Dale on the Daily

Direct to Seller vs On Market Deals: Which One Actually Makes You More Money?

• Dale Kerns • Season 1 • Episode 8

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Breaking down the critical choice between direct-to-seller and on-market deals in wholesaling real estate. Both strategies offer distinct advantages, but your choice will significantly impact your profit margins, scalability, and overall business success.

• Direct-to-seller delivers bigger spreads with assignment fees potentially reaching $40k-$50k
• Less competition with direct access to motivated sellers means better negotiation opportunities
• Building trust and rapport directly with sellers creates stronger deals and opens creative options
• Flexibility to offer various solutions including subject-to arrangements, seller financing, and customized closing timelines
• Marketing costs represent the biggest hurdle for direct-to-seller strategies
• Time-consuming process requiring significant follow-up and handling rejections
• Title issues and seller misrepresentations can derail direct deals
• On-market provides easy, free access to motivated sellers through MLS, Zillow, and Redfin
• Property photos, condition details, and comparable sales data already provided with on-market listings
• Building relationships with real estate agents can lead to consistent future deal flow
• Competition significantly higher with on-market properties
• Smaller profit margins typically capped around $10k
• Agents act as gatekeepers limiting direct seller communication
• Less flexibility in deal structure with more regulatory restrictions

Start with the strategy that matches your current resources – if you have no marketing budget, begin with on-market. Once you've tested both approaches, focus deeply on whichever method suits your personality and business goals best.


Speaker 1:

And what's up everybody? Today we're going to be diving into a topic that I see all the time and that I struggled with myself when I first started. Should you go direct to seller or focus on on-market deals or MLS deals? Both strategies work and, depending on which path you choose can affect your deal flow, your profits, how fast you can scale and the overall success of your wholesaling business. So let's break it down the pros and cons of each, and I'll share what's worked for me and where I've lost time and money on either strategy. We'll start with direct toller and the pros of that.

Speaker 1:

Direct-to-seller is where the big spreads live, plain and simple. Mostly, you can get the bigger assignment fees with the direct-to-seller deals versus the MLS deals. There's no agents, there's no bidding wars, it's just you and the seller. You're going direct to the seller and you'll be able to negotiate with them, talk about the property and have more overall communication with the seller. So let's start with the pros. There's less competition. The only person that you're dealing with is the seller and people that are doing direct to seller. They're only going to be able to see that deal if they're reaching out to that customer. Now, everyone that's wholesaling doing direct to seller. We know that we're all typically going after the same deals. However, if you are more consistent, you follow up, you get that lead, you call that customer or seller right away, then you are going to beat out your competition. Our competition is no good and they are not going to do better than you in the long run. If you are doing the follow ups, calling them right away and doing those things better. And also, when you do get on the phone with them, if you're negotiating better, you're talking through them, you're actually solving their problem. You're going to outdo your competition. So, in the terms of less competition, there's less people and less wholesalers that are actively going to follow up and stay up with that customer and that seller, even if they are getting a bunch of calls from other people. They're also not broadcasted on MLS, so not everybody's seeing them, which is a positive for the direct to seller.

Speaker 1:

Also, the bigger discounts. So that's the next pro you can negotiate with that seller to get a bigger discount on the property than if it had been on MLS. Typically, if that seller has more pain, the more they are probably going to give you a discount in order to sell it, and most sellers that are selling direct-to seller, not on market, they typically are not as aware of what is selling on the market. But also you can negotiate and show them the as-is value to get a bigger discount rather than what the MLS might try for if they're going to sell it on the MLS. So another positive you can build trust with that seller. You're direct to sell. You can talk to them directly, unlike MLS deals which typically is involving an agent. You can talk to them, you can build a rapport, you can have multiple conversations with them. You can see what their actual pain is, can see what their actual pain is, see what their actual motivation is and talk through all that with them, including what's selling on market, how much, what type of condition. You can really spend the time to go through these things with them, educate them on the market, the prices, the renovations, and build that rapport and build that trust with them. One-on-one MLS deals typically can't do that because of the agent that's involved. So there's a barrier of entry there.

