Does Wholesaling off the MLS Actually Work?
MLS wholesaling has been gaining traction lately. I get new wholesalers sending me deals from the MLS all the time. So this begs the question: “Can you wholesale on-market properties off the MLS?” The short answer is absolutely. However, it’s not as easy as some of the gurus make it sound. MLS wholesaling is a newer strategy taught by many wholesaling mentors and coaches. It’s an easy way to get started in wholesaling because you don’t need any money up front for marketing.
In this article, we will tell you everything you need to know about wholesaling on market houses (including how to wholesale off the MLS step by step). We will discuss the pros and cons of MLS wholesaling, and tell you if it actually works.
Can You Wholesale Listed Properties?
Yes, you can wholesale listed properties. The process isn’t much different than wholesaling an off-market property. The biggest difference is you’ll be negotiating with the listing agent instead of the seller. Once you have the property under contract, you can mark it up (to include your assignment fee) and find a cash buyer for your deal. Once you have a buyer in place, you close with your wholesale friendly title company and get your check!
Easy enough, right? Not so fast. In most cases, wholesaling off the MLS is only successful if you get a HUGE discount on the listing. In other words, you will need the seller to agree to a price that is well under what they are asking. Probably 25-40% under the asking price. Why is this? If you put a listed property under contract close to the asking price and then mark it up, most investors won’t see that as a deal. Especially if it’s been listed for a while and the seller has already had other offers on it.
Chances are, the seller won’t agree to a 25-40% discount unless the property is way overpriced or it needs substantial repairs.
Understanding the MLS
The MLS is the largest marketplace for real estate and properties listed on the MLS get the most exposure to potential buyers. Because of this, listed properties usually go quick if they are priced right. Even if the house needs repairs, there are plenty of agents that have investor clients as well as cash buyers also browsing the MLS.
If you find a listed property that does need repairs, there’s a good chance that investors are already contacting the listing agent and making offers on it. If the property was recently listed (less than 30 days), it’s highly unlikely the seller is going to accept a deeply discounted offer. If after several weeks the property does not sell, the seller may reduce the price. If the property is way overpriced, this may happen several times.
In other words, the probability of getting an offer accepted 25-40% under the list price is very low. Your best chance at getting a seller to accept a much lower offer is to make offers on multiple properties.
Pros of Wholesaling From the MLS
You don’t need money for marketing. MLS wholesaling is an easy way for a new wholesaler to get started because you don’t need money to get leads. MLS leads are free.
The sellers are already committed to selling. Even when you are spending money on marketing, many of your leads are still undecided on selling. Most leads will require nurturing and follow up which takes time.
Some sellers might be motivated. The longer the house sits on the market, the better odds you have of getting a deal. Some of these sellers might be highly motivated.
Seller’s agents want the property sold. While it’s in their best interest to get the best offer for their client, if the property has been sitting on the market for a long time they are ready to be done with it. Sell your offer to your the agent and just might get it accepted.
Cons of Wholesaling Listed Properties
You’re looking for a diamond in the rough. Because there is so much visibility on the MLS, most deals that have been sitting for a while probably had multiple lower offers already. Your chances of getting a much lower offer accepted are slim, which is why you will need to make so many offers.
Time Consuming. Browsing through hundreds of listed properties and calling agents takes time. It may take 10-20 offers to finally get a deal under contract.
Many cash buyers prefer off-market deals. While there are certainly buyers that will buy wholesale deals that originated from the MLS, many buyers prefer working with wholesalers who sell off-market properties. Off-market deals can be more appealing because investors assume there is less competition.
Long-Term Reputation. If you are consistently calling agents and making lowball offers on their deals, it might harm your reputation in the long term. If this is your only marketing strategy you will likely end up contacting the same agents over and over again with lower offers. Some agents could think you are just wasting their time.
MLS Wholesaling Step-by-Step
Step 1: Find the properties. If you are licensed, you can go direct to the MLS. If not, use Zillow to search for properties. Use the filters and look for properties listed for more than 30 days. The more distressed, the better. Run your numbers. Identify comps, estimate repairs and calculate ARV. Check out this link for help running comps and calculating ARV.
Contact the listing the agent and ask about the property. What’s the situation? Has it had any offers? Get a feel for what the seller is thinking and verbally make an offer.
Step 2: Make lots of offers. I hope you are not shy about making offers! If you want to get a good deal on the MLS you will need to make dozens of offers. Repeat step 1 over and over again. Make sure you are running your numbers each time (your offers should be at least 25% less than the list price).
Step 3. Write a formal offer. If the verbal offer is something the seller will consider, put the offer in writing. You can also write your offer each time but I wouldn’t recommend it. Especially since 9 times out of 10 your offer is going to be rejected. I would write offers on a case by case basis. If you think they might counter, go ahead and write it up.
Tip: Make sure you use a wholesale friendly purchase agreement that can be assigned.
Step 4. Find a Cash Buyer. If you are wholesaling, your sales pitch to the seller’s agent is we are cash, we buy “as is” an we can close fast! If don’t already have a buyer’s list, post your deal to FB groups, call other local “We Buy Houses” companies or find another wholesaler to help you move your deal. I generally aim for a 10k minimum assignment fee, but if you got a smokin’ deal it’s possible you could get more!
Step 5. Assign the Contract and Close with Title. If you followed my step-by-step wholesaling guide, you know the drill here. You will need an assignment contract to send over to your buyer. Once that is signed, send both the assignment contract and PA over to your wholesale friendly title company.
Do We Recommend MLS Wholesaling?
MLS wholesaling does work and you can make money. There is no doubt about that. However, because we feel the cons outweigh the pros, we do not recommend MLS wholesaling. If you are a beginner and don’t have any money, I do think it’s ok to start making offers on listed properties. It’s a zero dollar marketing method and a good way to learn the wholesaling process. If you plan on building a wholesaling business, I would recommend putting together a marketing plan & budget and start sourcing off-market deals.