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7: Wholesaling Houses the Right Way

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Sharon Vornholt

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Sharon Vornholt is the owner of Innovative Property Solutions in Louisville, KY. She has been investing in real estate since 1998 and has been a full time wholesaler since 2008.

Sharon is the creator of the Louisville Gals Real Estate Blog and the popular podcast “Let’s Talk Real Estate Investing”. She is also a mentor and a coach who loves teaching others how to succeed in this business.

How she got her start

Sharon’s dad was a contractor that used to drag her to a lot of different job sites. She owned and operated a house inspection company for 17 years.

She then attended a Real Estate Investor Association meeting and learned about flipping houses. She then started rehabbing. Her initial plan was to rehab and get big chunks of money to buy rental properties with. That worked for a while, but then the market changed….big time.

Wholesaling houses

In 2008, she found it difficult to sell houses (as did everybody across the country). This is when she found out how awesome wholesaling was. She decided to try and sell a house she was going to rehab to another investor and see if she could make money quickly, without doing any fix up.
She’s been wholesaling ever since.

In this episode, Sharon talks about the differences between an assignment of contract and a double-close. The gist is that assigning a contract involves getting a house under contract and then selling the contract (as well as the obligation to close on the contract) to another investor for a fee.

Double-closing involves a little more complexity. Not much though. There are two transactions with a double-close. You have a A B transaction where the seller of the house sells the house to you as the buyer. Then you have a B C transaction where you are the seller and the investor that is buying the house ‘as-is’ from you is the buyer. he funding from the sale from you to the end buyer goes to fund the first transaction between you and the seller of the house.

For many people considering wholesaling houses, the fear of not being to find a buyer and not be able to close the deal if they can’t find a buyer scares them from ever getting started. Sharon shares how she allows for an ‘out’ by using escape clauses. During the show, we went over three good escape clauses that included: ‘subject to accepted inspected’, ‘subject to partner approval’, and ‘subject to funding approval’.

Sharon also discusses how she handles making sure her end buyer closes. This is done with a non-refundable earnest money deposit. If the end buyer doesn’t close, she keeps the (usually over $1,000) earnest money deposit.

We discussed how it’s better to have a short list of highly-qualified, experienced and fast-acting investors to sell your deals to. Sharon has about 4 or 5 people that she sells ALL of her deals to.

Check out the episode to also learn what to do if you are having trouble finding a buyer for a wholesale deal. Don’t just throw your hands up. There are lots of great tips for how to recover from that situation.
Sharon’s been kind enough to provide us with a detailed guide on marketing to probates and absentee owners for awesome deals.

The guide shows you why these methods of marketing work so well by delving into the point of view of the seller for each situation. I highly recommend you download this guide from the show notes page. Oh, and it’s absolutely free.

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Click Here to Download the ‘Probates and Absentee Owners: Your Fast Track to Real Estate Riches” guide

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The 12 Week Year: Get More Done in 12 Weeks than Others Do in 12 Months

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Welcome to the flipping junkie podcast. My name is Danny Johnson former software developer turned house flipper, flipping hundreds of houses. Each week we bring you interview, strategies, stories and motivations to help you get started flipping houses and on your way to becoming your own boss and achieving financial freedom. Thanks for spending time with me today. Now let’s get to it.

Danny Johnson: Today’s guest is none other than Sharon Vornholt from Louisville Gals Real Estate In today’s episode, Sharon and I discuss the ins and outs of wholesaling houses. You’re going to learn how to wholesale houses the right way, so that you don’t have to worry about not being able to find a buyer for your wholesale deals and exactly how to make sure your end buyer doesn’t back out of the deal leaving you with the tough situation. We also share some awesome escape clauses you can use in your contracts that allow you to gracefully back out of a deal if you ever need to and thanks again for listening. Enjoy the show.

Today I’ve got a good friend in Louisville Kentucky named Sharon Vornholt. She is the owner of innovative property solutions in Louisville Kentucky and she’s been investing in real estate since 1998. She’s been a full-time wholesaler since 2008. So Sharon is the creator of Louisville Gals Real Estate Blog and the popular podcast Let’s Talk Real Estate Investing. She’s also a mentor and a coach who loves teaching others how to succeed in this business. Hey Sharon thanks for being on the show.

Sharon Vornholt: Well, thanks for having me Danny.

Danny Johnson: Yeah I know you’re busy, so I’m glad that I got you on the call here.

Sharon Vornholt: Just to say I’m  always happy to do it. It’s a pleasure just doing things with you.

Danny Johnson: Oh, thank you. I wanted to find out more about why you got started in real estate investing. A lot of times people ask you know how you got started, I like to hear that too, but could you share with us why you got started in real estate investing and your back story on how you got started.

Sharon Vornholt: Well growing up my dad was a contractor. As a child he used to drag me around the jobsite. I always had this fascination with rehabbing and he did more commercial spaces, but he was a small business person so I had that had that background growing up and I guess I always knew I wanted to be an entrepreneur. I had jobs certainly, but I was more of like the creative process of it. So when I started thinking about what business would I go into that would have a house background, honestly I didn’t even think about real estate investing. I didn’t know that much about it initially. I owned and operated a home inspection company for a total of 17 years.

But about seven years into that business, in that business I worked with a lot of real estate agents and I met a lot of realtors and one of them said “Hey, why don’t you come with me to my REIA group.” And I had no idea what a REIA group was and she told me all about it. We had a large REIA group here even then in Louisville probably three or four hundred members. And I went to the meeting and it has just really opened up a whole new world for me. And I could see how I could make money kind of on my own terms. There were a lot of different ways I could make money and that was really the reason I got into it. I love the whole process because I started out rehabbing in as a buttonhole landlord. That was where I actually started out. I kind of got to be an accidental wholesaler along the way. That was kind of my why and that’s kind of my how – how I got started.

