How To Wholesale Real Estate In Missouri: Step By Step (2023)Feb 21, 2023
Wholesaling real estate has taken the investment market by storm over the past few years. Although not a new-fangled type of real estate investment, this investment strategy’s meteoric rise can likely be attributed to a real estate marketplace that has become increasingly digital, offering easy access to market metrics and property data – even if the wholesaling opportunity is in another state.
Once known as trading paper, wholesaling real estate is now practiced by new and experienced investors in all sorts of markets under various conditions.
If you are interested in learning how to wholesale real estate in Missouri, the good news is that the state’s real estate market remains strong. However, there are clear signs of a slowdown, which is the anticipated result of the Federal Reserve Bank when they raised rates to combat inflation. The good news is that these macro market manipulations will swing the market back to a more balanced playing field. Don’t be surprised to see competition levels change too.
The largest markets in the Show Me state are St. Louis and Kansas City – located on the east and west borders with other states. The 3rd largest city is Springfield, located in southeastern Missouri, near the popular tourist destination – Branson.
With a growing population of over 6.1 million residents and a housing supply of around 2.8 million units, Missouri is ripe with opportunities for wholesalers and real estate investors.
Zillow offers this recent look at Missouri’s real estate market -
With a median home value of about $237,000, Missouri’s home prices are less than two-thirds of the current median home price in the United States - $388,100 (Jan. 2023).
- What Is Wholesaling Real Estate?
- How To Wholesale Real Estate In Missouri (9 Steps)
- Is Wholesaling Real Estate Legal In Missouri?
- How Much Do Real Estate Wholesalers Make In Missouri?
- Do You Need A License To Wholesale Real Estate In Missouri?
- Is Wholesaling In Missouri Easy?
- Final Thoughts On Wholesaling In Missouri
What Is Wholesaling Real Estate?
The technique of wholesaling real estate – in a nutshell, is when an individual (i.e., the wholesaler) signs a real estate purchase agreement with a seller or homeowner and then assigns their “right to purchase” this property (known as equitable interest) to another interested end buyer.
Wholesaling real estate requires a wholesaler to enter a real estate contract to buy an undervalued investment property priced below the value of similar homes in the area.
The wholesale strategy’s short-term objectives are preferred by many (and for a good reason!) and have made this a wildly popular real estate investment strategy. First wholesaling, by definition, is an investment that reduces risk.
Wholesaling also offers a great entrance ramp into the investment market for those with limited experience and the funds typically required to begin a typical real estate career. Many investors begin their careers as real estate wholesalers because, with limited funds, it offers the opportunity to gain valuable skills.
How To Wholesale Real Estate In Missouri (9 Steps)
Missouri wholesalers enter a contract to buy the property from the seller, often a homeowner with a strong need to sell. Then, wholesalers sell the rights afforded to them as a buyer in an executed contract to another investor. These investors are usually “fix and flippers” who plan to rehab the property to resell to retail home buyers.
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 Missouri:
- Partner With A Wholesale Mentor
- Learn Missouri Real Estate Wholesaling Laws & Contracts
- Understand The Missouri Real Estate Market & Lingo
- Build A Cash Buyers List
- Find Motivated Sellers & Distressed Properties
- Put Distressed Properties Under Contract
- Assign The Contract To Cash Buyer
- Close Deal And Collect Assignment Fee
- Double Close Or Wholetail When Necessary
1. Partner With A Wholesale Mentor
Mentoring is a type of relationship that exists between an experienced professional (the mentor) and another less experienced individual (the mentee). The wholesale real estate mentor acts as a trusted advisor, offering guidance as a role model from someone who has been there and seen enough to know better.
Ultimately, the goal of mentorship is for the mentee to gain skills to strike out on their own as a successful wholesaler in Missouri. Mentors and experienced wholesalers have these skills -
- Exceptional knowledge about the marketplace.
- Ability to accurately identify those properties that are off the market, undervalued, or in disrepair.
- Recognize motivated sellers.
- Negotiate with the homeowners or sellers as well as with potential buyers.
2. Learn Missouri Real Estate Wholesaling Laws & Contracts
The Missouri Real Estate Commission (MREC) oversees the regulations and licensing rules for real estate activities in the state.
The legislation relating to Missouri law is Missouri Revised Statute Title XXII Occupations & Professions, Chapter 339.