Speaker 1:

The flexibility Flexibility this pro is probably one of my favorites the flexibility that you have to help that seller solve their problem of why they're trying to sell and what their actual motivation is you have the flexibility to do whatever you can and want to help that seller. So one of the flexibilities right off the bat is not only can you do a cash deal, you can do something creative, subject to seller finance novations, you can also give them more time. If you need to push out the closing date because they need to clean out the house or they are going on a trip and want to do it when they get back, there's the flexibility and you have the flexibility to make that choice with that seller. I've also seen people that have helped them move. Here's a couple hundred dollars. Let's get someone in there to clean the property, help you move. Let's get someone in there to clean the property, help you move, find you another place to rent, find you another place to buy. The flexibility that you have.

Speaker 1:

Talking directly to the seller is an enormous benefit and an enormous pro for direct to seller. So obviously direct to seller has a lot of pros. These are just a few of them. This is currently the strategy that I'm using and have used for the most of my time wholes the internet and that we see all the time. Yes, that does happen, but that is not the norm. They are hard work and they can be expensive if you don't know what you're doing.

Speaker 1:

So some of the cons the marketing costs. The marketing costs to pull a list skip, trace that list, call. That is the time effort. If you're hiring a virtual assistant to make those calls and that's money spent you are going to need to continue to pull those lists and get fresh data and get fresh leads. Skip, trace those and do all that on a monthly basis in order to keep leads flowing in your pipeline. And that all adds up and costs money. So if you're going to do cold calls, then and other people are making those calls, that's money. If you're going to do texting, which is probably the least expensive but maybe the least ineffective as far as response rates, and also mail, direct mail campaigns, they can get very expensive.

Speaker 1:

Anything that you're going to market, you're going to have to spend money to market, to go find those people to say I'm raising my hand, they want to sell. That's going to cost you money and time. The time consuming aspect of it, which is another con, is the time to send out those mailers and wait for a response. The time to skip, trace and call all those. If you need to call a thousand leads to get 10 people that say I want to sell. That's going to be more time consuming. There's a lot of time and effort that you need to talk to the sellers to get the actual ones that are saying they want to sell. So PPL and PPC have really helped this in the last few years that they've kind of come onto the scene and I'm using PPL so I am doing direct to seller with PPL so it alleviated some of the marketing costs and time for some of the other strategies. And also the PPL is a cheaper version of PPC, which can be more expensive but less time because you're sending that info out. You're marketing with the online and they're calling you, which is the inbound piece, which is a great strategy. But with PPL and PPC it's really limited the amount of time and some of the marketing costs with having to do all that marketing yourself. So those have helped the industry very much with those two cons to make them not as much of a con as they once were, maybe five or 10 years ago.

Speaker 1:

Another con is the seller objections years ago. Another con is the seller objections. So if you are direct to seller and you're talking to a seller, you're going to have to know how to skirt, dodge those objections and overcome those objections to really find the true motivation and the true solution that you can provide the seller. That's going to take time to get on the phones, talk to those sellers and really learn how to navigate those conversations to help yourself and help the seller and get deals under contract and close those deals. You're going to get lots of rejection With those objections. You're going to get lots of rejection With those objections. You're going to get lots of rejection. So really probably, seeing it out, with PPL leads, you might get one out of 25 or one out of 30 or one out of 40.

Speaker 1:

Whatever your numbers are, there's going to be a ratio of how many people you need to talk to and how many contracts you're going to get and how many deals you're going to be a ratio of how many people you need to talk to and how many contracts you're going to get and how many deals you're going to get. With each strategy the numbers vary but there's only going to be a certain amount of contracts that you're going to get. With the number of sellers you're going to talk to With direct to seller, that number might be higher because you're not getting those people that are actually motivated to sell like you might get with an on-market deal. So the rejection piece of it better get used to rejection. You might need nine no's to get that one yes. But as soon as you know your ratios then you're trying to get through those as fast as you can, knowing you're going to get a yes in that certain amount of time.