Danny Johnson: Wow. So that’s a pretty strong group then three to four hundred members for a real estate investor association group. And what year was that about roughly?

Sharon Vornholt: That was 1998. We had a very large group and then it stayed large really until around the crash of 2008 and then it dropped down to probably about 200. We’re in the building phase again. We’re probably, I’m guessing, we’re up to 350 maybe again. We’ve got a pretty sizable group here for a city of our population.

Danny Johnson:  Yeah, it sounds like it. So going there and hearing about people’s success and the things that they were doing got you interested. What made you decide to start as a rehabber?

Sharon Vornholt: Well, it’s just, like I said, that had always been something that I like the process of tearing it down and building it back up and knocking down walls is probably my favorite thing. It just appealed to me and I don’t know if it was the right place to start or the wrong place to start. But that’s where I started and then my initial plan – I had this, you know, how you get a plan and my plan was to do a rehab and make enough money off of it to put a downpayment onto one or two rentals. I went along that way for a while.

But I was doing it part time from 1998 to 2008 when I closed the other business and it all just happened about the same time. I was just really burned out from the other business. I decided that was the time for me to go into real estate full time. Well 2008 was the best of you know time to be in real estate, but it was also terrible time at the same time. There were deals everywhere, but it was absolutely the right time to get out of the home inspection business. But I had a house and they had already started the rehab has started sitting on the market here for maybe six, eight, nine months at that time.

And I just thought, “Gosh, I just do not want to have this house, get it finished, have to worry about it being vandalized and sitting on the market.” The whole deal – the carrying cost and everything and I thought “What if I get to wholesale this house. I’d never done any wholesaling ever.”

I called up one of the people I knew in my REIA and just said, “Hey you want to buy a house” and told them about the house. They said, “Well, yeah that’s a great deal.” In that moment I thought “Boy, that was that was the easy.” But I’d been in the business 10 years at that time. So for the next few years then I just kept on wholesaling. My intention was always to go back to rehabbing but I never quite made it back there.

Danny Johnson:  So you’ve been sort of wholesaling mainly the entire time now since 2008 huh?

Sharon Vornholt: Pretty much yeah.

Danny Johnson:  Do you recommend wholesaling as a way to get started flipping houses for four new investors?

Sharon Vornholt: Well, I think it’s a way that it works for certain people to start out wholesaling if they have a good grasp of numbers if they have a mentor. You can get started with no money, but it’s really difficult as you know to not have any money. You can draw offer dollars and find a house or maybe cold call or something like that. The main problem I see with wholesaling – well, it’s the same problem with all strategies when you’re first starting out is that you don’t really know what a good deal is. Sometimes you tend to try to make a deal work, so if you are a rehabber and you misjudged on your figures a little, you can generally still come out.

You may not make a lot of money, but you can come out clean in the deal. But if you make a mistake on the buy for a wholesale deal, I mean a sizable mistake, you won’t be able to give that property away. The seasoned investors know what you should be paying for those houses and I think that’s one of the big disadvantages of when you’re new. You just don’t know what you don’t know.

Danny Johnson:  Right. And like you said that that goes for also for rehabbing. But you’re saying with the rehab, you’re just likely to make less than you hoped instead of lose money. But on the wholesale I guess that depends on if you’re looking to assign the contract vs. double close. I guess right now would be a good time to explain what a double close and assignment of contract, what the differences are for people that might not know.

Sharon Vornholt: Yeah. I’d double close everything. I’ve only assigned just one or two contracts in all these years. If you buy a house and you put it under contract, you can simply use a piece of paper that says “I, Sharon Vornholt, give my rights associated with this property to Danny Johnson.” It’s that simple and then you just collect the difference between what you bought it for and what you are signing it for and it’s the same way and a double closing.

When I do a double closing, I put a house under contract just like you would any other house. But then if I were to sell it to Danny, then I would write up a second contract. I like it because it’s clean and because that’s kind of the way people do it here. I don’t personally like to get in to the closing table and have the seller know that after we’ve negotiated our deal that I’m now going to make $10,000 on top of what I offered them. It cost me about $300-350 to do a second closing, but in my mind I just figure that in my deal and it’s worth it to me because go in one room and the people get confused about it. So we have two contracts. We have the contract where I bought the house the A-B transaction A being the seller and the B person is me, I’m the buyer in that transaction.

And then when I find a buyer for my deal, that’s the B-C transaction and I am B. So I’m always going to be B. It’s just a matter of the order you sign the paperwork in. When people get confused and they say it’s illegal and you can’t use your seller’s funds to close the deal, well, there’s no money dispersed until the first transaction is closed.

It’s really no different than if you have an absentee owner, let’s say, your seller is an absentee owner and they’re out of town and they’ve signed the paperwork in, but you go to the closing and you sign the paperwork with you and your end buyer sign the paper work and then they bring in the paperwork from A-B closing where you purchase the house and then they collect the money from your end buyer and they take it back, copy all the paperwork, disperse the money and. In essence you are using the funds from the second closing to close the first transaction. Now the reason they are willing to do that is because you always need to bring certified funds to a closing as you know. So when I’m there with my in buyer and they have a check, it’s verified certified funds. You have two distinct contracts, two distinct separate sets of paperwork. It’s just the order in which the paperwork is signed. You sign the second closing first and then you sign your purchase second and then they dispersed the money in the proper order. Does it make sense?

