You ran the appointment, checked comps and calculated the offer. Now it’s time to present that offer to the seller. This is a critical step in the process for many reasons. Many rookie wholesaler’s will lose the deal at this step. Don’t make these same mistakes!
Never text or email your offer before speaking with the seller first. Get them on the phone. This is important because you don’t want to lose control. If you simply text or email an offer, you won’t know what their reaction was and how they feel about it. If they are getting multiple offers from different investors and yours isn’t the highest, you will likely never hear from them again.
They can also use your offer to leverage a higher offer from another buyer.
Always Call the Seller When Presenting the Offer
I always call the seller within 24 hours of running the appointment and give them a verbal offer. Get them on the phone, thank them for the opportunity to see the house and tell them your offer. I usually walk them through my bid process. I will tell them what I think the house is worth after it’s fixed up and how much money I plan to spend on repairs. That way they can see where I’m coming from as an investor. It doesn’t necessarily mean they will agree with your repair estimate, but at least they can see the logic behind the numbers.
Give them your offer and then listen. This is the hardest part. Instinctively, you will want to keep talking to break the silence. You want them to respond first so you can hear their reaction. Here are the typical responses you will get and what each of them means:
- “Sorry, that’s too low.”
- Translation: You are not even close.
- How to respond: “Where do you want to be?” You can negotiate further from here.
- “I’ll need a few days to think about it.”
- Translation: I’m not that motivated and this is not quite what I wanted, but let me think about it and explore some other options in the meantime.
- What to say: “Okay, no problem. Take all the time you need. Is this at least in line with what you were thinking?” Depending on how they respond, you can send over a signed purchase agreement after the call to show you are serious. If they do open up and tell you it’s lower than what they expected, this might be a good opportunity to give them your best price and see if you can get the deal done now. Only give them a few days to accept so they know it expires soon.
- “Can you go up to $X?”
- Translation: I’m interested, and motivated, but can you get me a little bit more?
- What to say: “Great, it sounds like we are close. Where are you hoping to be? Let me speak with my partner, wife, etc. about it and I’ll get right back to you, okay?” Usually this means they want to work out a deal and you probably don’t need to go up too much higher to make it happen.
- “Okay, sounds good. How soon do you think we can close?”
- Translation: I’m interested and motivated – let’s do this!
- What to say: I think you can take it from here! The next part will detail your next steps.
Don’t Be Afraid to Walk Away
Many times, seller’s will give you a number that is simply too high. Don’t be afraid to walk if the seller is asking too much. It will save you time and potential headaches if you put a house under contract that isn’t a good deal. There is nothing worse than wasting time marketing a property to cash buyers that isn’t a good deal. It’s not a good look for you as a wholesaler and it won’t be fun having that conversation with the seller when you can’t make the deal happen.
Emailing the Offer
I usually won’t email the offer unless I have a good feeling that they will accept. If after my phone conversation I think they will at least consider my offer, I’ll draft up a purchase agreement, sign it in DocuSign, and attach it to an email. I will usually summarize the terms of my offer. Almost all of my emailed offers say something like this:
Hi Bob,
Attached is the purchase agreement. We would cover both buyer and seller closing costs including state and county transfer taxes, title insurance, closing fees, title fees and doc fees. There are also no realtor commissions or any additional fees.
I put a close date of (date) but we can be flexible and close sooner or later if needed.
We use (insert local title company). We do a lot of business with them and they are easy to work with.
Let me know if you have any questions. If you are ready to move forward I can send this via DocuSign for electronic signature.
That’s it. Then I send the purchase agreement in DocuSign so they can easily sign it if they are ready to move forward.
The Purchase Agreement
Please check with an attorney before using this purchase agreement. States and counties have different laws regarding the sale of real estate. You may or may not need to make some changes to this before you use it.
Assignable Purchase Agreement for Wholesaling
Fill out the blank sections with your name (I recommend using an LLC), sellers name, purchase price, closing dates, title company and acceptance date. There is also a section on the last page where you can write in any additional terms such as who keeps appliances, who pays closing costs, etc. This is where I indicate that I will cover all seller closing costs.
You will notice this agreement has a few disclosures. An investor disclosure, no-agency disclosure, marketing clause and additional protections such as the inspection clause. If you are a wholesaler, these are important disclosures and clauses you will want to have in your contract.
In my experience, most seller’s are fine with the language in this agreement. Occasionally, you will get a seller who wants to negotiate terms or make changes to the language. I will make minor changes as long as I’m able to keep the disclosures, inspection period and buyer protections in the contract. As long as you are up front about your process and what the seller should expect, most sellers are fine with the contract as-is.
Earnest Money Deposit
I can’t tell you how many wholesaler’s are shocked when I tell them I don’t put up earnest money. It’s not that I won’t. If a seller’s asks me to put down EMD I will gladly put down anywhere from $2,000 – $5,000. Remember, we have contingencies that make that money refundable.
In my experience, nine times out of ten the seller’s do not ask for earnest money. If the seller brings it up, I will usually explain that my partner will put down a non-refundable earnest money deposit after we complete inspections. If that’s not good enough, I have no problem putting my own EMD down up front (refundable prior to inspections being completed).
In the next step I will go into detail about the inspection period and how to position yourself as a trustworthy buyer during the wholesaling process.
Related: Wholesaling Houses Step 7: Inspection Period Explained