Speaker 1:

One of the biggest issues with seller on mark or direct to seller is title issues and sellers that maybe don't portray themselves to the full extent of the truth. So what I mean by that is title issues. You could have some distant relatives that need to sign off. If it's an inherited property, maybe someone died and owned it and it needs to go through probate. Direct-to-sellers are not necessarily going to know those issues until they come up. You might go through the whole process, get a contract signed and then find out that someone else needs to sign off. Someone else owns the property, there's a title issue for some reason, the seller lied and they actually aren't the owner and there's someone else that needs to be involved. Or one of the biggest ones that I would say you can run into is that the property actually isn't what they said it was. You go through the process, you get out there and it's a big pile of ash on the ground when in reality they said that it just had some fire damage, but it's burnt to the ground. So that's a big con for direct to seller. The sellers necessarily aren't going to know those things going in which can cause problems with your contracts and talking to them. So those are the pros and cons of direct to seller.

Speaker 1:

So let's move on to on-market leads. So if you're brand new and you have zero budget for marketing, start with on-market. It's free, it teaches you how to underwrite deals fast and you can instantly talk to motivated sellers. So some of the pros of on-market deals. So some of the pros of on-market deals Easy access. You can go online the MLS, zillow, redfin you instantly have motivated sellers at your fingertips, especially if you can search for sale by owner, which you can on most of those Zillow and Redfin sites, and those are sellers that are selling it themselves without an agent. They're just listing it on a market through those sites. So those are people that have instantly raised their hand and said that I want to sell my property and you can have them, a list of them, in any state, city, town that you want. You just search it up and you can find it right away. So the access to finding sellers that want to sell, or at least saying they want to sell in some fashion the access is instant with that.

Speaker 1:

The second pro kind of same, but you have motivated sellers. They obviously want to sell Now. Whether they have the right price and they're the right bucket of seller is another question, but they are saying they want to sell their property. So you have them instantly with the access of the online searches. So you have them instantly with the access of the online searches. You don't have this.

Speaker 1:

The next pro is you don't have to spend any money to find those motivated sellers. To look it up on Redfin, to look it up on Zillow it's all free. You don't have to spend any marketing costs. This is why it's a great strategy if you're just starting, especially for sale by owner. You don't have to spend money. There's no marketing spend. There's no pulling list, there's no skip tracing. There's none of that. You just have them right there on the site and you don't have to spend any money. Obviously, you would need a computer. So you could say that that is spending money. But in order to get those leads you don't have to spend any money. There's no marketing cost to find those people.

Speaker 1:

The other pro you have photos of the property. You have the condition of the property. Most cases when deals are on MLS they're going to have pictures and even if they're for sale by owner, there's going to have some type of pictures usually up there and the condition of the property. So you know the condition, you know the photos. If they're on MLS with an agent, you might even have comps available that have already said here's our price, here's what we're comparing it to, and you'll have that available right away. So you may not have to comp properties and find those compables as if you were direct to seller. So if your skills are lacking in that department, then that's a huge plus. You might have that information already available.

Speaker 1:

The agent connections the people that I see doing MLS deals and agent outreach they love this part of the business and the ones that are successful with MLS deals take advantage of the agent connections, name and number. So even if you don't do something with that deal, you can build that relationship with that agent and get deals down the line and, in the future, keeping up with those agents and continuing that relationship and building that relationship. That's a whole portion that you need to keep up with on its own If you're going to go that route. That's hugely important to maintain that, because agents don't want to waste their time. They don't want to waste time on you if they think that you're not either skilled enough, experienced enough, they're not going to give you the time of day and they're not going to want to keep that relationship. So you need to work hard building that relationship. But having those agent connections for the future is huge.

Speaker 1:

If you do get a deal, you need to market something. You need to find a buyer, find an investor. The agents are going to be a big help in doing that down the line. So on market, it has its benefits. But if you're going to wholesale straight from the MLS, then you better buckle up because it's very tricky, it's hard, it takes a lot of work, which let's move into the cons for on market, which let's move into the cons for on-market.

Speaker 1:

So this tends to have more competition and have more competition than direct-to-seller. So obviously, if it's on the MLS, there's a lot more people that can see it. The access is there. So you tend to have more competition on the MLS, but a different type of competition. So you got more eyes on it. You've got investors, you've got the fix and flippers that don't want to spend the money to market Typically they can search on MLS. They can find those deals quicker, they may be able to, willing to pay more for that, because they don't have to worry about a wholesale fee. They don't have to worry about any agent commissions if they're buying the property. So there's a lot of benefits to fix and flippers looking at that, which could breed more competition just by being on the MLS With that direct to seller.

