Arizona is the country’s sixth largest state and one of the four Corner States in the southwestern United States – the other three corners include New Mexico, Utah, and Colorado. With nearly 114,000 square miles and a topography that varies from mountainous to desert plains, there are many things to learn about how to wholesale real estate in Arizona.
Arizona was adopted in 1912 and was the last state adopted in the contiguous U.S. The population of the southwestern state exceeded 7.2 million as of July 2021 and has been a favorite retirement destination for decades. The diversity of Arizona’s population includes 27 federally recognized Indian tribe reservations.
The topography of Arizona is as interesting as its history. While the north has pine forests, canyons, mountains, and snowfall, southern Arizona is a desert climate, with hot, arid summers and traditionally mild winters.
Arizona is also home to one of the seven natural wonders of the world – the Grand Canyon.
Phoenix, which is the state capital and cultural center, is also Arizona’s largest city. The median sales price for a home in Arizona (August 2022) was $437,500 – a 9.9% increase year-over-year.
However, the markets, which were on fire for about two years, have recently been cooled by the Federal Reserve Bank’s economic policy decisions that include rate increases. The following markets remain the most competitive in Arizona –
Scottsdale, AZ, once an incredibly popular destination, is not on the top ten list. This highlights the importance of staying in tune with the changing landscape of real estate investment.
In this article, we’ll show you exactly how to wholesale real estate in Arizona. Let’s dive in.
Wholesaling real estate is a short-term investment strategy. Investors have clamored for this type of investment because its short-term nature reduces inherent risks typically found in longer investment strategies. And the capital required to begin as a wholesaler is much less than what would be needed in other real estate investment options.
A real estate wholesaler’s objective is to find a property attractively priced, below market value.
Wholesale investment properties tend to have sellers or homeowners who are strongly motivated (usually financial, but not always) to negotiate with a wholesaler for a favorable real estate deal for both. When a wholesaler and seller have executed a purchase agreement, the wholesaler then assigns their equitable rights to another end buyer.
This alternate buyer is usually another real estate investor who specializes in the fix and flip houses side of the business – and the transfer typically happens before the first real estate transaction closes.
While there are various ways to go about wholesaling real estate in Arizona, here’s our proven nine-step process to help you reach your goals. Be sure to check out our in-depth video showing you how to wholesale real estate step by step here:
Here's our simple step by step process for wholesaling real estate in Arizona:
Mentorship is a tried-and-true method in which an experienced individual (the “mentor”) guides and offers emotional support and motivation as a role model to their protégé (or “mentee”). In addition to providing specific guidance about wholesaling real estate, a wholesale mentor can help a beginner –
Mentor relationships evolve as the needs of the mentee change. They can be formal or informal types of relationships. Finding a wholesale mentor can accelerate the time it takes you to become successful in your wholesale real estate business.
The Arizona Department of Real Estate is the state agency responsible for administering and enforcing the state’s real estate licenses. The ADRE is tasked with approving and monitoring real estate pre-licensing instruction, testing, and continuing education. Arizona’s real estate land license laws are found in Title 32 Professions, Chapter 20 of the Arizona State Legislature - entitled Arizona Real Estate Rules.
Below are the revised statute's definitions of real estate license levels in Arizona-
Real estate broker in Arizona is defined as follows -
An associate broker in Arizona is defined as follows -
A designated broker in Arizona is defined as follows -
A real estate agent or salesperson in Arizona is defined as follows -
However, there are a variety of exceptions to the state’s real estate licensing laws, which include being the owner of the property being sold, among others. These can be found in Ariz. Rev. Stat. § 32-2121.
The real estate investing strategy known as wholesaling has been incredibly popular over the past decade. Some argue that wholesaling, as an investment strategy, infringes upon the practices that require a real estate license. As a result, the state of Arizona’s House Bill 2747 – regarding real estate wholesaling was signed into law by the governor.
