When it comes to real estate wholesaling, there are several steps to successfully complete a transaction. Through the process there are several variables that can prevent you from finalizing a transaction and collecting a check. The process we want to talk about today starts after the property is contracted on the buy side and it is now time to locate a buyer and start the assignment process. For some wholesalers, this step of the process may seem to be the most difficult, while for the experienced wholesaler with a large network, this step in the process may be the easiest. As with all aspects of a real estate transaction, there are certain systems you can put into place to help streamline the process and help ensure you locate a qualified end buyer to complete your transaction.
We have all been there, we finally contract a motivated seller at a deep discount and we are extremely excited but we know as wholesalers, we do not collect our money until we find a qualified end buyer and the deal closes. Finding a motivated seller and contracting them at the right price is the first step of the process but we also need to be efficient in having buyers to assign our contracts to in order to seamlessly collect checks on a consistent basis. The dispatch process begins as soon as the deal is contracted and expectations are portrayed truthfully to the seller. Once we have commitment from the seller, we are ready to rock and roll. (as a wholesaler, it is always best to be upfront and honest about your intentions. Explain the wholesaling process to them and that you will not actually be the one closing on the property. This will prevent future headaches during the process as you market & show the property. Will also be very helpful if you are unable to assign the property to an end buyer).
Steps To A Successful Real Estate Wholesaling Dispatch Process
1) Coordinate Access / Get Keys - In order for us to show our prospective buyers the property for them to perform their due diligence, we have to get confirmed access to the property. Personally, in our business, we like to get the keys from the property to show the property. If the property is vacant, we will put a lock box on the property.
2) Schedule Open House - Over the years, we have found it to be most efficient to hold open houses instead of doing one-off showings. The reason for this is because it builds competition between the buyers, knowing other parties are interested and it also allows us to get multiple buyers into the property at once. Obviously our goal is to assign the property after the first open house. If we do not assign the property after the first open house, we will either do one off showings or schedule another open house. At this point, we are just getting confirmation on an open house date/time from the seller so that we can use in our marketing material.
3) Marketing Checklist - Once you have coordinated access & the open house for the property, we can begin to market the property to our perspective buyers. Our marketing checklist, is a checklist that is used as a reminder to ensure that we do everything we need to do in order to get the exposure needed to sell the property. Here is a quick rundown as to what our marketing checklist looks like:
Get Keys/Secure Property
Take Photos/Videos (this is typically done during the appointment with the seller during the acquisition stage)
Upload Photos/Video to Dropbox
Write A Property Description (3)
Create Headlines (5)
Blast Buyers Lists (Email/Text)
Post Ads On Classifieds Daily
Post Ads to Fizber
Post Property on Facebook Page & Groups
Post Ad on LinkedIn
Post to Real Estate Social Sites (Bigger Pockets, Connected Investors)
Contact Buyers Agents To See If They Have Buyers
We work through this list on every single one of the properties that we wholesale and are always continuing to look for new marketing strategies to increase our exposure. The key and starting point is to having a well qualified buyers list that you continue to add to on a daily basis.
4) Attend Open House
Within all of the marketing that you will be putting out there, you will push your buyers to a specific open house date and time. On your end, make sure you call and confirm with the seller, the day before the open house that everything is still confirmed. During the open house, you want to make sure that you take down all the buyers information who attend the open house. This is a great opportunity to network, learn more about your buyers and also build your buyers list with new buyers who are not currently on your list. Re-explain to all the buyers how to submit an offer on the property for the ones who you have not worked with in the past.
5) Receive Letter of Intents
In our business, we have our buyers submit letter of intents with their purchase price. The reason that we have our buyers submit letter of intents instead of standard purchase agreements is because since we will be assigning the contract, they will be taking on the current contract that we have in place, this means that they will be assuming the terms that we have in place as well. If we have our buyers submit their own purchase contracts, they think the terms that they submitted are the ones that they will have when going to close. So to avoid that, we have a standard LOI that is to be submitted to us. Within the LOI, we explain any non standard terms on the contract that the buyer is going to have to assume (i.e paying seller closing costs, paying seller attorney fees, etc)
6) Accept Offer & Issue Assignment Contract & Collect EMD
Once all of the LOI's are received, it is now time to review each offer and accept one of them. Once you determine the buyer you want to move forward with (based on price, comfort and ability to close), you will send them an assignment contract and the original purchase contract. This assignment contract will give them the rights, responsibilities and benefits of the original contract that you have with the owner. Once the assignment contract is signed, the buyer will need to send a deposit check to be held in escrow at your attorney's office (some people have them make it out themselves, but we found it easier to have the deposit to be held in escrow). Once the EMD and the assignment contract are received, the buyer is now locked into the deal.
7) Assignment Introduction
In order to communicate the official assignment to all parties involved, we send out an assignment introduction email. This email is sent to the buyers attorney, buyer, seller's attorney, seller, our team and our attorney. Within this email, we will introduce the buyer and the seller and their attorneys. This email will contain the signed assignment contract as well as the original purchase agreement. This is the official handoff that will allow the attorney's to begin updating title and survey for the property in order to schedule closing.
8) Monitor Closing
Some real estate wholesalers, will simply hire a transaction coordinator to monitor the closing and ensure that all parties show up for closing. We chose to pay our attorney $300 per closing to monitor and track the closings for us. The reason that we chose to do this, is because they can communicate with the attorney's on both sides of the transaction. If you are not an attorney, then attorney's are very reluctant to communicate information on a deal to you. To make this process run smooth, we created an excel document of all the properties that we have in closing that we send out to attorney every Monday morning, in which they give us an update on each file. This prevents a lot of back and forth and gives us a solid update on each deal every week.
Closing
We hope that this blog post gave you some insight into all of the specific steps of the wholesaling dispatch process and even some specific systems that you can put in place to help streamline this portion of the wholesaling process. As previously stated, there are several variables that can throw a deal off of it's tracks but if you put certain systems in place, you can help mitigate these issues.