Speaker 1:

If you find a diamond in the rough and a seller that hasn't talked to anybody maybe they're your cousin's friend and they want to sell the house so you have direct access where on the MLS everyone's already seen it and they're getting a bunch of calls on that property where direct to seller you may not get that, so the competition could be heavier. Another con typically smaller spreads heavier. Another con typically smaller spreads, smaller assignment fees. If you're wholesaling on MLS deals You're not going to be able to get the huge $40,000, $50,000 spreads. Like you've seen and we hear about on MLS deals it usually just doesn't happen. $ 10,000 maybe. But now that you have an agent, you've got MLS rules, you've got all the rules that come with on-market. The spreads tend to be smaller Agents.

Speaker 1:

The biggest con for me of on-market deals is agents. You don't have direct access to the seller. So anything you say or do or look at is going to have that agent involved and that agent is going to be the gatekeeper to the seller. It's like the telephone game Anything you say or they say, it's going to get mistreated, talking back and forth and you typically have less negotiation power because that agent's involved. So the agent's perception is going to be involved with that seller and could potentially have an issue with you getting access to that seller. The next con is less flexibility. So you're not going to have as much flexibility with the deal structure, the deal type.

Speaker 1:

With the MLS, the subject to's the seller financing the cash deals typically, how they're marketing that deal and how the agent needs to sell that deal. That's going to be how it needs to be purchased on market. With direct to seller you obviously have more flexibility. With MLS deals you don't have that flexibility and this typically comes in with the agents. If the agent thinks subject to is illegal, they like seller financing because they've had bad experiences in the past. That's not something they're even going to bring up to the seller or they're telling the seller right off the bat we need to do cash.

Speaker 1:

These are going to come up these other strategies, but they're no good. You don't want to do that, it's not in your benefit and therefore it's not something that is even on the table in a lot of MLS deals. So the flexibility of what you can do to help that seller typically is dramatically less than direct-to-seller MLS clauses. Another con is you are on the MLS so, like I said before the contracts, you use the red tape and the limitations with the MLS laws and things like that. You need to follow more strictly the inspections and if there's banks involved, then you typically are bound by the MLS. With things like that, some contracts and some brokerages might not even allow assignments or the agent to do both sides of the seller and buyer, which is a strategy sometimes wholesalers can use to get a less price. So if those aren't available because of that broker, that agent, that state, you're going to be limited by that with deals on market. So the truth is that with either of these strategies there is no one size fits all. Direct-to-seller gives you control, typically more profit and flexibility, but it can require capital and more hustle out of you to find the deals and the people that are actually raising their hand to say that I want to sell On market. It's faster to start but harder to scale. In my opinion there are people that are doing it, but I believe there's more barriers to entry in some fashion once you start getting leads and deals to get them to the finish line with on market, than there is direct to seller.

Speaker 1:

I'm doing direct to seller and pretty much have been since my start. I didn't like the agent interference and the gatekeeping of the agent aspect of it. I really wasn't good at it. To be honest, talking to agents, I've never been an agent and it was just a big barrier of entry for me that I didn't want to overcome and couldn't overcome at the time. So it steered me to direct a seller. My background talking direct to sellers and sourcing the leads for direct to seller it wasn't an issue for me. So I gravitated more to that direct to seller than MLS and that's what I've been doing since my start.

Speaker 1:

But if you're just starting out and you need to find out what's your budget, how much time do you have, and that is going to give you a better idea of where you should start.

Speaker 1:

Should I start direct to seller or should I start on market?

Speaker 1:

Once you start with either one of those and you start talking to people, talking to agents, talking to sellers for sale by owner, whoever it may be, with the direct to seller versus on market strategy, then you can find out maybe which niche is better for you, which strategy you like better talking to which is kind of what I did and then start with that strategy and go deep on that strategy for the long term with your wholesaling business.

Speaker 1:

If you want to do both and you're good at both, then do both. There are certainly people out there that are succeeding in just direct to seller, succeeding just on market, and then people that are doing both, depending on the resources and everything they have within their business. But both strategies are great. If you work hard, you put the time into them, you're going to have success with either one. But whichever you choose, good luck. Let me know in the comments what you think of the video, what your strategy is, how it worked for you and the success that you've had. Other than that, thanks for watching and we'll see you on the next video.