Hello everybody and welcome to the video. My name is Robert Robinson with Helpful Homes and today I wanted to discuss something that I hope will be helpful to you if you are trying to sell your home without using a realtor.
You need to sell the house quick for any number of reasons, and you are potentially looking to get cash for the house so you’re not worried about appraisals and bank loans and things of that nature. So, if you have a house that you want to list with a realtor, this doesn’t pertain to you. This pertains to homeowners who want to sell a property in its as-is condition and sell it quickly. So, I wanted to talk about the difference between a wholesaler and an actual cash buyer.
Wholesaling has been around for many, many moons. It is basically where you are getting the property under contract and if you’re a good wholesaler, you have a bunch of cash buyers that you have taken the time to pre-qualify and you know that based on the number you get the house under contract for, you’re able to then make a profit and sell it to that cash buyer. Wholesaling is a great business for a lot of people, but I want to explain to you, the actual homeowner, the seller, what the difference is between getting your house under contract with a wholesaler versus someone like Helpful Homes, who is the actual cash buyer, whatever you want to call the end user.
And so in this example, we’re going to compare wholesaling versus an actual cash buyer. I also want to say that there are great wholesalers out there that have a wonderful network of buyers, people that they have worked with in the past. But there are some differences and some nuances and you should understand that before you sign a contract with anyone.
So, when you are signing your house over to a wholesaler, they generally speaking do not have the ability or the desire because it’s not their business model to actually close on your property. What they will do is do their best to determine what a number is that they can offer you, which goes on the contract, and then be able to make money on top of that number, and still sell it to a person like myself or a similar cash buyer who either ends up renovating the property and reselling it or holds it as a rental property.
So, a really good wholesaler will have a network of buyers. He or she knows their parameters and knows when they get a deal under contract, oh well, John or Sarah or Bill or Mike, they’re going to be really interested in this house.
And let’s just use an example of $100,000. If they get the house under contract with you for $100,000, they can sell it to their buyer at $105,000. I’ve seen people make 50 or $100,000 on a wholesale just depending on the price of the property, the spread that’s there, and things of that nature.
Where wholesalers can get in trouble and where you can find yourself in trouble is if you’re dealing with a very inexperienced wholesaler or someone who doesn’t present themselves in the proper light and makes promises that they cannot fulfill. A lot of real estate investing has been taught in the ballroom of a Marriott over the weekend or YouTube courses where people all of a sudden come out after 2 days saying, “Hey, I’m a cash buyer and I can close on your property.” That’s a lot of times not the case. And when you are getting someone’s property under contract, it’s a pretty big deal. A lot of people, depending on their situation, are counting on you to do what you say and say what you do. So, when you make an offer on someone’s house and you represent yourself as a cash buyer, you’re not using a bank loan and you’re telling them that you can close in 30 days or 2 weeks or whatever that time frame is that you’ve put on the contract. There’s a lot that people count on. People are sometimes moving across the country or they need money for a surgery or whatever that may be that is something important and they’re selling the home because they need the money and have plans, right?
So, I think it’s very important for wholesalers and if you’re a great wholesaler and you’re watching this, hat tip to you — there’s a right way and a wrong way to do everything. I feel like being transparent and representing yourself to the abilities that you actually have is the way to do it. So, if someone is approaching you and you’re selling your home and they tell you they’re a wholesaler and they tell you they have a network of investors and that they can most likely perform based on these relationships with investors, then that’s a chance you need to be willing to take.
What happens a lot of times is they will use an inspection period and let’s say they got you back to the example of $100,000. They got you to agree to sell the house for $100,000. They will then ask for an inspection period. And during that inspection period, if they’re being honest, they’ll tell you, “Well, we’re going to come through with our qualified buyers, and I want to show them the property.” They may show up with three guys and gals. There might be 15 or 20 people. If it’s a wholesaler that has a large network, there could be 20, 30, 50, however many people that they have sent out their emails to or that are on their text message blast and all those people will show up. They’ll take a look at the house and then they’ll field what they feel is the highest and best offer where they can make that spread over the $100,000 that they are agreeing to pay you at closing versus let’s say the $120,000 that their best buyer has now offered. So in that instance, they make the $20,000 in the middle. You get your $100,000 and the buyer pays $120,000.