Danny Johnson:  Oh yeah absolutely. So just to clarify just a little bit so some of the finer points you can use the exact same contract, so you can take one blank contract make a copy of it and on the first contract which is the A-B transaction, the seller of the house is the one that’s selling it and you’re the buyer as the B part of the A-B transaction on that contract and then the exact same blank contract that you have a copy of for the B-C transaction and you are then going to be the seller of the property and your end buyer, the investor, is going to be the buyer on that B-C transaction. Correct?

Sharon Vornholt: That’s correct. Now at the bottom of the contract the only difference is my contract and probably everyone’s contract should be in the computer. I put down at the bottom where you sign and then it’s buyer and seller. I will flip flop those things depending on whether I’m the buyer or the seller you know what I mean. So that piece of it, I’ll be the buyer on one case and the seller in another case. Yes it is the same exact contract.
Now there is, if I am buying the house, I’m always going to have some kind of a contingency in there. You could have an inspection contingency, a way for you just in case you’ve overlooked something and you’re an expert but looking at rehab. Some people, especially when you’re new, they might want to have a contractor look at it or someone so you can put that kind of a contingency in there. You can also write in something and this is something that came straight from my closing attorney. This contract is subject to partner approval. Now what does that mean? Well it just means that you’re going to partner with somebody on the deal and they have to approve the deal and in the case of a wholesaler your partner is always going to be the person you partner up with to close the second transaction.

It’s kind of ambiguous, but here’s how I explain it to the people and this goes back to when I really didn’t know what I was going to do with the property, whether I was going to keep it or wholesale it or I was going to rehab it or keep it for rental, so I would say to them, “You know, I’m not sure what I’ll do with this property. I’m sure it doesn’t make any difference to you whether I’m the one who rehabs it or someone else or rehabs it.” But because I always have you know someone bring the money to the table for closing, this clause is in here “subject to partner approval” and I just explain it that way. You know this isn’t this is my money person and they’ve never not agreed to a deal that I’ve brought them for but there’s always that chance they would go “Nope, not doing that deal.” I’ve never had anybody balk at that ever.

Danny Johnson:  Right. I have never heard anybody balk at a clause either. I think some people stumble over the exact wording because they hear – and that’s what’s commonly referred to as an escape clause in the contract. They know what it should roughly say, but people struggle with exactly what it should say and you just gave one example for the partner approval and so it typically starts with “This contract is subject to X.” And so for an inspection, what would you say would be a good escape clause for the inspection?

Sharon Vornholt: I’d just say “It’s subject to satisfactory inspection.” Now people will go, “Shouldn’t I put a termite inspection? Shouldn’t I put this inspection? And my answer is no. Just put subject to inspection.

Danny Johnson: And you’re not referring to an actual inspection from a property inspector?

Sharon Vornholt: No. It could be an inspection. Maybe I’m going to have my contractor come over and look at the furnace or look at the foundation and if they ask about that I’d just say, “You know this is just as subject to inspection because every house is different.” And what I might have looked at on your home might be totally different than on the next house, so no I do not get specific.

The only time I might get specific and say subject to inspection and I might go one step further if there is an obvious foundation issue and I’m going to get somebody out there to look at the structure which is going to be a costly repair and would likely result in a much lower offer, then I put that in there because if you got to add 10 or 15 piers to a house that’s a big deal. It’s a lot of money in my area. That might be the only case. But I think if you put a nice clear generalized clause in there and you should have something, then I think that’s sufficient. But now on the other side, my rehabber friends that buy my houses, they do their inspections before they look at the house to decide and unless it is something big like a structural issue, they generally bow with no contingencies.

Danny Johnson: Right, yeah, because you want them to make a decision before because you don’t want them backing out afterwards. And before we continue on that side of it, on the buy side, so we have an inspection clause as a possible one, subject to partner approval is the second possible one. I tend to like to put the “subject to funding approval” because a lot of times – yeah I mean it’s the same thing like the partner, you don’t have to specify exactly who is doing funding but that’s a nice honest thing because really it always boils down to whether you’re going to get funding or not.

Sharon Vornholt: Yes and that’s another one that you could use and I don’t think there’s any right way or wrong way to do it, but I think for your protection when you are the buyer, you want that escape clause just in case of whatever comes up that you don’t know about, but in my area and I’m sure when people work with you, it’s the same way, not end buyers. This is the other thing, people think you need 100 people on your buyers list, you don’t. You need a handful of good solid buyers and I go back to my same buyers every single time and 99 times out of 100 they’re going to call me from the house because I know what they’re looking for and I know my numbers, we may not be exact but we’re really close. They’ll call me from the house and they’ll just say, “Yeah I’ll take it. Send me a contract later.” We’ve done business long enough that we do that now. With that being said I always get in earnest money deposit. Always.

Danny Johnson: Is that non-refundable?

Sharon Vornholt: Non-refundable.

Danny Johnson:  And what amount is that typically? Does it depend on the deal or do you have a number set every time?

Sharon Vornholt: Well, with the people I’ve worked with and I have to explain to them over the years it’s just business you know, it’s the way I run my business straight down the line. I get a thousand dollars if so long as there’s a buyer I’ve worked with and I know them. If it’s a brand new buyer on me I’m going to ask for proof of funds. If they tell me they have cash or an equity line or an investor friendly bank, I don’t really care where they get their cash. I just want to know that they have it. Now, when they’re new to me, I will ask for a proof of funds letter and I will ask for a larger earnest money deposit probably around two thousand dollars and if they are unwilling to do that, then they’re not really a buyer.

