9 Reasons You Couldn’t Find A Buyer For Your Wholesale Deal

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Let’s imagine you have a house under contract. You’re excited, but nervous. It’s very important you close, not only because you want to make money for your efforts, but because you’ve taken on the responsibility to get the deal done.

The seller is relying on you and the last thing you want to do is cause them any problems.

This is one of the biggest fears, if not THE biggest fear of a new wholesaler. There are often several reasons for not being able to find a suitable buyer in time and I’m going to go over the main ones.

1. Priced The Deal Too High

This first one is the main reason why people are not able to find a buyer for their wholesale deal. You’d better believe that your buyers are familiar with the the fact that we make our money when we buy. If they can’t get the house cheap enough, they will turn their nose up to it…and probably you if you offer up turds as deals all the time.

There are several reasons why you might be tempted or unknowingly offer up a wholesale deal at too high of a price. Let’s discuss some of the most common ones.

Overestimated the ARV

If you are working with limited information or invalid comparable sales (or, heaven forbid, are overly optimistic – like that would ever happen :)), and come up with an after repaired value (ARV) that is too high, you could inadvertently price the deal too high.

Avoid this by making sure that your comps are actually comparable and that the data is recent (within the last 3 months is best).

Also, wishful thinking caused by a desire to make more money on the deal is best left out of the picture. Don’t play games with yourself thinking that because your property has a nice wallpaper border around one of the bedrooms walls, you will be able to ask $5,000 more than was paid for other similar sold properties that didn’t have that incredibly cute border. It just doesn’t work that way. Sorry, I wish it did.

Underestimated the Repairs

This one is very common as well. I think this one is usually more from inexperience with rehabbing and determining repair costs than it is from wishful thinking.

I’m routinely amazed by the numbers given for the cost of repairs of some of the wholesale deals that come across my desk. I think I’ve gotten to the point where I just double what is mentioned for repairs.

Want to know the best way to get a grip on the what repairs are costing? Ask an experienced investor to show you. If you don’t know any or can’t get one to show you by taking them to lunch first, find a contractor. It’s important to find a contractor that has worked for other investors (house flippers, landlords, etc.). These guys will know what is typically paid for things. Investors usually pay less for their rehabs because they are often able to keep the contractor busy with work.

Of course, if you can’t find a contractor that has experience working with an investor, it can still benefit you. They will probably give you higher repair estimates. This will cause you to offer less for your deals and offer up better deals to your buyers. Your buyers will love you for this.

Asked Too Much For The Wholesale Fee

Don’t be greedy. Sometimes it’s tempting to ask for the world because you feel that you spent an eternity finding the deal.

Don’t let emotional reasoning affect your pricing. You want people begging your for more deals, not begging you to stop insulting their intelligence.

It can be difficult to push a deal out with a high price and then lower that price. Sometimes people would have bought at the lower price if it was priced that way from the beginning, but will ignore the price change and the deal altogether if lowered later.

Wholesaling is really all about building a reputation and relationships. Don’t forget that.

2. Didn’t Have Enough Buyers On Your List

It can be hard to find a willing and capable buyer when your list of buyers is small. You should always be working on building your buyers list from the very beginning. I’m talking about starting to build it as soon as you decide you are interested in wholesaling. Don’t wait.

There are a lot of ways to find buyers. Just off the top of my head, you could find them:

  • at the courthouse steps (foreclosure auctions)
  • from their advertising (bandit signs, phone book, newspaper ads, websites, etc)
  • at your local REIA (real estate investor association) meeting
  • here on Bigger Pockets
  • by tracking down who bought investment properties with cash from the MLS

3. Didn’t Have The Right Buyers On Your List

If you don’t screen your buyers well enough, you could end up wasting a lot of time with people that love to kick tires but will never buy a house from you. Don’t play 101 questions with these buyers.

What you want are people that can pay cash, make decisions quickly and do their own due diligence. It also helps to find buyers that are interested in properties in areas that you are focusing on. Many investors don’t like certain areas of town. Find more of the investors that are looking for what you are selling (or going to be selling).

4. Didn’t Approach Your Buyers Correctly

What I mean by this is that it is very important to treat the very serious buyers with extra courtesy. The ‘very’ serious buyers are the guys that do make decisions quickly, pay cash, usually only ask for price, address and lockbox code, and have a history (or capability) of buying a lot of houses.

These investors are usually busy and will simply ignore an email that looks as though it was a mass email blast. They just don’t have time to run out and look at stuff that has the potential to have a lot of competition. Sometimes, I just feel that if it was an awesome deal, they probably already called their serious buyers and are now just sending it out to their list. If they didn’t want it, I probably don’t want it either. I understand how flawed that thinking is, but it’s just what happens when we get busy and tired of chasing after deals that are likely to be bid up by other investors. We want to know that we have dibs and that it is a good deal that is worth spending time on.

