NAR Class Action, Local Personal Brand, MLS > Cash Buyers?

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Welcome To The Business Of Wholesaling Newsletter!

Every week, we’ll be sending you strategies, tactics, and tools used by successful wholesalers and we’ll cover any important market insights and news in the industry.

Here’s what we got for you today:

• NAR Class Action

• Local Personal Brand

• MLS > Cash Buyers?

NAR Class Action Lawsuit

If you haven't heard about the NAR lawsuit by now, here’s the rundown.

The real estate game is set to change forever. The National Association of Realtors has decided to settle a major lawsuit that not only requires them to pay out millions of dollars in damages but also changes how agents are currently being compensated.

According to the settlement, the NAR will payout $418 million over the next four years in connection to a class action lawsuit that alleges that the association is responsible for inflating real estate sales commissions.

Furthermore, the settlement will decouple seller and buyer commission making it so the seller will no longer be obligated to pay out buyer agent compensation. 

That being said, it doesn’t mean that sellers won’t be able to offer any compensation. They still have the option to do so, but with the commission no longer being shown on the MLS (multiple listing service) and buyers agents having to negotiate compensation agreements with buyers, more and more sellers will likely choose to either offer a smaller buyer commission or get rid of it altogether.

And while for agents this will most certainly create a rift in their day-to-day business, for wholesalers it creates a unique opportunity to get a bigger share of the pie.

With real estate commissions projected to go down between 30% and 50%, both sellers and investors will have an opportunity to cut down one of the highest expenses in buying and selling a property; the real estate commission. 

Unlike in the past, when you had to factor in a 5% to 6% fee in your MAO, that percentage now could potentially become much lower, or even obsolete.

With less money going to the agent, comes less competition. Agents who previously could compete in a particular market segment will now need to find other avenues to generate income.

But regardless of whether that means agents offering a lower commission or a flat fee, it creates an opportunity for a wholesaler to offer value like never before.

It levels the playing field and shows the seller how much money they could potentially put back in their pocket by working with a wholesaler.

However, it’s important to keep in mind that even though everyone knows that there are going to be opportunities on which to capitalize on, no one knows exactly how this will play out when the rules go into effect. 

Make sure to keep a close eye on how it affects your market and make appropriate plays to make the most out of it.

Local Personal Brand

hen you’re just starting out, your first deal could be within arms’ reach.

Meaning, your network, neighbors, friends, or family may know someone who could be your first deal. 

If you keep focusing on building your network, especially in your local community, it can be a steady source of deals.

We had Andrew Lucas stop by the Business of Wholesaling podcast where he revealed that 30% of his business comes from referrals. 

That’s an insane number. And how did he do it?

Andrew made himself known in his local community as the local house buyer guy. So just normal everyday people would bring him deals. 

He didn’t have to fight over competition to get these deals. He didn’t have to spend a penny on marketing either. 

His personal brand attracted these local deals to him. 

Right now, we live in a social media dominated world where the idea of a personal brand has thousands of followers online. 

That is true. But you don’t need that to get deals from it. Maybe it’ll help when you scale, but your personal brand can have an impact locally.

The beauty is that it doesn’t even need to be city-wide. If you live in a big metropolitan city, your personal brand can have an impact in just your local community. 

That’s better than recruiting a force of bird dogs, right?

Some agents make six figures a year working in one neighborhood. Obviously, it depends on the neighborhood.

But the concept remains the same. Think of it as building a marketing channel in your own backyard… one that doesn’t require you to spend money per lead.

MLS > Cash Buyers?

Here’s an interesting strategy to consider…

Referencing Mr. Andrew Lucas again from the previous section, Andrew actually pivoted his wholesaling model a bit.

When he finds a deal, instead of getting it under contract and selling the contract to a buyer…

Andrew purchases the deal using funds from lenders and lists the home on MLS.

Obviously, there’s a high risk with this model, but what you gain as a wholesaler is leverage.

Think about it. Buyers know you’re in a time crunch. You have to sell the contract before the end date before it’s free game for everyone.

So maybe they start bidding you down. And all that does is cut your margins. On top of leaving a sour taste in your mouth.

When you outright own the property, you can get buyers to bid up. Because something Andrew realized is that the same people are buying off MLS and cash.

You gain leverage because you’re not on a timeline. 

By implementing this strategy, Andrew raised his average deal size from $12,000 to $30,000. More than double the return with the same amount of work.

Now, we’re not sure if he’s still averaging those numbers. And they were based on a small sample size.

But even then, that’s a pretty significant difference. 

I guess that’s why they say higher risk, higher rewards.

Thanks for reading this week’s issue of the Business of Wholesaling. 

We’ll be back next week with more marketing & sales strategies, market insights, and other advice you can use to grow your wholesaling business. 

See you next week.

Team Business of Wholesaling