WholetailingPosted on April 30, 2015 by
In many markets, properties are receiving multiple offers within days of being listed. This includes retail listings, foreclosures, short sales, etc. As long as the list price is remotely reasonable the properties are going into highest and best. This is not an ideal situation for investors because it means they may need to pay a higher price to be competitive. This can also be true for unlisted properties because all buyers, including retail buyers, are looking everywhere for their next purchase.
A solution to this problem can be solved by using wholetailing. What is wholetailing? It is selling a home for a price above the wholesale price but below the market retail price, maybe even at the market retail price in some cases. Typically these properties need mostly cosmetic or smaller, less serious repairs and/or updating. For this reason the seller is not willing to sell it at a wholesale price. As an investor you can close on the property at a discount, but not as low as a wholesale, and rehab it relatively fast. Once the property is ready you can advertise it at a profitable price below market retail value and get it sold fast if priced right. Some properties may need nothing more than just a deep cleaning. The targeted buyers are investors that may be looking for a rental property with minimal to no repairs and/or owner occupant buyers that are looking for a deal and not afraid of doing some sweat equity. This allows the investors to rent the property immediately to begin cash flowing ASAP. Owner occupant buyers already save thousands buying a wholetail property but they can also increase their equity if they decide to update or remodel the home to the property’s full potential. All these situations create a win-win all around.
If you do decide to wholetail you want to build a relationship with a real estate agent that will offer a flat fee listing or a discounted commission with full service for providing a volume of business. Advertising wholetail properties on MLS can draw a higher price. When listing on MLS make sure to explain to your agent that you are only seeking cash or conventional loan buyers. Last time I checked, you cannot sell wholetail properties to FHA buyers because, if you do everything right, you should be closing on the sale of this wholetail deal within 90 days. Keep in mind that FHA loans do not permit buyers to purchase homes from sellers that have been on title for less than 90 days. Typically, this can be circumvented by showing that a significant amount of repairs and/or remodeling was done before the sale. In most wholetailing there is not a significant amount of work done to the property, in some cases none at all.
Take advantage of the current seller’s real estate market and implement wholetailing into your business plan today. Make your wholetail property draw those multiple offers and highest and best situations.