Treat your VIPs correctly by calling them individually and giving them 12-24 hours exclusive access to the deal. If they don’t want it, you will call the next one down your list. Once you’ve exhausted this short list, then send out the email. If you have a small group of so-so investors, you might want to send individual emails that are personalized to them, even if you are sending several of the emails one after the other.

5. Didn’t Handle Access To The Property Correctly

If you don’t have a way for your buyers to see the property you are asking them to buy, you are going to have a tougher time getting someone to want it. It’s important to be able to give access to as many investors as possible.

This can be a problem when someone is living at the house. You will want to get as many pictures, or some video, of the house to show your potential buyers. If someone is very serious, you would then schedule with who lives there to view the property again. This is usually done by having the potential buyer represent himself as a contractor or a business associate.

6. Demanded Too Much Non-Refundable Earnest Money

…paid directly to you. I’ve read some training where people advise wholesalers to demand a large amount ($2,000 or more) in non-refundable earnest money, paid directly to the wholesaler. The reason given is that if it is non-refundable, the wholesaler (you) will get it no matter what.

The problem comes from when the deal doesn’t close for reasons outside of the buyer’s control. He/she would then have to get you to pay back the earnest money and a lot of people just don’t want to deal with that hassle.

Just have the non-refundable earnest money paid to the title company if you are asking for a lot.

7. Didn’t Give Yourself Long Enough

It’s best to get as much time as you can from the seller to be able to close the deal. If you are going around promising a 3 day closing and don’t already have someone interested in the deal, you are going to have a lot of trouble getting the deal done.

Try to get 4 weeks if you can. You don’t want to be continuously going back to the seller making excuses to get the closing extended.

8. Didn’t Market the Property Hard Enough

If your buyers list doesn’t respond to the deal, you’re going to need to market it to find a buyer. You should be marketing it anyway so that you can be building your list. Nothing builds lists quite like having inventory.

Plaster that deal up everywhere. Stick bandit signs all over the area where the house is (if legal in your area.) Of course, if you don’t want the sellers to know what you are doing, you don’t want to include the address on the sign.

You could also put some ads on craigslist.org, push the deal at your local REIA, put an ad in the major and smaller newspapers in your area. Get creative. Maybe a publicity stunt… that would probably just be embarrassing.

9. Didn’t Start Pushing It Immediately

As soon as the seller signs the contract and you have it safely receipted at the title company, you need to start your blitz to get it sold. Don’t wait until Monday if you get the deal signed up Saturday morning (unless you are worried someone will try to steal the deal from you because you haven’t receipted it at the title company yet).

Time is of the essence. Use it wisely. You have to be careful because you might find it harder to find a buyer than you thought. Days crossed off the calendar already can’t help you.

Conclusion

Knowing that these 9 reasons are the main causes of not being able to find a buyer for you wholesale deal, I hope you are able to prepare yourself so that it will never happen to you.

We all want to be able to sleep soundly at night and that is much easier done when we know that sellers can count on us to do what we’ve promised.

Sleep well, my friends.
Photo: woodleywonderworks

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About Author

Danny Johnson (G+) is a real estate investor in San Antonio, TX. Visit his blog: Flipping Junkie - A House Flipping Blog to follow along with him as he shows, in detail, the marketing he is doing, the leads being generated, the lead and deal analysis, the rehabs and really, just about everything. He also provides real estate investor websites at LeadPropeller.com.

25 Comments

  1. OMG, everyone should print this and tape it to their wall or bulliten board, and read it every day!

    Wholesaling takes focused, devoted effort. Danny, it is so good!

    I did mention it here https://www.biggerpockets.com/forums/83-rent-to-own-a-k-a-lease-purchase-lease-options/topics/83008-how-to-set-up-a-lease-option-assignment-business-fast?page=2

    Nice job!

    You have to write one for sellers too! 9 Reasons Why Your Wholesaler Home Owner wants to shoot you! lol

    Keep it up!

    Brian

  2. Great Article Danny,

    I will point out bigger pockets in general seems to frown at the idea of building your buyers list before you have deals. Many of them suggest to have the deal and if its an actual deal you wont have a hard time finding a buyer. Curious as to what you think about that thanks

    • Samantha,

      I used to share that opinion. Mainly because I got tired of people calling me and asking me a million questions. It was annoying because of the way they went about it and the fact that the vast majority of them would never even find a deal to call me about. I just didn’t have time for it.

      But….

      I’ve come to realize that the approach is the problem. The calls should not be just an obvious asking of questions from a call sheet. If they are handled differently, it makes all the difference in the world. The purpose of the call should be to start developing relationships.

      So, I propose just calling and introducing yourself and being honest about just starting out. During the conversation you should be able to determine if they are serious buyers and whether they can pay cash. That’s it.

      Now, when a good deal comes along, you could have a good idea of who to call first. If you hadn’t started building the buyers list, you’d be starting from scratch while under the gun.