For the purposes of this law, real estate is defined as –
Section 339.20 notes –
According to Missouri state law, the definition of a broker is –
A real estate salesperson is defined as –
The state provides for a third type of real estate professional –
Furthermore, Missouri notes that the following scenarios do not apply to sections 339.010 to 339.180 and sections 339.710 to 339.860 of the Missouri Revised Statute.
(1) Any person, partnership, limited partnership, limited liability company, association, professional corporation, or corporation who as owner, lessor, or lessee shall perform any of the acts described in subsection 1 of this section with reference to property owned or leased by them, or to the regular employees thereof;
(2) Any licensed attorney-at-law;
(3) An auctioneer employed by the owner of the property;
(4) Any person acting as receiver, trustee in bankruptcy, administrator, executor, or guardian or while acting under a court order or under the authority of a will, trust instrument or deed of trust or as a witness in any judicial proceeding or other proceeding conducted by the state or any governmental subdivision or agency;
(5) Any person employed or retained to manage real property by, for, or on behalf of the agent or the owner of any real estate shall be exempt from holding a license, if the person is limited to one or more of the following activities:
(a) Delivery of a lease application, a lease, or any amendment thereof, to any person;
(b) Receiving a lease application, lease, or amendment thereof, a security deposit, rental payment, or any related payment, for delivery to, and made payable to, a broker or owner;
(c) Showing a rental unit to any person, as long as the employee is acting under the direct instructions of the broker or owner, including the execution of leases or rental agreements;
(d) Conveying information prepared by a broker or owner about a rental unit, a lease, an application for lease, or the status of a security deposit, or the payment of rent, by any person;
(e) Assisting in the performance of brokers' or owners' functions, administrative, clerical or maintenance tasks;
(f) If the person described in this section is employed or retained by, for, or on behalf of a real estate broker, the real estate broker shall be subject to discipline under this chapter for any conduct of the person that violates this chapter or the regulations promulgated thereunder;
(6) Any officer or employee of a federal agency or the state government or any political subdivision thereof performing official duties;
(7) Railroads and other public utilities regulated by the state of Missouri, or their subsidiaries or affiliated corporations, or to the officers or regular employees thereof, unless performance of any of the acts described in subsection 1 of this section is in connection with the sale, purchase, lease or other disposition of real estate or investment therein unrelated to the principal business activity of such railroad or other public utility or affiliated or subsidiary corporation thereof;
(8) Any bank, trust company, savings and loan association, credit union, insurance company, mortgage banker, or farm loan association organized under the laws of this state or of the United States when engaged in the transaction of business on its own behalf and not for others;
(9) Any newspaper, magazine, periodical, internet site, internet communications, or any form of communications regulated or licensed by the Federal Communications Commission or any successor agency or commission whereby the advertising of real estate is incidental to its operation;
(10) Any developer selling Missouri land owned by the developer;
(11) Any employee acting on behalf of a nonprofit community, or regional economic development association, agency or corporation which has as its principal purpose the general promotion and economic advancement of the community at large, provided that such entity:
(a) Does not offer such property for sale, lease, rental or exchange on behalf of another person or entity;
(b) Does not list or offer or agree to list such property for sale, lease, rental or exchange; or
(c) Receives no fee, commission or compensation, either monetary or in kind, that is directly related to sale or disposal of such properties. An economic developer's normal annual compensation shall be excluded from consideration as commission or compensation related to sale or disposal of such properties; or
(12) Any neighborhood association, as that term is defined in section 441.500, that without compensation, either monetary or in-kind, provides to prospective purchasers or lessors of property the asking price, location, and contact information regarding properties in and near the association's neighborhood, including any publication of such information in a newsletter, internet site, or other medium.
To reiterate, the above scenarios are all exemptions to the licensing requirements in Missouri.
Missouri License Reciprocity
An individual who holds a real estate license in another state/jurisdiction who would like to obtain become one of Missouri’s licensed agents must comply with these defined requirements –
For a brokerage license in Missouri –
3. Understand The Missouri Real Estate Market & Lingo
The Missouri REALTORS, headquartered in Columbia, is the largest professional organization in the state. Founded in 1936, Missouri REALTORS is the state's leading advocate for real property rights. Missouri is divided into 31 local real estate boards/associations.
Missouri Is Not An Attorney-Close State
While certain states require real estate closings to be conducted by a real estate attorney, Missouri is not one of those states. If you are unfamiliar with the legal consequences associated with real estate, it is smart to consult with a real estate lawyer prior to signing a legally-enforceable document.
