapproval along with down payment proof.
Research and identify a seller via public records. Make an approach by introducing yourself as well as explaining that you are interested in purchasing their property if possible. See if you can get them to give you a price. You need to get an idea about their timing, dynamics, and other factors that matter to them. Write an offer and wait patiently for their response. Make sure that you convey the certainty of the offer and also explain the conditions that the offer might be subject to. If you receive a reply, respond immediately but appropriately, and then wait. What you want to achieve from this interaction is dialogue engagement from the seller, so acting smart may backfire.
Consider Renting The Property Back
It is possible that the seller might not want to move right away. You can try lowering the price by offering the seller an option to live in the property post the closing date for a specific period of time. A traditional thirty-day window for closure will allow the seller to get proceeds from the deal, while allowing them to stay in the property for a specific period of time without paying any rent. This is one trick that may positively work for you while getting the seller to sign the wholesale contract.
A controversial strategy, avoiding contingencies works like purchasing a car in “as is” condition without having any mechanic check the car first. There are some properties that come with more risk than others, which is why not all real estate specialists recommend this tactic.
According to experts, the seller will easily be attracted if you are flexible and avert contingencies. But waiving contingencies can work against you, especially if you are willing to give up the right to get the property inspected, or appraised. It may cost you a lot eventually. However, if you have a guide to help you with the deal, you can still go ahead and waiver contingencies in order to get the seller convinced to agree to sell their property.
Offer Below Appraised Value
The thumb rule that is highly popular among real estate agents is making an offer below appraised value. In reality, appraised value refers to perceived value, which means that you don’t have to sell any property at the appraised value, as it is not the property’s actual value. Value essentially refer to the money that you have to pay for the property, so you need to convince the seller that their property can only be as much valuable as the amount that buyers are willing to pay for. Talk to the seller and reach an understanding so that the property can be secured with 6 to 7 percent of interest in writing (in case you have that kind of confidence in selling/marketing skills- it will do the job).
Make The Letter Heartfelt
It may be true that sellers generally are more concerned about what their net profit is going to be rather than who moves into the property, it will benefit you to write a genuine, earnest letter. There are many sellers who are keen on knowing what kind of individual will reside in their property once they sell it. Sellers seem to appreciate those buyers who are willing to give respect to their property, especially if the property has an historic or unique origin.
Offer Buying Furniture
Another trick that may just work for you is offering to buy furniture of the seller. There are several sellers who are not in the least concerned about moving their stuff. In case you find that the furnishings suit the property, you can tell the seller that you are interested in purchasing the furniture from the seller. You can offer a separate deal for the furniture, which will include a distinct bill of sale and a distinct transaction.
A realistic seller knows that no buyer will want to pay more than what the value of their property is. In case the price set out by the seller appears to be overly optimistic, try to figure out a way to point the fact out to the seller in a gentle by strong way. You can also consider adding neighborhood statistics and comparable sales to make your case strong. However, being real might work against you, especially if you get too real with pointing out the amount of repair work the property requires. Instead of intimidating, take a gentler approach and try to understand the seller’s situation so that you can convince the seller to get through with the deal.
Consider Something Outside The Box
There have been notable cases in which buyers have gone to new lengths to convince sellers. In one such incident, a buyer (also owner of pizza restaurant) offered free pizza to the seller every month for a lifetime in lieu of selling their property. While such an offering may not be possible, you can always come up with some new idea to intrigue the seller. The final objective is to make the seller believe that they will profit from the deal, so thinking outside the box might come in handy in a situation like this, especially if you have any special product or service to trade as an asset.
Getting a seller to sign your wholesale contract is essentially a business. So, if you are hoping to be rewarded financially, you have to come up with strategies that will make the deal a success. Keep a track of your marketing on a daily basis, be patient when waiting for response, and keep pushing until you know that you will get a positive reply from the seller. Make sure that you get a detailed understanding of the seller’s present situation and what they really want from selling their property- it is the key to strategically moving forward with your deal.
Make offerings that you know will be too tempting to reject; however, remember that you need to profit from the deal so plan accordingly. Once you learn how to feel the pulse of the seller, it will become easier for you to convince the seller to go forward with the deal and sign the wholesale contract.