The following wholesaling law (Ariz. Rev. Stat. 44-5101) is effective on September 24, 2022. For the purposes of this Arizona law, real property is defined as follows –
In this new Arizona disclosure requirement, the wholesale players are defined as follows –
And the new law notes that prior to any party entering a binding agreement in Arizona –
If the wholesale buyer in Arizona violates the above-noted law, the seller in the transaction –
If the wholesale seller in Arizona violates the above-noted law, the buyer in the transaction –
Those people who hold a real estate license from another jurisdiction who wish to seek licensure recognition must comply with these state requirements -
Read Also: How To Wholesale With A Realtor
The Arizona Association of REALTORS is the largest professional organization that serves the Arizona real estate business market. The Arizona Association of REALTORS (AAR) represents more than 50,000 professionals across the state. The AAR became a member of the National Association of REALTORS (NAR) in 1945. This state organization consists of 14 location associations across the state.
In October 2022, the Arizona Association of REALTORS is releasing an updated residential contract. Note, the revisions include –
Ultimately, the broader verbiage provides more contractual options to the contract’s parties. Additional FAQs and their answers are provided by the AAR.
The updated documents are available as follows –
Although some states require legal representatives to manage a real estate closing, Arizona does not. However, investors and those new to wholesalers should consult with a real estate attorney for those issues and real estate matters for which they have no experience.
A cash buyers list is an important facet of a wholesaler’s toolbox. Cash buyers are the end buyers – usually other investors, who are ready to buy distressed properties that need renovation to make them market-ready. A cash buyers list can be bought or developed organically by delving into the local real estate market and its established players.
Either way, the more comprehensive and current a buyer’s list, the smoother a transaction will likely proceed.
You can also check out this video on how to find cash buyers!
The digital real estate landscape provides a variety of sources to find motivated sellers and distressed properties that offer wholesale opportunities. Sites dedicated to real estate, like Redfin or Zillow, offer incredible amounts of current data, plus potential wholesale deals. Check out meetups and podcasts dedicated to real estate wholesaling.
Lender foreclosure or REO lists or off-market properties for other sources of wholesale real estate deals in Arizona. And note that a potential wholesale deal can be a rental property, multifamily property, or even single-family owner-occupied.
When you find a property worthy of consideration, the next step is to negotiate with the seller to determine the details of the wholesale real estate deal. However, before executing a wholesale real estate contract (with very real legal consequences), it is important to analyze or assess the quality of the potential investment.
Experienced wholesalers will eventually create the criteria on which to base an investment decision. But until then, it is best to rely on some proven metrics to demonstrate the viability to profit from the wholesale deal.
Real estate wholesalers and flippers typically depend on dual investment metrics to determine if a potential property is of investment quality. How they use these metrics depends on their investment objectives.
The 70% Rule – this investment metric notes that an investor should pay no more than 70% of the property’s ARV – After Repair Value. The ARV is the anticipated market value of the property – accounting for the expected renovations and updates to make it market-ready.
The MAO – Maximum Allowable Offer - The MAO Formula is a calculation that accounts for the repair costs and expenses required to bring a property to market. Most often, an MAO will be less than an ARV due to the existence of required repairs.
Consider this example which should help clarify the math steps -
A motivated wholesaler is able to negotiate a $260,000 purchase price for a property. However, with some research, the wholesaler determines that the property, after renovation, could be sold for $450,000 - also known as the After Repair Value.
Based on the above-noted criteria, what would a fix and flip real estate specialist (the likely buyer of a wholesale property) be willing to pay? What would their Maximum Allowable Offer be in this scenario?
Step 1 - calculate what 70% of the ARV or 70% of $450,000 = $315,000
Step 2 - calculate the MAO for the investor by subtracting anticipated renovation costs ($35,000) from $315,000 or $315,000 - $35,000 = $280,000. The MAO would be $280,000.
Therefore, a wholesaler in Arizona could generate a quick $20,000 profit (MAO of $280,000 - $260,000) in the real estate transaction noted above.
A wholesaler’s goal is to assign their Equitable Rights to a new buyer. Ideally, an Arizona wholesaler attempts to assign the right to purchase the property BEFORE the first contract closes. This conclusion to a wholesale deal is the fastest and least costly. And the risk is reduced because the wholesaler never actually takes legal title or possession of the property.