4. Build A Cash Buyers List
The typical buyer of a wholesale property is another real estate professional – usually a fix and house flipping specialist, who is in the market for an off-price property that needs work before selling it to a retail buyer. In this way, a Missouri wholesaler performs as any other middleman – connecting those sellers with strong motivating reasons with renovators who want an easy way to find their next rehab project.
The key to succeeding as a Missouri wholesaler is to create a strong list of cash buyers. Without a ready, willing, and able buyer, a wholesale deal cannot be completed with the use of an Assignment of Contract – the preferred exit strategy and a double close may be required to complete the sale.
While a large buyers list is a great goal, it is even smarter to have a small list of dedicated cash buyers or clients with whom you have established strong business relationships.
You can also check out this video on how to find cash buyers!
5. Find Motivated Sellers & Distressed Properties
Wholesalers look for distressed properties, which usually include highly motivated sellers. Wholesale opportunities are available from a variety of sources, including off-market properties, expired listings, or websites like Zillow and Redfin.
Don’t forget about the tried-and-true search methods. Many wholesalers find opportunities on a lender’s foreclosure or Real Estate Owned (REO) lists.
Take the time to learn about the market and identify potential opportunities on your own. Start by driving around and looking for homes that don't fit in or are in disrepair. Are there any properties showing neglected repairs, or severely outdated curb appeal?
Finally, simple email marketing efforts or joining REIA Facebook groups may offer additional options for Missouri wholesalers.
6. Put Distressed Properties Under Contract
When a wholesaler locates a Missouri property, the next step is to negotiate with the seller and execute a contract to purchase the property (rental property, multifamily, or owner-occupied single family) at specific agreed-upon terms. A wholesaler needs to have the ability to ensure the wholesale price leaves enough room for the wholesaler’s buyer (a rehabber) to fix and flip the property to be sold to a retail end buyer.
The first thing a wholesaler’s buyer (the fix and flipper) is going to consider is the After Repair Value or ARV. The industry standard is known as the 70% Rule. This refers to the fact that an investor should not purchase a wholesale property for a price that exceeds 70% of its expected market value.
When wholesaling, Missouri investors need to be aware of the cost to renovate or rehab the property. These costs are crucial for your analysis of this potential investment. In other words, the ARV refers to the anticipated value of the property – after it has been updated and is ready for a retail buyer.
The next essential metric or calculation that needs to be considered is the fix and flippers (the wholesaler’s buyer) Maximum Allowable Offer (MAO). This refers to the maximum offer made on a wholesale property – after subtracting and accounting for repairs, expenses, and other out-of-pocket costs. Consider the following example for clarity, which references a small home in Missouri –
A wholesaler is offered a property to purchase that is in major disrepair, but with some renovations, the property would have an ARV of $200,000. The property price is as-is, at $100,000, with at least $30,000 needed for repairs and renovations.
As such, a fix and flipper would be willing to offer 70% of $200,000 (or $140,000) minus the cost to update ($30,000) or $110,000. The wholesaler’s gross profit in this scenario would be as follows –
The wholesaler’s buyer is willing to pay $110,000, while the wholesaler’s cost basis is $100,000. The gross profit for the wholesaler would be $10,000.
Read Also: Estimating Rehab Costs
7. Assign The Contract To Cash Buyer
Assigning a contract is the simplest exit strategy for wholesalers. A Missouri real estate wholesaler’s right to purchase the property (which is referred to as their equitable interest granted by the Doctrine of Equitable Conversion) is the ONLY asset they can sell without first earning a Missouri real estate license.
While the first contract is awaiting a closing date, the wholesaler seeks to find another buyer and then assigns their equitable rights to purchase the property (using an Assignment of Contract) to the new buyer.
Note that most contracts allow for assignments (by default). Although, it is possible for anyone to have a legal representative add a provision requiring the buyer to obtain written permission from the seller in the event they want to assign their equitable rights referenced in that legal document.
8. Close Deal And Collect Assignment Fee
The new buyer closes with the original seller according to the terms stipulated in the original purchase agreement. The difference between the original and end buyer’s price is the wholesaler’s profit or assignment fee.
9. Double Close Or Wholetail When Necessary
There are scenarios in which a wholesaler in Missouri may not be able to assign the contract to a new end buyer before the first contract is obligated to close. In this case, two closings are used to accomplish the same task of wholesaling in Missouri.
