How To Wholesale Real Estate Alabama

Courtney Osborne

10-23-2023

What is Wholesaling Real estate?

Wholesaling real estate is the process of identifying a distressed property, securing a contract with the seller, and then transferring or assigning that contract to an end buyer for a profit. The end buyer is usually a cash investor interested in either renovating and reselling the property or holding it as an investment.

Wholesaling can involve various property types, attracting cash buyer investors, but among beginner wholesalers, single-family homes are the most popular. This preference stems from the relative ease of finding and selling single-family homes, as they typically require less upfront capital compared to other property types.

Real estate wholesaling can assume various forms, yet the most prevalent strategy involves identifying a motivated seller, securing them under contract, and subsequently locating a buyer willing to offer a higher price. The wholesaler then profits from the margin between the two prices.

If you are new to wholesaling, it is important to begin with the simplest strategy and the easiest property types. This will help you learn the ropes and avoid making costly mistakes.

What is a motivated seller lead and what role do they play in wholesaling real estate?

Have you, a friend, or a family member ever wanted to get rid of a certain property, such as a car, a table, or even a computer? You were so motivated to sell something you own because it was taking up storage space, incurring extra taxes and fees every month, due to a lifestyle change, a lack of funds necessary for repairs, or simply because you no longer wanted the item. Have you ever seen pawnshops and wondered why they are in business, or why someone would sell something for less than what it's worth to a pawnshop? Well, if you've ever experienced this yourself, which I'm sure you have, these situations are the foundation of what causes a motivated seller.

An owner of a property may be motivated to sell or get rid of an item for a price lower than its market value due to various reasons, such as it being a headache to maintain or simply out of necessity. The real estate wholesaling business model is built around this concept.

Is Wholesaling real estate in Alabama legal?

If you are reading this post and understand American politics, you will know that there is often a loophole hidden within the laws that are passed. While there are no specific titles or chapters in Alabama's laws that explicitly mention real estate wholesaling, there are a few general provisions in Alabama's legal framework that could be interpreted to apply to wholesaling.

The Alabama Real Estate Commission (AREC) is the state agency responsible for regulating real estate licensees. The AREC has adopted rules that govern the practice of wholesaling real estate. These rules require wholesalers to disclose their status as wholesalers to sellers and buyers and to provide buyers with all relevant information about the property.

The AREC rules do not prohibit wholesaling real estate. However, they do impose some requirements on wholesalers. If you are considering wholesaling real estate in Alabama, it is important to be aware of the AREC rules.

Here are some of the AREC rules that apply to wholesaling real estate:

• Wholesalers must disclose their status as wholesalers to sellers and buyers.
• Wholesalers must have a signed contract with the seller before they can assign the contract to a buyer.
• Wholesalers must provide buyers with all relevant information about the property, including any known defects.
• Wholesalers must not misrepresent the property to the buyer.
• Wholesalers must not engage in any illegal activity, such as fraud or misrepresentation.

If you are considering wholesaling real estate in Alabama, it is a good idea to consult with an experienced real estate attorney if you need one.

How to wholesale real estate in 10 steps

1. Identifying and selecting a market (Wherever buyers are)

Before you attempt any wholesaling, it's crucial to have willing cash buyers who are interested in what you're offering before you even have it available. One of the best feelings is having buyers lined up for a product or service before it's even produced or in stock. It's akin to having a long line of customers waiting outside your restaurant, eager to order your food based on the pictures you've shared online. At this point, your main challenge is sourcing the ingredients and ensuring you can sell your product to the buyers at a price higher than the cost of production.

Cash buyers typically want to purchase real estate properties that aren't listed on the MLS. The reason for that is they don't have to pay extra for realtor commission fees from buyer and seller agents. They realize that agents and brokers love commission fees, so often properties are listed on the MLS for more than what they're worth, making it impossible for real estate investors to stay in business. A bad deal for a real estate investor looking to fix and flip a property is buying a property that's over 70%. The over the 70% rule is the Maximum Purchase Price = (After Repair Value * 70%) - Repair Costs. We will explain later in this blog post how to calculate this if you were to perform a wholesale transaction without knowing what cash buyers are paying for similar properties to the ones you are marketing to. Avoid finding properties on Facebook Marketplace, properties on the MLS, properties with title issues, and properties in flood zones. Cash buyers prefer easy properties to acquire with as little friction as possible.