Danny Johnson: Right. And the big reason is you don’t want to come to closing and find out that they’re not coming and then you’re the one that has to tell the seller, “Hey can’t buy your house right now” because your buyer didn’t close.

Sharon Vornholt: And I don’t ever try to explain wholesaling – that procedure to a seller. I just don’t go there.

Danny Johnson: Right. So newer investors when they’re trying to sell, either sign a contract or do a double closing and selling to an end buyer, an investor you know they struggle with asking for a big amount of non-refundable earnest money especially if they feel like they’re going to make quite a bit on the deal. They don’t want to lose the buyer and so they get scared and let the end buyer control the deal and you never ever want to do that.

Sharon Vornholt: No. Never. Never. You cannot. If they start to give you a hard way over the deposits say, “Look, this is just my business model. I do this across the board. It’s nothing for you or against you but this is my policy.” And then you just stand firm. You just stand there and be quiet and say “Well, I’m sorry.” When they say, “Well, I only want to give you $250.” You have to say, “Then you’re not a serious buyer. I’m going to have to move on to a serious buyer.”

Danny Johnson:  Right. And you hit the nail on the head too. That’s exactly what you do. This is my policy and then you just be quiet.

Sharon Vornholt: You be quiet. Yes.

Danny Johnson:  Negotiating sometimes for people especially newer people, being quiet is the hardest part, but man it works so well because if you keep talking then they know you’re not really committed to it.

Sharon Vornholt: Exactly. And that is something that should be non-negotiable in your business. Now I’ve been doing this a long time and I’ve got a couple of people that we work on a little bit looser terms, but I know with 100% certainty that after doing many many many deals with them, if they’re out of town – let’s say, I had a case where my buyer was out of town. He was on vacation, but he knew the area. He was able to pull up the house. The house had been listed previously, so he was able to pull up the interior pictures. I sent him the figures. He said “I’m not going to be back for two weeks I don’t have my company checkbook.” I said, “Fine.” We didn’t have a problem but I wouldn’t have done that if we didn’t have a history.

Danny Johnson:  Right, right. So that gets into you’ve already mentioned it, you kind of already answered one of the questions that I wanted to ask far as whether you believe in a small highly qualified buyer’s list or a large buyer’s list.

Sharon Vornholt: Yeah, small. The same probably five people buy all my ideals and I have people call me all the time and want to get on my list. I hope I can send some deals to them eventually, but when you get buyers that are what are called the real investors and you know what they want and you get a house in their area and when you can call them, the day you’ve got the house under contract – I always get a lock box on a house and they just go over there and look at it. We’re usually closing and no more than 10 days. It’s just so easy once you’ve got this really small, but very responsive buyers list. Why would you mess that up? They’ve earned their place on you’re A-list in other words.

Danny Johnson:  Absolutely and then you’re just focused on finding more great deals instead of wasting your time trying to find a buyer and then worrying about whether they’re actually going to be able to close or not.

Sharon Vornholt: Right.

Danny Johnson:  Yeah, I do exactly what you do. I have a small group of people that I call typically. I don’t have to call more than one and at most. It’s usually just the second person if the first one didn’t want it will take down the deal and what that keeps me from having to deal with is if you’re having to send out to a bunch of people on a buyers list that you don’t know much about, you’re going to get calls with people asking you, “Well, how old is the roof?”

And really you don’t want to be taking those calls because that person is not serious enough to be able to buy the house. On one-off or two occasions maybe they would end up being able to pay it but you got to do a lot of handholding. That’s going to take time away from you getting other deals to do. So finding out who the qualified buyers are and having that small group of people that you send the deal to is such a time saver. Can you explain how you found your highly qualified buyers and how you built the relationship with them?

Sharon Vornholt: I can tell you exactly where I found them, in my REIA group. Several of the buyers are long term buyers. One gentleman is probably 76 or 77 and still works up under the table. He’s got a couple hundred houses and he’s one of the guys you can call – he’s got a very strict criteria though because he’s holding everything, so he’s got this very niche down.

I want to be in this price range, so I can call him and he’ll go, “Look, yeah, I’ll buy it. When are we going to close?” And he writes a check. He is someone I met through my rehab.

Look at your long term investors that are still buying. Another several folks that I sell houses to, they’re very active investors, they’re in my REIA group and they have full time professional jobs that they have built systems for their rehabbing business and they go on their lunch. If you’d call them, they leave and go on their lunch and look at the house typically or no longer than at the end of the day. They get their cash from small investor friendly banks because they have great jobs. There’s another gal in there that she’s a full time investor. She set up with the local bank that’s an investor friendly bank, but I’ve met and found all of them through my REIA group. Now I did find a buyer one time on Bigger Pockets. I had a house that was a little bit of an outlier, but still a good house and I posted it on Bigger Pockets and I sold that guy a couple of houses till he moved over into commercial. But if you’ve got a decent REIA, you’ll find them there.

Danny Johnson:  Right. And what are your thoughts on building – so there’s always the question with wholesaling, right? There are two options to the buyers list. Should you start building buyers list before you find deals or should you find deals and use that as a way to build your buyers list?

Sharon Vornholt: I think you should know who the real people that you want on your buyers list because you can take them houses and if it’s not in the area they want or the type of house they want, they’re going to think you’re an idiot after awhile. I think you need to start building the buyer’s list first and just be upfront with them, say, “I’m going to be wholesaling.

I’m looking for some people to put on my buyers list but I want to be sure I’m looking for the types of houses that you are interested in. So could you answer a couple of questions for me?”

