Interested in learning how to wholesale houses without really trying too hard?
Well, that’s exactly what I’m covering in this lesson.
JP Moses here, and I call it the “no-pitch pitch,” which is the opposite of the hardball approach.
Look, if you follow these steps, you’ll make great money on these deals when they come your way. You can do it without trying very hard—or without putting yourself or your seller at any risk.
So, I latched onto this strategy from a conversation with investor friends during a group coaching chat. An investor named Glen was asking for advice. He had a deal that he was interested in, but he said that it wasn’t the best he’d ever seen. He referred to it as a little “iffy.”
And, by his own admission, Glen is not a fan of tying up a property and then having to come back and say there’s no buyer. So he wanted to know the best route to take.
Make Your Offer Clear and Simple
The answer Glen got surprised him, because it’s something he hadn’t thought of before...
Another member of the group named Brian said that an option on the property would be the best way to go.
The strategy is to tell the seller that you can’t give him the price he’s stating, but then quickly add, “I have a network of buyers. Can you give me 45 days to find that buyer at no cost to you?”
The next step is to let the buyer know that if you can’t find a buyer within that timeframe, the seller is released from the agreement: “All you have to lose is 45 days.”
Important: Avoid talking legal language because people will always say no to what they’re not comfortable with. Keep it simple.
The Option Strategy
So, as Brian suggested, the route to take with Glen’s deal is with an option agreement – put an option in place and then shop the option.
This creates low risk for the seller, which puts them more at ease. You now have the equitable interest that you need in the option agreement, so you can look for a buyer, but you’re not committed.
An option is different from a purchase and sale agreement.
The P&S agreement legally commits the buyer and the seller to the arrangement.
An option agreement only commits the seller of the property and does not commit the buyer to buy. In other words, the buyer has an option to buy, but is not obligated to do so.
Frame This as a Service to the Seller
This is the approach Brian suggested:
“I can see you’re in a tough spot. So, as a service, I’d be willing to help you out in this situation at my cost. All it will cost you is 45 days or so. Here’s how it works…”
As you walk through the paperwork with the seller, ask him if he’s familiar with how stock options work. Remember – keep things simple and easy to explain.
Whether they say yes or no, you continue explaining: “I have the right to purchase your property for (whatever price you’ve agreed to), but I don’t have to buy it. But I’m going to try my best to get you your price.”
Always frame the price by asking what the seller needs versus what he wants. As we all know, needs can be much different than wants.
Yet another tactic that can be used here is this…
Tell them: "If someone else offers you more money, I'm happy to cancel my option early for you, so you can move forward with them."
If the Deal's Tight
If it's a viable deal but the margins feel tight, and you trust your buyer, you could create a note for your cut as opposed to the quick cash.
Set up payments for the note, or just let them pay off when the property sells.
The more strategies you have, the better chance of landing the deal.
Your Opportunity for Renegotiations
Once you have a valid option, you can always try to renegotiate price based on legitimate offers you actually receive. The option agreement is your ticket to give you the equitable interest you need to market – and try to match this deal with a buyer.
If you get a really lowball offer from a buyer, you’re in a strong position to renegotiate with the seller: “I have a legitimate offer for you, but it’s less than your asking price. If you’re willing to adjust your asking price, then we can close on this quickly.”
Creative Negotiations
One of the amazing aspects of real estate investing is that there are so many ways to structure a deal.
The more of these you have in your toolbelt, the more successful you’ll be.
Your Two Cents Worth
Have you structured a deal using the option agreement? Tell us about it in the comments section below.
Go with the option route when a deal looks iffy.
Frame offers to the seller that say you’re offering a service (non-threatening).
Learn as many different negotiating and deal-structuring strategies as you can.
Leave the door open to come back and renegotiate with the seller.
JP Moses
is a real estate investor in Memphis, TN, with experience ranging from land lording to note buying, rehabbing, and wholesaling. However, wholesaling is the area that he enjoys most and where he bring the most experience and expertise to his students.