The Breakdown: Wholesaling Listed MLS Pr...

Did you know that wholesaling listed properties is different than wholesaling houses from a private seller?

Well, it most definitely is…

Hey Moguls, Steph Davis here, and I get a LOT of questions about a listed properties… like which ones to go after and how to go about it.

And by ‘listed,’ I mean MLS.

So let me start off by saying that I'm very picky and I have a very specific type of listed property that I look for…

Why?

Because in my market, it's extremely competitive. I don't make a lot of offers on MLS deals—I do every now and again—and every now and again I get one.

But, you can still do these deals successfully in many places across the country…

So, let’s dive into these high-level tidbits about making offers on listed properties.

The Contract

You can’t use your own contract when making offers on listed properties.

You have to use the state-approved Board of Realtors contract for your state. The agent you're making the offer through—whether it’s the buyer's agent or the listing agent of the property—will supply you with that contract.

So don’t make the mistake of trying to use your own contract—you won’t be able to.

Earnest Money Deposit

You’ll need to submit an earnest money deposit (EMD)—typically $500–$1,000+—when you make your offer.

That's one of the drawbacks when you're first starting out and you don't have a lot of cash...

When you’re going after listed properties, you are going to need to cough up that earnest money deposit upfront.

No Marketing Money (Hooray!)

So, while you do need money for the EMD, you can save it elsewhere…

An upside to listed properties is that you don't have to spend money on marketing because you can use the MLS, Zillow, Redfin, etc. to find the leads for free.

Proof of Funds

You’ll need a Proof of Funds letter—especially if it’s a bank-owned property or short sale, and you’re making a cash offer.

You can use a bank statement if you actually have the cash in your bank account or you can get a generic letter from a transactional lender.

A friend and colleague runs a great transactional lending company and I recommend you get your letter from there: FundThisWholesaler.net

Now, a generic letter won’t work all of the time. But I do have students all over the country who are using letters from that site right now…

Every once in a while my students have worked with an agent who said that the generic letter wouldn’t work and they required a bank statement.

But if you have nothing else to work with, a letter from a transactional lender should suffice.

When I was just starting out, I used the statement from my dad's line of credit. It didn't even have my name on it! Maybe one time an agent asked me about it, and I just said that it was my partner. And it worked.

No Assigning :(

With bank-owned properties and short sales, you can’t assign your contract.

What I mean is, when you’re working with a private seller and you put the property under contract, you can simply assign that contract to your end buyer… and then there's one closing and that's it.

Since you can’t assign your contract with listed properties, you have to do a double close where you're actually purchasing the property from the bank, closing on it, and then immediately reselling to your end buyer.

But no worries—this leads me to my next suggestion…

Transactional Funding

Some title companies don’t require you to bring cash to close on that first transaction... they use your end buyer’s funds to fund both transactions.

But keep in mind that those title companies are few and far between, so you might have to actually do a double closing.

But, you can use a transactional lender to get the funding for that. That same company I mentioned earlier, Fund This Wholesaler, also does transactional funding, but there are also a ton of transactional lenders out there, just do a Google search.

What’s cool about transactional lending is that you don't have to qualify. It doesn't matter if your credit is good or if you're unemployed or whatever…

The only stipulation is that you have to have your end buyer lined up already and under contract.

So they're basically just going to wire the funds to the title company. You're going to purchase the property from the bank, and then immediately after you're going to resell it to your end buyer. So the transactional lender is just funding the money for a very short time period.

You Got This

Listen, I get it…

This all sounds kind of complicated and confusing. I was terrified before I closed my first listed bank-owned wholesale deal!

But, I had a good title company lined up ahead of time—and I recommend that you do that as well. If you don't have one, ask for a referral from fellow investors.

Having a, a good investor-friendly title company on your side is worth its weight in gold! It will help you through the whole process. They're used to doing this day in and day out, so they’ll help make sure it goes smoothly.

Now get out there and start making offers to wholesale listed properties.