And they’ll usually say, one gal she said, “I’m looking for three-bedroom brick ranches. I hate basements I hate garage just because they always leave all their junk there and I have to clean it out.”

Because I’ll call her up and she’ll go, “Does it have a basement?”


“Well, I don’t know. I’ll go look at it.”

And they have certain areas and they want to attract certain tenants, therefore they’re looking for a house on a certain price range. And for one fellow on my buyers list he’s looking strictly up to about $60,000. He doesn’t care that has knotty pine cabinets in it. That’s great because they’re indestructible. He isn’t going to replace them, so that’s another case another whole conversation. But he also sometimes buy deals that maybe the numbers are kind of tight for a full rehab, but he isn’t going to rehab it. He’s not going to replace the cabinets and those sorts of things, so it’s still a great deal for him.

Danny Johnson:  Right. That’s something I want to get into a little bit further in our conversation too as far a some people knock wholesalers and say that it’s really not a good way for people to get started for different reasons. And so, I want to come back to that the fact that you just said that buys what other typical rehabbers don’t buy. And so we’ll go back to that and why that’s important, but I’m kind of just saying that so I remember too. But I wanted to ask, so one of the worries that wholesalers have is if they put a house on a contract and then can’t find a buyer what do they do?

Sharon Vornholt: Yeah. Guess that was my terrifying thought all those years that I didn’t wholesale because it is hard to wrap your brain around it. But it all comes down to, and people say this but it is the truth, if you have a great deal in a decent area someone will buy it. What I find people do is they do what I call a eraser math.

They know the 70% formula or wherever their starting point is and then the numbers don’t quite work, so they start erasing, “Well, maybe the repairs won’t be quite this much and here’s one comp over here that’s outside of the norm, so let’s just take that comp.”

And before they know it, they put together a deal that’s not really a deal. That’s where I think the problem lies. If you stick to your numbers in the beginning, you’re sure that you’re getting it at the right price. Then you will be able to sell it but you still need a place to sell it. In my case we have a great REIA group.

But maybe you can connect with other wholesalers out there putting up, “We buy houses sign” or rehabbers.

Call some of those people some of them they’ll probably say, “You know, you’re crazy for calling me.”

But then maybe you’ll find one guy who is a rehabber who’s always looking for more deals, so that’s another way you can find buyers.

I have bought houses and put out bandit signs in the area. “Want to buy a house cheap?”

I think sometimes you have to get creative. Another thing that I’ve done is to pull up that street. If it’s in a rental neighborhood and I bought a house once that wasn’t in a neighborhood that I knew my regular buyers list was not going to want but it was a great deal. It was on a street called Lincoln and all I did was get into the time go into the tax assessor’s site and just typed in Lincoln Avenue and when I started looking down the pages Danny, there were at least 25 investors that own property on those four or five blocks. And then I just sent them all a letter. I just sent them all letter and said, “Hey, I have a property in the 1100 block of Lincoln. Would you be interested in talking about it?” And I had a buyer within a day or two.

Danny Johnson:  Wow. I’m taking notes.

Sharon Vornholt: That won’t work and you’re “not really nice” residential areas, but in a rental area you know these were $60,000 dollar houses in an area that was a high percentage rental area. But try that some time if you know it’s a rental area. Just put it in there I would see the same names coming up multiple times, the ones that did know to buy and notarize, then there were trust names, and then there were ABG real estate company had like 10 properties. It was it was an awesome way to find a cash buyer quick.

Danny Johnson:  Yeah and also you could see if there’s a loan on that property that they got and it’s not like a bank or something you could find lenders that way as well.

Sharon Vornholt: Right, absolutely. You can find people and sometimes people they concentrate on areas and if they are cash buyers you hit the nail on the head, they are also lenders many times. And you can find those people back in your good REIA too. Remember that cash buyer that I was talking about who actually came to closing with this little checkbook and wrote a check, he was also a lender, now that’s all cooled off a lot since Dodd-Frank. He used to buy houses, rent them out and then would convert them to tenant buyers. He still makes loans to other investors from time to time. So investor-investor wasn’t affected by Dodd-Frank.

Danny Johnson: Right, yeah. It’s almost like always taking a tough situation. You couldn’t find a buyer immediately, so you’re forced to these other things. But these other things also put you in a position where you can find lenders and other things like that. So it’s actually a positive, you turn the negative into a positive. But I wanted to go even further though.

Let’s say that you got one under contract, you did the eraser Math, you kept changing the calculation so it worked for you, so you could put that deal on your contract and then you couldn’t find a buyer. You pounded the pavement, you went and put out bandit signs, went to the REIA group, looked for landlords on the street, couldn’t find anybody interested in it. What do you do at that point?

Sharon Vornholt: Well you can you can do one of two things really. You can go back to the seller and say, “You know the repairs are going to cost a lot more than I anticipated. I need to talk to you about renegotiating the price.” Sometimes they will do that sometimes they won’t. Worst case scenario you’ve written your contract, so that you can get out of the contract. Now I will say this you don’t want to be going around doing that too often because you will get a reputation in your area.

Danny Johnson:  Absolutely.

Sharon Vornholt: But sometimes sellers, if they’re reasonable people, and you just go in there and you just say look, “I messed up the numbers you know. I did not realize how much this was going to cause all of this.” If sometimes they’re reasonable enough that they will negotiate down a little bit even enough for you to sell the house and go through with the deal even if you’re not going to make a lot of the house. And that’s one point I want to put out there. You should always try to close with your seller even if it means you’re not going to really make anything. You just don’t want to be the person that seller tells 10 people, “I met lady and guess what…”

Danny Johnson:  And you might think that that wouldn’t happen but it absolutely does. You’ve got to always follow through with what you do. I think that’s what makes a lot of people nervous. But you could take that point and it makes you nervous and use that as a reason to never do that eraser math.