Agreedment provides valuable information so that you know what cash buyers are purchasing in Alabama. We offer insights into property types, purchase prices, the number of properties in a buyer's portfolio, as well as the cash buyer's name and contact information, such as email or phone number. All this information is available on Agreedment, the premier platform for nationwide cash buyer data. We have made it incredibly easy to access this information from cash buyers nationwide, allowing you to be well-informed before entering into a contract for a property (more on this in the following steps). It is crucial to have this information about cash buyers in the specific areas where you plan to market. This approach helps you save on marketing costs and effort. There is nothing worse than spending money and marketing in areas buyers aren't buying in.

Now that we have selected a market, either one where we know cash buyers are active or one where we are engaging in virtual wholesaling, it is time to compile a list of individuals or properties that fit the distressed owner/property profile.

2. Free Motivate Seller leads

Now that we have identified the areas where real estate cash buyers are active, our next step is to target motivated sellers in those specific areas. This can be done by focusing on Alabama counties, cities, and zip codes where cash buyers are actively making purchases. It's important to understand the types of properties that cash buyers prefer and direct our marketing efforts toward those properties. If you're just starting out, it's advisable to avoid commercial properties.

There are various factors that can lead someone to sell their property below its market value or off-market, as we discussed earlier in this blog. Now, we need to put ourselves in the shoes of motivated sellers and understand their perspective. We must find reliable sources that provide us with information about these motivated sellers, allowing us to reach out to them or for them to reach out to us. Fortunately, there are numerous public records and online platforms where we can find FREE leads for motivated sellers.

We can obtain FREE motivated seller leads by submitting a public records request to the Central Appraisal Districts and tax offices in the county where we plan to market. If the county has a website, the information may be accessible there. Otherwise, we will need to send them an email. Some counties may charge a small fee for this data, while others provide it for free or at a lower cost compared to purchasing it from real estate seller-lead service providers like Propstream. It is important to contact and gather data from both of these sources, as combining the datasets will help identify motivation factors related to properties. There are many steps to obtain FREE seller leads.

3. Real Estate CRM systems and software tools

At the time of writing this blog post, there is currently no dedicated real estate wholesaling CRM available. Our team at Agreedment had previous experiences searching for the right real estate investor CRM, but unfortunately, we came up short. We extensively searched for suitable options and ultimately had to create our own software using Close, which we highly recommend as the leading CRM for real estate small businesses. Close allows you to customize features such as automatic follow-up and number rotation, ensuring optimal results for real estate or wholesale businesses by leveraging their API for only $59 a month. Additionally, Close offers an automatic dialer with voicemail capabilities, SMS, and built-in email marketing. This is especially beneficial if most of your business activities are conducted from your computer, without the need for in-person appointments with property owners. However, if you do visit property owners, you can utilize Close's Zapier integration to connect with your preferred platform like Podio, and receive lead information on your mobile phone. Alternatively, if you're tech-savvy, you can integrate the data automatically via api.contr

To effectively grow your wholesale real estate business, it's essential to become comfortable using a robust system. While using Google Phone and a spreadsheet can work when you're on a budget and just starting out, a reliable CRM to manage large amounts of seller leads is everything is unparalleled. If you follow our recommended outline to acquire seller leads from the county, you will undoubtedly need a CRM to handle the influx of deals, especially if you have access to motivated sellers from the entire county, as mentioned earlier. Before we start doing cold outreach to our list of prospects it's important to have some [[Real Estate Software]] to manage outgoing to incoming communication. In the next section, we will dive into the details and kickstart our outreach efforts.

4. Software, Systems, and Processes

Now that we have our system set up with the data uploaded into our CRM, it's time to take action and be proactive and do some cold outbound marketing. Now there are different kinds of marketing methods to create lead generation. The method in this blog we use will allow you to get started quickly.

If you are using Close you will need to upload your leads into the CRM. The process is the same on other CRMs as well. This is a great video that shows you how to upload your leads into Close CRM on YouTube. Once they are uploaded, you've now completed most of the hard work. The next step is understanding the local market and gathering information. Having information on what investors are paying in different areas is crucial because it allows you to start making offers to the sellers you're contacting. Next, we will delve into the numbers you need and how to calculate them.

5. Know the numbers ARV, comps, and what the buyers actually pay

When speaking with buyers, it's crucial to have a solid understanding of your numbers, including ARV (After Repair Value) and comparable properties in the area. This knowledge is essential before making offers to sellers too.

