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Explaining Wholesale Real Estate to Sellers

By Brian Kline | January 18, 2019
  • As investors, we are always looking for motivated sellers. People needing to seller their house fast and willing to take substantially less than market value. We want to buy at wholesale prices. Maybe you even have a sign or two up around town or a classified ad that reads "I Buy House Fast for All Cash".

    Unfortunately, most sellers are not sophisticated when it comes to the real estate industry. They might have a decent understanding of the retail market but don't even know a wholesale market exists for residential homes. As a wholesale investor, your offers are turned down four out of five times, if not more often.

    Wholesaling is often an entry point for new investors. These are people working at investing part time. People who can least afford to spend time analyzing deals that will never get off the ground. Being upfront with sellers from the beginning can save new wholesale investors a lot of time and frustration.

    When to Tell Sellers You Buy At Wholesale Prices

    Often, I see investors spend several hours preparing to make a wholesale offer only to have it turned down without a counter offer. You can save yourself a lot of needless work by explaining upfront that you are a wholesale buyer. Make it your up-front practice to explain that you are a wholesale buyer before even making an offer.

    Instead of driving across town to look at a house and then doing a market analysis and a rehab estimate followed by writing an offer, spend your first few moments on the phone explaining your investment business model to callers looking for a quick sale.

    Explain that you provide a valuable service to the industry but that you are not a retail buyer. You don't need to get qualified for a bank loan. You will pay cash. And you can close in as few as three days. You help people out of really bad situations but only at wholesale prices.

    Used Car Analogy

    Automobile sales make a good analogy. Most people understand the automobile supply chain. Manufacturers sell to dealers at one price and dealers mark up the price to retail before selling to the end buyer. When it comes time for a new car, owners trade their old car in at wholesale prices to avoid the work and hassles of selling at retail themselves. That is the service you are offering to the housing market. To buy their house at wholesale when they can't find a retail buyer but need to get out of the property fast.

    The time to do this is when you have the first telephone call with a seller responding to your advertisement. You already know that most sellers aren't desperate enough to accept your low-ball offers. Instead of doing the up front worked needed to make an offer that will be rejected, tell them that you will be making a wholesale offer. Ask them if they are still interested. If they are, you can then go look at the house, do a market analysis, and make an offer.

    It's as easy as stating - "You might be familiar with how wholesale works in the auto industry. If you buy a large fleet of delivery trucks, you deal directly with the manufacturer to negotiate a wholesale purchase. Otherwise, you buy from a dealer selling at retail prices. Another part of the auto wholesale market is when you are ready to sell your car to buy another one. You have a choice. You can put a "for sale" sign on your current car and run classified ads to sell it at retail. Or you can trade it in with a dealer that pays you the wholesale value. It's your choice."

    "I offer that choice with real estate. While I am interested in helping you sell your house, I need you to understand I will not be able to offer you the retail price. If you are interested in selling wholesale, let's discuss how I can help."

    It's honest, straight forward, and without gimmicks. By making it clear up front that you are a wholesale buyer, you avoid wasting both your own time and that of a seller expecting a retail offer.

    Please leave a comment about your approach to explaining wholesale to sellers or if you have a question. Also, our weekly Ask Brian column welcomes questions from readers of all experience levels with residential real estate. Please email your questions, inquiries, or article ideas to [email protected].

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