Sharon Vornholt: Don’t do eraser math. God knows we’ve all done it especially in the beginning. It’s tempting.

Danny Johnson: Yeah. I’ve got to share of story to it. It’s funny now but at the time it was. So I put a house on a contract and thought it was a really good deal and that afternoon I think I was looking at my numbers again after I put it in a contract and I was looking at my notes and it’s says three bedroom one, but in my head for some reason I started walking through the house again because I had just walked through it that day.

So I was thinking back through walking through the house and I said, “Oh, my gosh. There’s not three bedrooms in the house. There were only two.”

And so all of my calculations I had done before I went over there about value were based on a three bedroom, so I just all of a sudden get really nervous and I started calculating “Okay, what are the costs for the two bedroom?”

And you know I did exactly what you said I just owned up to it. I called them and said look, “I’m sorry I made a mistake.” And even if they didn’t want to negotiate, I would still buy it at what I told them I would because I keep my word, but they actually did. They allowed me to have the price lowered just a little bit and you know it worked out great. So don’t ever feel like they would never budge because people – as long as you’re honest with them, don’t go in there and lie about things and everything. Just be honest.

Sharon Vornholt: Yeah. And there’s no – I mean that’s a big mea culpa when you say, “Look I messed up” But if you say it just like that and you tell them the truth, they’re going to be so much more willing to work with you. They may not, like you said, may not come all the way down to where the price should have been but if they budge you’re in still in a much better position right.

Danny Johnson: Right and another thing I wanted to ask you, so we’ve talked pretty much about you know putting a house under contract to having an escape clause, how to find a good small list of qualified investor buyers that you can sell you deals to, what happens if you don’t find a buyer. And I want to bring up something that not a lot of people talk about when it comes to real estate investing in general, but more specifically wholesaling.

In certain areas of town, I’m sure you probably have the same situation, we have certain areas that aren’t really good retail areas, right? So these are rental mainly. You can’t find many comps because people aren’t really selling the houses. It’s either on a finance for rental properties and people try to buy those with the same formulas using the 70% minus repairs and it doesn’t work because first of all you don’t have comps to go on, second of all that’s not the model for that type of property. How do you handle those types of properties when it comes to figuring out what you can offer and what you can sell them for?

Sharon Vornholt: Well I think the neighborhood definitely comes into play and the worst neighborhood for me, the lower the percentage. If it’s so if it’s that type of neighborhood, I’m probably rarely going to go over 60% and sometimes I’ve gone lower than that because it is tough to find comps for those types of houses. In that case, I would rather lose the deal than to really make a big mistake on value. But I will definitely – in general, I’ll start down – if it’s that type of a neighborhood, I’ll start at 60%, start taking out the repairs. For wholesaler you need to take out your fee and here’s the point too. If you’re in those types of neighborhoods you may be making less than what you would normally make. If you normal fee is $10,000 and you can only make $5,000 off of a house like that, that’s still a good day at the end of the day. I think you sometimes have to adjust your expectations, but you’re going to have to buy it cheaper than what you would normally buy it to be safe.

Danny Johnson: Yeah. We got to be safe now. Do you have certain buyers though that buy in those areas that have different criteria they go on?

Sharon Vornholt: The only people that I have – well, if they’re rehabbers most of my rehabbers, most of my rehabbers, I I would say they’re up a notch or two. They no longer buy in those marginal rental neighborhoods, but I do have a couple of landlords that still, I mentioned, that they’re looking in that $30,000 to $60,000 which is a kind of a kind of a lower blue collar neighborhood I would say. They will buy the houses and you can use the lower formula. You can generally still make your fee because I do the same thing on every house I go through and I figure a complete rehab and by that time it’s a really low number.

Then I go back I have a second column on my sheet and I start saying, “What if it were a landlord, what would they do?”

So if they have a furnace, let’s say, a furnace and it’s 12 years old, what is the life of a gas forced air furnace, what about 20 years if it’s been maintained? So if the furnace is 12-13 years old, well a rehabber might pull it out and say it’s just going to cause my buyer questions, that landlord is going to leave that furnace so long it looks okay.

Had a house with everything knotty pine, a rehabber would have yanked all of that stuff out. This guy, you would have thought you’d given him some gold because I mean you could hit those cabinets with a baseball bat and nothing was going to happen. It even had some 90-pound walls in there. That man was happy as a lark. The standard was different. He wasn’t going to do a thing in that kitchen. The countertop was like a greenish ugly, you know the kind with the metal strip around really all clear, but it was pristine. There wasn’t anything wrong with it. He wasn’t going to change any of that, so I knew by the time I took out all the things he was not going to fix or update, what my offer would have to be to give him still a great deal, and that’s where I made my offer. If you have a couple of those kind of landlords on your buyers list and you should four deals that you can’t do anything else with, then you call them.

Danny Johnson: Right, absolutely. So always in your building of buyer’s list get highly qualified buyers, but also make sure that you get a diversity of people looking for different things because no one investor wants every different type of property unless they’re going to be doing wholesaling themselves as well. Finding the people have different criteria, the example for me in where I am is, I’ve got friends that actually buy and they base it all on if it’s a two bedroom house that’s under X square feet then, it’s $30,000 minus repairs is what they want to buy it for. If it’s a three bedroom it’s $40,000 minus repairs and it’s as simple as that. It doesn’t have to get any more complicated, so it makes it real easy if I look at one of those houses that there’s not a lot of comps for that’s more of a rental area. That’s all I have to do to determine value. I don’t have to look up any comps.