Remember that a real estate wholesaler’s right to purchase the property (granted by the Doctrine of Equitable Conversion) is the ONLY legal, and marketable wholesalers can sell/market without first obtaining a real estate license in the state.
The legal instrument used to assign the wholesaler’s equitable rights is an Assignment of Contract, which stipulates that the new end buyer now has the legal right to buy the subject property, according to the contract’s provisions.
The assignment document changes the buyer from the wholesaler (the ‘assignor’) to the new end buyer (the ‘assignee’). The new buyer, disclosed by the Assignment of Contract, closes with the original seller.
The Arizona wholesaler’s profit or also known as the assignment fee is the difference between the price in the original and assigned purchase agreement.
There are times when unexpected events arise, and a wholesaler needs to close the first contract prior to assigning their equitable rights to another buyer. If this should happen (and it does), the wholesaler must have the ability to close (in other words, the capital to fund the deal) and meet the terms of the original legal agreement before selling the property to another buyer.
Should the wholesaler take title, even if temporarily, they will do what is known as a "Double Closing". Technically, the Double Close requires additional closing costs but does so by providing additional protection. Remember that in the double close, the wholesaler takes title and, when selling, is truly the owner of the property– someone who would not need of a real estate license in Arizona.
So, in the first transaction, the Arizona wholesaler is the buyer, but in the subsequent transaction, the wholesaler is now the seller.
Another benefit offered by the double-close exit strategy is that the wholesaler’s profit is not disclosed to the seller or anyone else involved.
Wholetailing is also another wholesaling method which is a combination of a fix and flip and a standard wholesale deal. In wholetailing, you’ll take ownership of the property, do some renovations, and then re-list the property shortly thereafter on the market.
Wholetailing is often a desirable exit strategy because you can access a larger pool of buyers when you re-list the property on the MLS. These buyers typically use financing and are generally less sensitive to pricing as compared to cash buyers.
Wholesaling is legal in Arizona if wholesalers comply with the new real estate legislation that went into effect on September 24, 2022. This new law requires the following of wholesalers working in Arizona -
If the law is violated, the seller -
If the law is violated, the buyer
With a simple disclosure statement made with your initial offer, wholesaling is completely legal in Arizona.
Among the many benefits of working as a self-employed real estate wholesaler is the fact that at any point in time, one’s wholesaling income potential is unlimited and only based on possibilities that are presented and effort.
To give some perspective, in 2021, this is the number of professionals (BLS 41-9021 & 41-9022) that were working in the Arizona real estate market -
The median annual income in 2021 for real estate brokers and real estate sales agents was $48,770. Comparatively, real estate wholesalers who close just one deal per month, at an average wholesale fee of $10,000, are making well over double the average salesperson.
No. Arizona real estate wholesalers, if they comply with real estate and license laws, can work without obtaining a real estate license.
In addition, to comply with the new and existing laws in Arizona, wholesalers will generally benefit if they use sound business techniques and principles to accomplish their wholesale objectives -
Read Also: Can A Realtor Wholesale Property?
Wholesaling real estate, like most real estate investment types, requires skill and patience. However, wholesaling can be done with less money, which essentially opens the investment to many interested investors who were previously boxed out if they only had limited funds to use.
Wholesaling is also short-term, which reduces some risks but does not eliminate them. Wholesaling is easy – once you understand the lay of the land and the rules of the game. You can go it alone or join forces with those who have already learned the hard (but avoidable) lessons. Modern wholesaling mentorship such as the Pro Wholesaler VIP Program offers a convenient way to ready yourself for the Arizona wholesale market.
The Pro Wholesaler VIP Program is designed for the modern entrepreneur to learn the basics and how to help new real estate wholesalers avoid the pitfalls typically found by beginners. It is 100% online and is used for local and virtual real estate wholesaling.
Many experienced real estate investors first began by dabbling in the wholesale market and trade. The limited capital allows you to test the market (and your own ability) without large liabilities and risks. Plus, wholesalers are constantly evolving and learning new insights and trends within this specific slice of the real estate market.
Check out our brand new free training on how we help investors all across the country wholesale and flip houses from the MLS using only a laptop and a cell phone.
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