Can You REALLY Wholesale MLS Deals?
By: Jim Zaspel
In short…YES, you can! However, there are certain challenges that go along with doing this, and how you go about doing it can be very different than wholesaling a FSBO (For Sale By Owner) deal. Here are my top 4 ways to do it:
Here Are Four Ways to Wholesale MLS Deals:
1) Add a buyer to your agreement of Sale
I learned this strategy from my friend and mentor, Cam Dunlap, and it’s as simple as executing an addendum to the AOS that the Realtor uses, and adding “Bob Buyer” as an additional buyer. Then, prior to closing, you execute a “quit claim deed” that gets held in escrow (i.e. on the desk of)by the title agent. This protects your buyer so that in the event that the deal closes in both your names and you excuse yourself to the bathroom and don’t return, he doesn’t wind up with an un-wanted partner J
2) Sell the Entity
My attorney tells me that if you employ this strategy to avoid double transfer taxes, you could be setting yourself up for a rude awakening if/when your local municipality catches up with you. This is a good strategy, but in my opinion, you should go ahead and pay the double transfer taxes. If you’re using a land trust, you’ll sell or assign the beneficial interests of the land trust, and it often helps to have the closing agent be the trustee. Whether you use a land trust, an LLC, an S-corp, or a C-corp, you should definitely get your attorney involved to make sure that all your I’s are dotted and your T’s crossed.
3) A “Wet” Closing
This strategy is very straightforward, but it does incur two full sets of closing costs PLUS financing costs of 1-2%, so be sure to take that into consideration when calculating your profit. In this scenario, you’ll actually buy the property in the name of the entity that signed the AOS to buy the house, and you’ll use what’s call “Transactional Funding” to fund the purchase. Then, 10 minutes, or a couple days later, you’ll sell the property to a cash buyer. Keep in mind that you can only get a transactional funder to fund the deal when…and only when…you have a bona fide cash buyer who has put a large non-refundable deposit in escrow with the closing agent. (A “dry” closing is the same as a wet closing EXCEPT that you use your buyer’s money to fund the initial purchase; this strategy is frowned on by most title agents.)
4) Get an Offer from Your Buyer!
Some people think that this is a risky way of wholesaling houses, but it really isn’t, so long as you know your buyer well. Bottom line is you have your cash buyer (whom you trust and have done business with before) walk through the property with you (and possibly the Realtor), have the cash buyer tell you what he/she will pay, and then get to work negotiating a lower price. Of course, then the difference is your profit. You could do this in any of the three scenarios listed above, but the difference is that the offer gets made in the name of your cash buyer. Obviously then, your buyer could screw you out of the deal, but you’ll find that experienced investors and investors who care about their reputation are more concerned about getting more deals from you than getting a slight discount on just ONE deal.
How Will You Find LOTS of Cash Buyers?
This is an amazing tool that Cam taught me. Basically it’s a tool that gives you access to ALL cash buyers all across the country! Of course you can just pull up the ones that are close to the deal that you’re wholesaling, too. Then, with a few clicks of a button, you can send them postcards. It’s pretty sweet.
Here’s the Website for Unlimited Cash Buyers: www.UnlimitedCashBuyers.com
To YOUR Success,
Jim “JimmyZ” Zaspel