Sharon Vornholt: Run that by me again. That’s something I want to write down. They’re looking at the property and if it’s two bedrooms they’re saying I’m going to offer $30,000 less and less the repair—

Danny Johnson: They want to buy it for that much.

Sharon Vornholt: They want to buy for $30,000 less repairs?

Danny Johnson: So if the house needs $5,000 to make it rentable, for the two bedroom one bath, they’re willing to pay $25,000.

Sharon Vornholt: Interesting.

Danny Johnson: So if I offer $30,000 I could get five thousand on it.

Sharon Vornholt: Interesting. That is a way and here or there were a certain group of landlords and they all lived in really nice houses. But they were investing in what I call the really low end housing. They used to call them disposable houses here because they were out early and not great houses, but they’d buy them for five thousand dollars. Maybe it was three bedroom house and the section ___ [0:43:14] was $5,0000 they’d have that house paid off in 10 months and then it would just cash flow and they would piecemeal it together. Back before 2008, some of them had some of them had 75 of those. The cash flow was really huge, but did I want to be in that arena? No I don’t. Because they were having people go down there and collect the rent before they went to the bar on Friday night right after they got paid. It just it wasn’t my thing, but they made a lot of money doing that. I know that.

Danny Johnson:  Yeah. When there’s more work involved, there’s more money to be your made, right? If you want to do that kind of work and I’m not. I would rather make less but have less hassle.

Sharon Vornholt:  Me either.

Danny Johnson:  So this gets you mentioned again the gentleman that was really interested in the knotty pine because it was indestructible and people have different buying criteria like we just talked about and that’s where I wanted to tie back in here. Some people, usually people selling other methods of investing, but some people do like to see the wholesaling is much more difficult than rehabbing because you have to get that property at a lower cost than your end buyer and they’re suggesting that you’re basically competing with the end buyers, so you have to get it even lower so you’re going to get less deals. Combine that with having to do more deals because you don’t make as much per deal which makes wholesaling bad choice based on what they’re what they’re talking about right there. Where you have to do more deals and it’s harder to get the deal because you’re offering less than what other people would. Can you explain why they’re wrong about that?

Sharon Vornholt: Well, some people simply aren’t marketers now. Now you are rehabber and you’re a savvy marketer, but after being in this business for many years what I have found is most people that are rehabbers, they want of rehab. They don’t want to do direct mail and they don’t want to do any of that stuff. They just want to have a deal show up.

If I can give them a deal – because a wholesaler typically has to buy below wholesale which does mean that if I’m competing with Danny and he’s not easily only looking to make money from the rehab, then he’s not going to have to figure in my $10,000 our wholesale fee or $5,000 or whatever it is, so that is true. But what I have found is that there isn’t a single buyer on my on my list that is doing any marketing other than one gal she looks on the MLS and occasionally finds a rental on there. Most of the fellows they have the full time jobs, they look on the MLS little bit, but mainly they just are there to have wholesalers bring them deals.

They don’t have an interest in marketing and when the older gentleman where he’s concerned he goes to the commissioner’s sale, that’s what he thinks marketing is. If it is at the commissioner’s sale and he can buy it then he’s done some type of marketing in his mind or found the deal. Other than that he just sits around waits for people to bring him deals which they do.

Danny Johnson: Right. And that’s an awesome point to make. A lot of times you’re not dealing with people that are doing a lot of marketing and even the competition you do have on the deals might not be as sophisticated and might not be able to come up with accurate numbers. But then there’s the other side also with the way I like to look at it as well as that you find the atypical buyers as well, so that they have the different criteria and so if you’re thinking in terms of only buying rehabs and not doing wholesaling, then you’re going to pass up on deals that don’t make sense as a rehab.

Sharon Vornholt: Right. Well, here’s the other thing where a wholesaler is of great value to a rehabber, and that is that a lot of us we market it to off-market deals. We’re marketing, where as mentioned my friend, she’s looking on the MLS, another friend is down at the commissioner’s say, but there’s this whole vast arena out there of off-market deals with absentee owners and probates. They’re not doing any of those. So if you are a wholesaler that gets very good at marketing and make no mistake your number one job as a wholesaler is marketing. That’s it – to get deals. Once you learn how to market for deals in ways that other people that are doing other things either don’t want to do or don’t want to learn it, whatever the case may be, it doesn’t really matter then you have deals that they don’t have access to and it makes you very popular.

Danny Johnson:  Well, absolutely. I don’t think that those arguments are usually valid from the people that try to see that wholesaling is not good way to go. I think it’s always something that people should focus on and learn because like you said becoming an expert marketer is really what it’s all about no matter which part of real estate investing you end up wanting and finding to be your path.

Sharon Vornholt: Yeah and let’s face it Danny, not everybody has the skills or the knowledge to be a rehabber like you do and in many cases they just plain don’t want to do it. Generally speaking people don’t have the knowledge or the talent or maybe the resources to get the money, whatever, they don’t know how to do that. For some people, wholesaling is just the better fit.

Danny Johnson:  Absolutely. And I mentioned at the beginning that you also do some coaching and I like to ask people that do coaching for investors. If you’ve ever noticed a common trait or something that people that do well in the business have that they possess that maybe the people they don’t do well are lacking. Is there something that you’ve noticed that’s common?

Sharon Vornholt: It is it comes down to what really one thing they take – well, really two things. They have a plan and they take action. I think there are people that I have come to my REIA group for now almost 20 years. They come every time and they’ve never bought a deal because they learn and learn and learn and study, but they never actually buy a deal.