In the circumstance or instance where the wholesaler doesn’t get the offers that they expected because maybe they misbid on the property — they don’t have experience with real renovations — so let’s say they thought $30,000 would be needed to bring the property up to a level where it can be resold, their buyers came and they said, “Well, this is going to cost 50 or $60,000 to do it right.” So, their buyers offered $80,000 for the property. In that case, you might find that the wholesaler starts backpedaling and during that inspection period, they tell you, “Well, we’ve come up with some different calculations here and actually this is going to cost more than we think and x, y, and z. So, now we need to reduce our offer.” So, that can be a bit misleading. It can be disappointing, especially when you as the seller are counting on this number that they put on paper and then all of a sudden that number is no longer a reality. So, I’m not saying that that’s the way it always happens, but that’s very common, especially if the wholesaler is new and doesn’t have real hands-on experience in renovating a property. They don’t really know what the materials are going to cost. They’re not hiring people to actually do the labor. So, they really don’t have a handle on every dollar that’s actually going to go into this property. They’re much more focused on trying to make the spread of 5,000, 10,000, 20,000, whatever that is, and their focus is on trying to make money on the contract as opposed to what are the real numbers here that actually make sense in a real world application that an investor like Helpful Homes would actually pay and still have room to do the necessary repairs to the property and make a fair return when we either sell it or what would we need to put into it to now bring it up to rental standards and be able to rent the property and hold it for long term.
So, those are the things to pay attention to — when you do go under contract with someone, ask yourself and ask them, are you wholesaling my property or are you the end buyer? Is this person the actual cash buyer? And that can make a big difference in what to expect during the transaction. Helpful Homes, we use our own funds. So, when we go under contract with you, it’s because we’ve already done our due diligence. We’ve looked at all the numbers and we’re taking our real world experience to formulate what that offer is, right? Sometimes that offer doesn’t always work. Sometimes it works wonderfully and it makes people very happy. And we only make offers that we know we can stand behind. So, I don’t want anybody out there to have a bad experience. I’m not trying to give wholesalers a bad name whatsoever. There are plenty of them that know how to run the numbers. They have qualified buyers. I get called from wholesalers all the time and they want to show me properties because they know our history. They know our track record and they can tell that Helpful Homes actually closes on properties, purchases properties, renovates them, owns rental properties, etc. So, we are one of those people that that wholesaler may reach out to. They have networks of good buyers.
So, I just want you as the homeowner to know the difference. Am I actually dealing with the end buyer or am I dealing with someone in the middle? Because the person in the middle makes a huge difference on what your end result is going to be and what you can really bank on at the end of the day to reach that closing table.
So, I hope this has been helpful in some way. Some of the things that you can ask for are — just ask straight up for honesty and transparency and ask them to represent themselves as who and what they really are. And it’s a good sign if they tell you, “Yes, I am a wholesaler and I do have these wonderful buyers that I have a track record with,” and they should be able to show you that to some form or some degree, whether that’s Google reviews, previous transactions from an attorney’s office showing assignments that they’ve done to buyers that they’ve assigned properties to. And then you can see, well, this is a buyer that they made a sale to and this is the same buyer that’s buying my property. So that’s something that you could feel more comfortable about when you enter into a contract.
And so yeah, I just hope that this has shed some light on what the difference is and who you can kind of count on so that your real estate transaction and the sale of your property in its as-is condition when you’re looking to sell it fast goes smoothly. Helpful Homes buys properties all around the Triad. We buy Kernersville, Winston Salem, Greensboro, Oakridge, Summerfield, a lot of the surrounding cities as well. So, if you’re looking for a cash buyer, someone who can buy your property quickly, pay you a fair price, and do what we say at the end of the day, we would love to hear from you and see how we could potentially fit into your needs for selling your property.
Okay, we will see you again in the future. I hope this video has been helpful and informative.
Wholesalers, if you’re watching, I’m definitely not trying to give you guys a bad name. Oh, one other thing you can ask for — proof of funds, right? It’s something where you can say, “Okay, you’ve offered me $100,000 for this property.” If they haven’t been transparent and they’re representing themselves as a cash buyer, ask them to show you the funds. How are you going to pay for this? Where’s the $100,000 at? And people can send over a proof of funds, which is usually something from a bank. If they’re using a hard money lender, that lender may provide a proof of funds showing the address and that the funds are available.
Obviously, people have Photoshop or PDF tools where you can kind of finagle and fudge numbers, so be careful for that as well. It’s much more based on someone’s reputation — if they have reviews, if they have a really good website, if they can connect you with people that they’ve done business with, that would be something that would make me feel comfortable and know, “Hey, I can count on this person and I can make my plans accordingly because I think they’re actually going to do what they say.”
So, I hope that’s helpful. If you have questions or comments, leave them down below. We’re happy to answer questions even if we don’t do business with you. And we appreciate you taking your time to watch. We hope to hear from you in the future. Okay, we’ll see you later. Bye bye.