Wholesaling Listed Properties

[kjb1891]

How many of you have wholesaled listed properties? Is there any drawbacks to wholesaling listed properties compared to unlisted properties for sale by owner? Is it beneficial to use a buyer's agent when making offers?

[Verb]

Theres no reason not to as the commision isnt increased if there are 2 agents involved, its split.

The main differance is the REAgent can give an educated opinion as to what the seller could expect to sell for and would try to sell the property for more to get a larger commission.

[carolann]

True....but isn't it the buyers agents fiduciary duty to perform in the best interest of the buyer i.e. getting the sales price as low as possible, regardless of his/her commission split? A several thousand dollars sales price difference only makes a small difference in the commission split. Ending up with a happy buyer brings more money to the buyers agent (referrals) than a higher sales price on one deal. Correct me if I'm wrong or misunderstood.

[Verb]

Hard to argue a good point

[FL Commercial Guy]

Typically in Florida (where I work) realtors are expected to present any and all offers, verbal or otherwise. The buyer should theoretically see them all and pick the one he feels is best suited for them. Of course, deals will have many variables, so lowball offers might be accepted if, say, the deposit is better on that particular deal. Depends on the seller most of the time.

Both buyer and seller are well-served by educated opinions of the respective realtors (as Verb said). Just make sure the representation is educated enough to provide such advice.

-Anthony

[campbellgroup]

I noticed a technique I would like to know more about if anyone can help.A wholesaler has a hud home on his list for $91k the hud home is listed on HUD for $73k. How would this work if hud does not allow you to assign the contract. Other than a double closing. But isnt it a BIG risk you take of loosing your escrow if your buyer backs out or can't close?

[kjb1891]

I've actually seen a technique where you start a new entity(LLC), sign a purchase contract for the HUD home with the entity as the buyer, and then when you find an investor/buyer to wholesale to you assign the whole entity over to them. Since the entity has the right to the purchase contract you in essence just assigned the purchase contract to the investor/buyer through the entity. You would want to make absolutely sure you had a buyer for it though because you wouldn't want to be stuck with a business entity that you don't want with a purchase contract with a government office that you don't want. I've never done this or know anyone that has, but I hope that helps.

[kjb1891]

There are times when I may come across a listed property that has been on the market for at least a few months, is vacant, and has come down 10%+ from it's original asking price. You could probablly assume that the owner is very motivated to sell.

There's basically two options with this situation for a wholesaler, either make offers and negotiate price and terms on your own, or hire a buyer's agent to represent you.

I could see a few problems arising when doing it yourself. For one, the listing agent will want a substanial earnest money deposit which is a big no-no for wholesalers. Second, when/if you get a contract signed and need to show it to investor/buyers what do you tell the listing agent when you need to show the property to your "partners" after you already signed a contract? The agent probablly won't give you a key or code to get into the property by yourself without them being present. Third, the listing agent might not take you too seriously if you are planning on assigning because they will see this as risky and unorthodox. They would rather have a qualified homebuyer who is actually going to buy the home themselves.

I figured if you're using a buyer's agent you have someone helping you out with negotiations without any cost to you because they split their commission with the listing agent. Also, the buyer's agent doesn't care if you assign the contract to an investor/buyer because they get their commission whether you bought it yourself or someone that you assigned to did. Also, when you have a contract signed and need to show the property to investor/buyers that you want to assign to your buyer's agent wouldn't have any problem getting a key or code from the listing agent to get in the property since they're a certified agent. You could then show the property to investor/buyers without any hassle from the listing agent.

What do all you think? Opinions? Experiences?

[Verb]

I think this sounds about right, very near the response I got from my realtor. Id be interested to hear what other realtors think though. Good post

[carolann]

BINGO!!!!  :o

 If the property is listed with an agent,...get yourself a buyers agent. Make sure he/she is experienced and is familiar with the area.  

[Bettysue]

I didn't know you could flip properties once the seller has an agent.  Wouldn't the agents not want to work with an investor, knowing the investor wants to flip it?

[carolann]

It would not matter to buyers agent, they get their commission either way.

[kjb1891]

The listing agent(aka seller's agent) may have a problem with you assigning(aka flipping) your contract to another buyer, but you don't have to tell them necessarily. You can assign a contract as long as it doesn't specifically say that you can't assign it. There's nothing the listing agent can really do about it.

[henryinma]

These are all good in theory, but the real question is where are you going to find a buyer that's going to offer more than what you're paying for it?

You run the real risk of the following happening: I saw a condo that originally listed for $255k. Other condos were listed at up to $269. Looks like the listing agent bought the condo for $240k. Now he's got it listed for $269k. Only problem now is that there are TWO other condos with the same square footage in the same complex now selling for $229k. He's going to take a bath or hope that those $229k go under agreement and he can sell before they close otherwise, he has no chance of selling at $269k. Plus any buyer that offers $269k is going to have a tough time because the appraisals will be tough with two that sell at $229k.  

The previous strategy worked when there were more buyers than sellers, but I believe the market is cooling in much of the country. There's still a few areas in the country where it's still hot so this may still work in those areas, but a very risky thing to do. No rewards without risk though.  

[kjb1891]

Well, if you're going to be wholesaling a property you have to have solid comparable sales. You can't go off of asking prices. You base what you put the property under contract off of the comparable sales. If comparable sales in the area average out to $X per square foot, then that's what you could expect the property you're looking at to go for in the same type of condition. If you can negotiate a substantial discount off the price you estimate it's worth whether because the owner is motivated because the property needs work or they're in a bad financial situtaion such as divorce, bankruptcy, double house payments, etc. then you get the contract for the discounted price and assign it to another investor/buyer for a little more than what you got it for.  

That's the name of the game: "Buy Low, Sell Low"