ARV represents the estimated value of the house after all necessary repairs and renovations have been completed. It indicates the potential market price of the house once it is in optimal condition with necessary repairs. To enhance your wholesaling skills, we recommend utilizing tools like Flipper Force to calculate repair costs as if you were planning to fix and flip the property yourself. By providing accurate numbers to cash buyers, you demonstrate professionalism and increase your potential revenue on each deal. The most expensive components of a house often include the roof, HVAC system, foundation, and plumbing.

In the case of wholesaling land, particularly vacant infill lots, it's important to determine if there are water hookups available on the property. If the land is large enough, it may be possible to subdivide it into individual lots with separate parcel IDs. Cash buyers typically focus on three key factors: whether the property is located in a flood zone, whether is it a buildable lot, and whether there are water hookups accessible from the street. You can reach out to the city authorities where the property is located to obtain this information. Wholesaling land can be a niche market, offering fewer competitors and more opportunities when approaching sellers who are potentially interested in selling their land.

Comparable properties, or "comps," provide insights into what a property could sell for at retail price once it is fully renovated. They reflect the market value of the property in its updated condition compared to other similar properties in the vicinity. To calculate comps, gather data on recent selling prices of properties within a half-mile radius that share similar characteristics, ensuring they are not located across major streets. Ideally, focus on the past six (6) months; however, if this data is unavailable, consider extending the timeframe to two years or exploring areas where fix-and-flip activity is minimal. If you're unable to connect with an experienced cash buyer who can help determine accurate comps. Not every property is suitable for wholesaling; both the property itself and the numbers involved must align for all parties involved.

6. Purchase and sell agreement to use in Alabama

In Alabama, you can create your own custom contract with the seller. If you need an attorney or title company with attorneys on staff they can create one for you. ASAP Cash Home Buyers has one that they use in Alabama.

Make sure to read the entire agreement and adjust the terms to fit what's applicable for each agreement between parties.

7. Scripts and how to talk to sellers making the first call and following ups

Now that we are reaching out to potential sellers, it's important to understand that not all of them will be ready to sell to you when they answer the phone, especially if you are engaging in cold outreach. Therefore, it's crucial to have a script prepared and gather necessary information about the property and the seller if they express interest in selling. Understand that you are essentially in a sales role, and some property owners may not appreciate or be receptive to your outreach efforts.

From the distress data you have gathered, it's important to remember that some property owners are facing tough personal and financial situations. Therefore, it's important for you to approach them with empathy and understanding, without taking their circumstances personally. Your primary objective should be to offer assistance and be of service to these property owners, rather than attempting to take advantage of them. Strive for a win-win situation that benefits all parties involved. If you can't uphold simple ethics and principles of being a all-around good person, then perhaps this business is not suitable for you. Remember that as a wholesaler, your role is to provide support to individuals in distressing situations. Mistakes and misunderstandings may occur, but don't let them affect you deeply. If your intention is genuinely to help people, you should be able to navigate these challenges. While some people may appreciate your calls, others may not, and that's a normal part of the process.

When a seller expresses interest in selling, always prioritize consistent follow-up. However, avoid contacting them excessively every day, as it may become bothersome. If a seller shows any level of interest in selling their property, it's important to maintain regular communication and follow-up. You can categorize sellers into three distinct "buckets" or categories based on their timeline to sell. Keep in mind that different lists you acquire will likely include sellers with varying motivational timelines.

• Cold bucket - This category is for sellers who plan to sell in 3 months or more. They are likely motivated to sell but not in a hurry. Follow-up should be conducted once a week to maintain top-of-mind awareness.

• Warm bucket - Sellers in this category have a timeline to sell within 1 or more months but less than 3 months.

• Hot bucket - Sellers in this category have a timeline to sell within 2 weeks or less. These are individuals who are eager to sell either immediately or within a month.

You can determine these factors by asking the seller about their timeline to sell. This will give you a rough idea of which temperature bucket they belong to.

Key factors to inquire about include:

• Timeline to sell
• Asking price
• Reason for selling
• Conditions of the property aka major or minor repairs

This list is what Brent Daniels Brent Daniels - Wholesaling Inc calls "The 4 Pillars of Motivations".

When speaking with any seller, avoid throwing out the first number and instead ask open-ended questions to gauge their interest in selling. Building rapport with the seller is crucial, as people tend to do business with those they like. Maintain excellent communication and strive to be helpful and of service to the seller.

