5 Questions To Ask On A Potential Wholesale Deal
By Paul Esajian on June 14, 2017
A good real estate investor utilizes every tool at their disposal. They know how to profit from every situation that comes their way. There are times when a deal isn’t a great fit for you but may work for someone you know. These situations make ideal wholesale candidates. Every real estate investor should know how to work a wholesale deal. If you can pass along a deal to a colleague you can bet they will think about you in the future. It is not enough to simply pass along the name, number and address. There are a few key questions you should ask to gain the motivation and strength of the seller that will let you know exactly where they stand. Whether you work a wholesale deal for yourself or someone else here are five key questions you should ask on every deal.
- Why Are You Looking To Sell? The clearer you know a seller’s motivation the better you can explain the deal. With every potential deal, you should ask a series of questions. How you ask them depends on how the conversation is going but as long as you get the questions out the order isn’t important. The most important question is why they are looking to sell. In some cases, the answer is straightforward to avoid foreclosure or because they have been relocated for work and don’t want to deal with a real estate agent. Other times the answer is not as simply. They may want to test the waters and are not truly motivated unless they can get their price. These types of deals are much more difficult and usually end up not closing. If they express a reason for selling you should get some information as to how they got in their current situation. The more you know about the seller the smoother the transaction will be.
- What Price Are You Expecting? There is a typical cat and mouse game that comes with trying to figure out price expectation. A seller may not want to lose their leverage and come right out and tell you what they want. Instead of asking specifically for price you should ask them if they know what other homes in the area have sold for. If they give you a price you can ask how their property stacks up in relation. This will usually give you an idea of what they think their value is. You can also come right out and ask what their ideal sales price is in a perfect world. If the number is unrealistic you can ask what they base their number on. How they respond will tell you if you are wasting your time and should move on. Many times, their number is based on a listing or a sale that happened a few months ago. You should explain to them how comparables work and that the market can change quite a bit in just a few months. You don’t need the homeowner to agree on a price right now but they should have a realistic idea of their value.
- Are There Any Areas Of The Property You Should Be Concerned About? If the initial conversation is over the phone you should ask about the properties condition. The truth is that you will do your own independent research if you set up a meeting at the house but it helps to have prior knowledge of trouble spots. If there was a flood in the basement a few years back there could be mold under the carpets or on the walls that they aren’t aware of. If they had to replace the toilet a few times it can be an indication of trouble with the pipes that can be a bigger issue. Start by asking general questions about the condition and work your way into more specific issues. You aren’t going to make list of repairs after the first conversation but you should get an idea if you need to make some tweaks or wholesale changes to the property.
- What Is Your Expected Timeframe? You should never assume that the homeowner wants to sell on your timeframe. You may in the same ballpark as far as price but if they don’t want to sell for six months you have a problem. You should always get a general timeframe for when they want to sell. Ask if you got the right price how quickly would you want to act. Even if the situation is dire they still need at least a month or two to find living accommodations. They may want to stay until the end of the school year or until after a holiday. If you don’t know when they want to sell any work you do may be for naught.
- Liens/Title Issues. If you get to the point where you are ready to make an offer you will do a full title search. In order to see where you stand before then you need to find out if there are any additional liens or issues you need to be aware of on title. Many homeowners don’t think that a HELOC counts as an item on title that must be paid off. If they have a copy of a credit report that is a good start if not ask if they are aware of any title issues or potential concerns. Getting a jump on these issues now can save you time, money and aggravation moving forward.
How a homeowner answers these five questions will give you a good idea of the type of deal you have and whether it is a good fit for you.