Real Estate Wholesaling

The 4 Types of Real Estate Wholesale Deal Buyers (& How to Handle Them)

Expertise: Personal Development, Real Estate Wholesaling, Real Estate Investing Basics
96 Articles Written
wholesaling-newbie

As a real estate wholesaler, you have many concerns. These are just a few:

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  • Did I calculate the repair cost correctly?
  • Is my ARV close?
  • Did I use the correct comps?
  • Can I increase my assignment fee on the deal?
  • Will the seller or the buyer back out of the deal?

Again, these are just a few of the concerns wholesalers have when working a deal. There are tons more, but one thing many wholesalers overlook when putting together a deal is knowing which types of buyers are out there.

The 4 Different Classes of Wholesale Buyers

There are many classes of buyers, and each one brings a different set of positive qualities and challenges to the table. I want to take a moment to discuss a few of the classes of buyers I’ve come in contact with.

1. The Inquisitive Buyer

This person I believe can potentially turn out to be a valuable customer, but you will need to do a lot of hand-holding with this person.

See, the inquisitive buyer knows he or she is a real estate investor, but although not entirely new, still has many questions. One aspect I like about this buyer is that they have tons of questions, and depending upon your response to their questions, you may be able to steer them into a solid deal. Once you provide a solid deal for an investor, you will have them as a customer every time.

However, on the other hand, be prepared to spend some time on the phone with this person. You have to exercise patience. Many wholesalers disregard this buyer because they are mistaken to be tire-kickers, but in actuality, they still have a little bit of the jitters because they don’t know you and they are still trying to vet the deal.



Related: 5 Costly Pitfalls That Catch Wholesaling Newbies Off Guard

2. The Tire-Kicker

There are no words that can express my frustration with these buyers. They favor the inquisitive buyer, but the real reason they are on the fence is because no deal is ever right, no matter how sweet the numbers are. If you’re not careful, this type of buyer can make you lose precious time and money dealing with their antics.

The tire-kicker will ask you numerous questions, but many of the questions make no sense. For example, I was asked by a tire-kicker buyer if they could have an inspection period. Sorry! This is not a traditional deal where you get to talk it over with your significant other.

Wholesaler beware: This buyer can suck up your time and potentially lock your deal up and walk away at the closing table. This is the main reason I have a large nonrefundable earnest money deposit.

3. The Savvy Buyer

This is the buyer who is willing to pull the trigger even after simply looking at the numbers and pictures. These buyers are cream-of-the-crop and the ones you want in your stable.

The difficult thing with these buyers is that they are savvy and know that every penny counts. So if you’re a newbie and they can smell it on you, they will try and negotiate your wholesale fee down. This is not done intentionally. They don’t know how much you’re making, but they are trying to secure the best deal for themselves.

Wholesalers might talk about having a ton of buyers on their list, but the truth is if you have a handful of savvy buyers, you can make a lot of money. The downside is that savvy buyers are not all that easy to please. They know what they want, and they know what price they need to buy it for. One of most challenging things with the savvy buyer is making sure you have enough properties to push their way. Once you hit a string of times where you can’t provide them a deal, they will move on to the wholesaler with a deal.

4. The Pretend Buyer

This is the worst—the wannabe wholesaler who is trying to tie up your deal to find an end buyer. Honestly, this has happened to me, and it did work out in the end, but I made them put up a hefty earnest money deposit. I don’t have an issue with the wholesaler that discloses the fact that they’re a wholesaler looking for another buyer. It’s the ones that try and talk a big game but who begin to play games when you tell them to put up the earnest money that I take issue with. These are the ones that give legitimate wholesalers a bad name within our own community.

newbie-first-deal

Related: What Comes First for Wholesalers: The Buyers List or the Deal?

How to Know the Difference Between Buyers

It can be difficult to differentiate between the different class of buyers. If you have a solid deal, all buyers will show interest and ask a few questions. The majority of them will call you and ask to walk the property. This is a good thing. Sometimes if the deal is sweet enough that the savvy buyer will go ahead and lock up the deal. At that point, you can feel pretty confident that you're going into escrow.