  3. Katie Trankina on

    Hi Danny,
    I’m working on my first wholesale deal in downtown Chicago and with your background I”m hoping you can help me- I’ve put a lot of work into this and come to a point where I could use some advice.
    I’ve found 10 REO condos, the actual banks that hold them and what they paid for each. I have several cash buyers ready to purchase atleast a few of these The banks have not listed the properties with a broker and seem to be holding on to them. I can’t find the person(s) (asset manager) to make an offer to –

    And I believe that recently Banks are now requiring a buyer to hold the property for 90 days –
    Any help would be greatly appreciated Danny
    Katie

    • Are the banks larger banks or smaller, local banks? I’ve had good experiences being able to make offers on REO from a small local bank because I was able to get in touch with a decision maker. That is what you will have to try and do. Way back when I was able to get in contact with a small bank about making an offer on one of the properties they took back, all I did was send a letter to the bank telling them I was interested in paying cash for the property. The right person then called me. So whoever opened the letter was able to put it in the right person’s hands. This is probably a waste of time for a large bank.

      There are ways of getting around these 90 day restrictions. Some of them are buying in a land trust and assigning the beneficial interest in the trust to your end buyer, buying in an LLC and selling the LLC to your end buyer, or just not working with banks that require you wait.

      I’m buying directly from homeowners these days, so I don’t have to deal with these issues.

  4. Hello I am a newbie, trying to get started.. I am following directions and am educating myself before I do anything. Your article is well written and easy to understand. Thank you for the information.

  5. Hey Danny, so how do you set your price in a wholesale deal? 70% ARV-repairs, let buyers bid or…? Thanks for great articles

    • I price them with the formula you mentioned: 70% of ARV – repairs – my wholesale fee. Sometimes, if the house is in an area where I have a buyer that has his/her own formula, it changes. So someone might buy a 3/1 in a certain neighborhood for $50k all in. So if it needs 10k in repairs, I would need to buy it for cheaper than $40k because that would be about the most they would pay. Typically, it is the 70% formula though.

  6. Great article Danny! I’m new to wholesaling; I’ll be sure to keep these pointers in mind as I build my business. Brandon kept his word on forward this article to new wholesalers. :)

  7. Hi Danny,

    Thanks for the well written thought out article. I too like the others am a “newbie” to the Real Estate game…and I’m loving every inch of it so far!!! There is so much to learn but a lot of it I noticed comes from TAKING ACTION through much experience. I may be floating on a pink cloud right now but even if I fall off I know it is a matter of time before I get a shot at another great deal!

    Definitely going to checkout your website.

    Peace brother

    Al

    • Hi, Al.

      Thanks. You are absolutely right about getting out there and taking action (no matter how small). Taking action will show you what you need to know, immediately.

      Danny

  8. Hello Danny,

    Great article! I read your blog as well.

    I have a question about “having the contract safely receipted at the title company” so nobody “steals the deal”. How does their receiving the contract protect your deal legally?

    I was told that the only way to protect the deal was to file an Affidavit and Memorandum of Agreement at the courthouse, in order to create a cloud on title.

    Thank you for sharing!

    David

    • If the seller signs more the one contract, from what I understand, the first one with money paid is the valid one. The contract is not valid until you give consideration (earnest money). Check with an attorney about this as I am not one.

  9. Hello Mr. Danny Johnson,

    To begin, you are amazing. You give us amateur real estate investors some sense of hope and comfort. Thank you for sharing your expertise.

    My name is Chelsey Wilkins, I’ve been pursuing a financial literacy education for about a year and now I’m to a point where I am ready to start learning by doing. I plan to invest for long-term max cashflow through multi-family rental properties. I have run into my share of obstacles, including generating revenue for my start-up business. As a financing option, I have chosen to take advantage of private lenders, however, I am not sure what my real estate proposal should include? Or if I should even start by just sending a deal to my list of private investors?

    I’ve taken on the method of wholesaling to assist in generating revenue for my business. I have a few questions if you don’t mind:
    1) How can I get an REO property under contract without a proof of funds letter?
    2) As a method to find cash buyer’s I began constructing a list of single-family homes sold within my county of interest. Then I went to the tax accessor website and looked up the properties, I recorded mailing information for any owner who did not live in the property. Is this an effective way of drawing out cash buyers? I am mailing out contact letters to make the cash buyers aware that I have properties in my inventory similar to properties they’ve recently purchased.

    I really appreciate everyone’s feedback. Thank you for your time. :)

  10. Jonathan Jimenez on

    Awesome Post! I will definitely refer back to this many times.

    If anything, I would argue your #3 point could be #1 as it would then make several other points “a given”. ie: If you know your buyers, you wouldn’t ask above and beyond their asking price (#1) and you would have approached your buyers correctly (#4).

    With that said, (even though I would argue) I wouldn’t change a thing! Simply put, it’s a great article every wholesaler should read and I will highly recommend it to others.

    Thanks,
    Jonathan

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