If the seller expresses interest in selling, you will need to gather the following information about the property:

For 1-4 unit properties:

• Square footage of the property

• Property address, including the neighborhood and ZIP code

• Purchase price

• Number of bedrooms and bathrooms

• After Repair Value (ARV)

• Comparable properties in the area

• List of major or minor repairs required

• Cost of repairs and specific items that need to be addressed (if you possess advanced wholesaling skills)

• Vacancy status or occupancy by tenants, including rental rates for each unit and the length of contracts

For vacant infill lots:

• Frontage measurement

• Depth measurement

• Confirmation of buildable status according to city regulations

• Zoning information

• Square footage of the property

• Availability of a survey

• Previous structures on the vacant land (if applicable)

• Existence of water hookups (contact the city for verification)

• Requirement for replotting, if necessary

Have the seller lead script sent to your inbox

8. Sending signed contract to title company/attorney

When you have the property under contract, it is important to ensure that all the details in the agreement are correct. Afterward, you will need to send the contract to an investor-friendly title company with an earnest money deposit (EMD) with whatever amount agreed upon in the contract. The reason for finding an investor-friendly title company is that not all title companies understand or are familiar with an assignment of contract and may have never handled such a transaction. Therefore, it is best to work exclusively with investor-friendly title companies. The title company will do a title search on the property, which typically takes between 7-10 days. Hint: This is why wholesalers and investors make cash offers and often claim that they can close quickly in 7 days. If the funding is available and there are no title issues, the closing can take place within that 7-10 day timeframe.

9. Negotiate with cash buyers

Cash buyers are the lifeblood of a wholesaler's toolkit, and wholesalers cannot run a real estate business without them. This applies to any real estate investor who engages in marketing to property owners, as not every property that enters your pipeline will meet your buying criteria. Just because a property doesn't fit your buying criteria doesn't mean you shouldn't help the property owner by assisting them in selling a property they don't want to a buyer who does. It also provides a way to generate income instead of throwing away a lead.

Download our buyer script here and practice it before making calls. Ensure that you obtain the correct information from the seller, such as:

• Schedule a time for the buyer to walk through the property.

• Provide pictures and videos of the property to the buyers.

Make sure to include this information on the Assignment Agreement you send to buyers:

• Name and contact information of the title company and escrow officer.

• Legal description of the property (search the county records for this).

• Company name and signature of the end-buyer.

• Final purchase price.

Once you have all this signed, then you want to send this to the title company. They will provide you with further steps.

Note: Do not disclose the amount of wholesale fee you will make on the transaction. Some buyers may play around with your agreement if they know your assignment fee or, worse, argue with you on the day of closing.

10. Closing the deal.

You can have the money wired to your account of have the title company mail you a check. The average wholesale fee is $10,000 but this number can vary. A solo wholesaler can make around $200,000 in revenue without the need to have a huge wholesaler operation.

Real Estate Investor Mindset

Having the right mindset as a wholesaler and real estate investor accounts for 80% of your efforts. So, what kind of mindset should you have as a wholesaler?

1. Don't give up and don't be discouraged easily.

2. Think long-term.

3. Set real estate-specific goals.

4. Maintain a positive attitude.

5. Stay consistent and stay persistent.

It's going to be tough, and you will receive a ton of 'no's. It can be discouraging at times, but if you are willing to put in the work and not just look for quick profits, you will reach your goals and secure your first deal, along with many more thereafter.

Wholesaling without a real estate License

Wholesaling real estate in Alabama without a real estate license is legal according to Section 34-27-30 of the Alabama State Code. So, yes you can wholesale in Alabama. This means that you can sell equitable interest in a property without being a licensed real estate agent because you are selling or marketing the property just the interest in it.

However, there are some important things to keep in mind when wholesaling real estate in Alabama without a license. First, you must disclose your status as a wholesaler to the seller and the buyer. Second, you must have a signed contract with the seller before you can assign the contract to a buyer. Third, you must provide the buyer with all relevant information about the property, including any known defects. Fourth, you must not misrepresent the property to the buyer. Fifth, you must not engage in any illegal activity, such as fraud or misrepresentation.

Working with others

If you are just getting started you can use help from others such as cash buyers you bring them the deal and they will help out after that. or you can reach out to other wholesalers in your market and possibly do a joint venture. YouTube University is a great tool for learning. If it's your first time starting a business this can be a little challenging and having some help along the way never hurts.

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