You’re so much better off to just take action. At some point in time you got to just cut to the chase and go buy a house and you might muck it up, you might not make as much money as you had hoped, but I like to call your first houses college where you go in you learn on the job. But yeah, it boils down to – People are divided, those that do take action and those that don’t. And I think even if you’re taking the wrong action and maybe not doing it just right, if you’re taking action and putting one foot in front of the other that’s it. You’ve got to get up each day and put one foot in front of the other but you need a plan. You really need a plan for what you’re going to do.

Danny Johnson:  Absolutely. That’s good advice. There’s a book that you’ve enjoyed that you’ve read recently that you could share with us.

Sharon Vornholt: There is. I’ve read several good books last year. My new favorite book and that’ll change if you ask me probably in a couple months, but my new favorite book is called the 12 Week Year by Brian Moran. This goes back to what I just talked about, which is taking action. What I love about this book is we all set annual goals and I think the statistics say most people have thrown them out the window by January.

But what is different about this book is that it tells you to break year down into 12 week segments. So you look at your grand plan and maybe your plan is you’ve been working on all of your things you’ve been working on your website and your REIA mobile and all that. So maybe for this 12 week segment that would be your focus, maybe in your next 12 week segment to reach a grand plan it’ll be these three things. But I think it takes all the pressure off of you looking down the road 12 months and it helps you to get very focused on what you need to do now. So I love that book.

Danny Johnson: Oh great, thanks for sharing that. Isn’t Brian Moran – doesn’t he do the Facebook marketing?

Sharon Vornholt: He does a lot of different things. He does a lot of different things, yes. I think he initially made his money in gyms or fitness or something like that, but he is a brilliant marketer. He’s a brilliant guy period and I love that book because it’s applicable to any investing strategy to any business.

Danny Johnson:  Great. And so is there a way that the listeners out there for the Flipping Junkie podcast can find you?

Sharon Vornholt: They can. The best way to find me is over on my blog, The Louisville Gals Real Estate Blog and they can contact me through there and then we can get on a more of an email course of correspondence, but that’s probably the best way. If I try to give you the spelling of my name, they’ll just muck – they’ll get that wrong. So Louisville Gals Real Estate Blog.

Danny Johnson: Okay. I always create show notes as well for these interviews and so you can find the show notes. We’re going to include links to the book mentioned and to Sharon’s website there and you can find that at and Sharon is S-H-A-R-O-N and then Vornholt V-O-R-N-H-O-L-T. That right, right?

Sharon Vornholt: Yes. You do. You got it.

Danny Johnson: Alright. So that’s it. It’s a recorded if you want to catch it again, you can play it back. But she’s also been kind enough to provide us with a detailed guide. It’s pretty awesome. It’s about marketing to probates and absentee owners for awesome deals and it shows you why those methods of marketing works so well by delving into the point of view of the seller situation for the probates and for absentee owners. I highly recommend you download that guide and that’ll be on the show notes page and it’s absolutely free. It’s not going to cost anything. So definitely download it, check it out, and visit that page. It’s called Probates and Absentee Owners, Your Fast Track To Real Estate Riches Guide. It’s really great, so check that on the show notes page.
Alright Sharon, I really enjoyed the interview and got a lot out of it and I appreciate you taking the time to join me on the show.

Sharon Vornholt: Well, it’s always fun Danny and thanks so much for having me.

Danny Johnson: Alright, thanks Sharon. I’ll talk to you soon.
Thanks for listening to the show. I’m glad you joined us for this episode. And to find out more and learn more about how to flip houses, go to To go to the show notes page, you can go to or you can simply just go to flipping junkie dot com slash 7 – the number 7 – to download the guide that she was kind enough to share with us. You can download that for free if at Great episodes coming up in the coming weeks. I release a new podcast episode every week, so be sure to subscribe on iTunes or Stitcher and I will see you next week.


Comments (9)

  • Deb

    Great content! Loved the interview! Before today I had no clue what whole selling was, but now have a great grasp of the ins and out! One question I still have though is “what is the key to finding cheap properties and/or negotiationing cheap deal with “Seller A” ? Can you walk me through the process?


    • Danny Johnson

      Thanks, Deb. There are tons of ways to market to motivated sellers to find good deals. Here’s 57:

      Regarding negotiation, I would start with asking these questions and building report:

      Honestly, I don’t really “negotiate” much. I calculate what I need to buy it for and they either accept or negotiate a little. I always offer just 2 or 3 thousand below the max I can offer and will increase my offer by smaller and smaller amounts. So if I offer 55k but can pay 58k and they want 70k I will go up to 56k. They might go down to 65k and I will go up to 56.5k. They might go down to 60k and I will go up to 56.8k. This way they see my increases are decreasing and I am getting to my max I’m willing to go.

      • Deb

        Hi Danny,

        Thanks for getting back with me so quick! Checked out the links you sent me, great info! You have it all figured out! Looking forward to your next podcast! Thanks!

        • Danny Johnson


          No problem. Glad it helped.

          If you haven’t yet, would you mind leaving a rating and review for the podcast on iTunes? It would help tremendously. You can find out how to do so within a couple minutes here:

          Either way thanks for listening to the podcast.


  • Michelle

    Hi Danny,

    Good podcast and Thanks to Sharon as well. I really enjoyed listening I am looking to get started with wholesaling.

    Danny I subscribe already to the podcast you have my email should I still sign up again to get the get Sharon’s guide.


    • Danny Johnson


      Yes, just subscribe again there on that page with the same email. You won’t be subscribed twice but will still be able to get the guide.

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