In a Double Close scenario, the wholesaler takes title (if only temporarily) for an hour, a day, or a short period of time. There are a few important factors to understand about the Double Close -
- The wholesaler is the buyer in the first transaction and the seller in the second transaction, which ensures they do not need a Missouri real estate license.
- The wholesaler has no need to disclose their profit to anyone involved in either transaction.
- The wholesaler may need to have the funds to close on the first deal, and there will be two sets of closing fees to consider.
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 light cleanup or repairs, and then re-list the property shortly thereafter on the market to an investor.
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 may be able to use financing and are generally less sensitive to pricing as compared to cash buyers.
Is Wholesaling Real Estate Legal In Missouri?
Yes, real estate investors who wish to legally wholesale in Missouri will find that it is legal if the wholesalers remain aware of the state’s real estate and license laws and do not act in a way that violates these laws. The legality of wholesaling has become a hotly debated topic, with some states implementing rules for wholesalers. Missouri, however, is not one of them.
Remember that wholesalers cannot sell or market real estate; they can market and sell their ‘equitable rights’ set forth in the executed contract.
It is important to emphasize that real estate professionals who wish to wholesale should always be well-versed in the state and local market’s laws and regulations to make sure they stay within the legal boundaries set forth by Missouri law (Missouri Revised Statute Title XXII Occupations & Professions, Chapter 339).
How Much Do Real Estate Wholesalers Make In Missouri?
Wholesaling and other self-employed types do not work at a typical nine-to-five job. And while there are benefits from being your boss as a wholesaler, one must also remember that ultimately the final outcome and earnings depend on the wholesaler’s skill, professionalism, and motivation.
Among the varied reasons that wholesaling real estate has become popular is that the income or earnings potential is essentially limitless. Wholesaling real estate is not the same as the work done by a real estate broker or real estate agent; however, the work is closely related and a fairly accurate indicator of a wholesaler’s potential earnings working in Missouri.
However, the exact amount of money earned by a Missouri wholesaler will depend on the market in which you work and the number of transactions you put together each year. As with most sales jobs, your effort will be the biggest factor in determining your income potential. The following offers the latest median annual salary information for real estate brokers and real estate agents working in Missouri-
- Real Estate Brokers in Missouri - #510 active in 2021 - Annual Salary Per BLS = $51,520
- Real Estate Sales Agents in Missouri - #2,010 active in 2021 - Annual Salary Per BLS = $57,790
To relate back to wholesaling, if you assign just one contract per month for an average assignment fee of $10,000, you're earning well into the six-figure range.
Read Also: Can A Realtor Wholesale Property?
Do You Need A License To Wholesale Real Estate In Missouri?
No, wholesaling houses in Missouri is legal without a real estate license if wholesalers stay within the state’s applicable laws.
It helps to remember that –
- Missouri real estate wholesalers have only one asset to sell – their right to purchase the subject property at the agreed-upon terms (also known as their equitable interest) – to an alternate end buyer for a price that differs from their original cost.
- Missouri real estate wholesalers cannot sell real estate (unless they are the rightful owner or meet one of the state’s exceptions) without a real estate license in Missouri.
- Wholesalers are not acting in the interests of any party other than themselves. Licensed agents generally have a fiduciary duty to protect their clients' best interests. This is a key difference.
Is Wholesaling In Missouri Easy?
Wholesaling is an investment strategy that offers a viable, short-term path to the real estate market, but that doesn’t mean it is an effortless venture without a hassle or two. While wholesaling’s recent popularity has attracted more investors, the recent Fed move to raise rates (to tame inflation) has cooled a once red-hot market, making it a great time to enlist the help of those who have successfully negotiated many wholesale real estate deals.
The digital marketplace offers affordable online training programs. For instance, the Pro Wholesaler VIP Program provides best-in-class training that can help investors of all experience levels accelerate their path to wholesaling success. With a bit of specialized guidance, new investors can cut through misconceptions regarding wholesaling and prepare for a lucrative career as a Missouri real estate wholesaler.
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.
Final Thoughts On Wholesaling In Missouri
Wholesaling real estate, to those who do their due diligence, offers tremendous opportunities for short-term investors with limited capital or a reduced cash flow.
The most essential aspects to remember about wholesaling in the Show Me state include the following –
- A wholesaler cannot violate Missouri’s real estate or license laws by selling real estate.
- A wholesaler can market and sell their equitable rights awarded through the Doctrine of Equitable Conversion.
Anyone can be successful in wholesaling real estate. The real question is, what’s holding you back? 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.