Just be aware that buyers come in different forms. Some will try and ask you to reduce your assignment fee to make the deal work. You have to be confident in your numbers and have a long enough inspection period to get the deal done.

Have I overlooked certain types of buyers?

Comment below!

Marcus Maloney is a value investor and portfolio holder of residential and commercial units. He has completed over $3.3 million in wholesale transactions. Currently, Marcus is a licensed agent who ...
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    Jason Matthews from Jamaica, NY
    Replied almost 2 years ago
    Thank you Marcus for sharing. I am new to wholesaling an this information helps me.
    Marcus Maloney Wholesaler from Queen Creek, AZ
    Replied almost 2 years ago
    Jason, thanks man let me know if you have any questions
    Katie Rogers from Santa Barbara, California
    Replied almost 2 years ago
    “The tire-kicker will ask you numerous questions, but many of the questions make no sense. For example, I was asked by a tire-kicker buyer if they could have an inspection period. ” That may be the mark of buyer who isn’t all that familiar with wholesale deals, not a tire-kicker. Also, just like you cannot necessarily believe proforma numbers on commercial deals, the buyer cannot necessarily believe the wholesaler’s “sweet” numbers.
    Marcus Maloney Wholesaler from Queen Creek, AZ
    Replied almost 2 years ago
    Katie, thanks for your input. You’re right there is a thin line between an uninformed buyer/investor and the tire kicker. The tire kicker will continuously ask questions that they should know from conducting their own due diligence. As with the analogy you used regarding the proforma the investor will seek to understand the numbers and what’s missing.
    Gary Leonard Real Estate Broker from Brockton, Massachusetts
    Replied 3 months ago
    There is a Buyer in between Tire Kicker and Savvy. The “Tester”. They will test if you are confident in your numbers whether they know your data is right or wrong. If they see you dont back down and your confident, they will give their last stand by saying “let me get back to you in a day to run my numbers” but end up complying with your Assignment amount. However, if they think you know very little, they will make up ridiculous rehab costs for instance, say you go ahead and have 3 contractor friends who are licensed inspect the home and you basically take the average cost- and even double check that cost, then use it for your deal as a “estimated costs” , The tester, once you fail their test, they will tell you a $3,000 job is actually a $10,000 job and almost have you believe it (ie Gaslight). They will intentionally have you 2nd guess your data and it will show. Stand firm, agree to disagree and be polite, and they should come in at or around what you are looking for. Fail their test, they will send you low ball offer and then patiently wait for you to either drop out of the deal to swipe it up at around the same price you had it for. These are the buyers who didn’t have the knowledge or software to get their deal in front of the buyer and you beat them to it! They realize they can just buy direct and will do the same thing over and over again preying on inexperienced wholesalers- Refrain in announcing that your “new” or that you just started the business- that will target you these type of buyers involuntarily. They are however avoidable because they range between the ages of 55-70 yrs of age and aren’t that computer software and:or marketing savvy to find their deals.... The Tester can also be known as “The Hater Buyer” or “ If he doesn’t know his stuff we will wait until he loses the deal by throwing a indirect wrench in his marketing” then we will approach the Seller ourselves. Do not give them info on the Seller- Make sure they submit Non refundable EMD. They will begin to respect you once you close a deal with them and will become a Savvy investor but to other newbies will still be known as “The Tester”. These Buyers account for 35 to 40% of Buyers so they are prevalent. Best thing to avoid them is have Testimonials and Examples of Partner deals on your website showing that you are active and a force to be reckoned with. Again, the are usually between 55 and 70 yrs old. The best buyer is age 30 to 50- They aren’t the “How about me” or “In better than everyone” type - They are down to earth, cool and ready to close. They best culture of buyers in my experience is those or African and /or Spanish decent
    Marcus Maloney Wholesaler from Queen Creek, AZ
    Replied 3 months ago
    You are right the testers will see if you’re knowledgeable about your deal. If not they will try and get a price reduction from you.
    Gary Leonard Real Estate Broker from Brockton, Massachusetts
    Replied 3 months ago
    Correcting word “avoidable” to “unavoidable”
    Blake Wood Real Estate Agent from San Diego, CA
    Replied about 1 month ago
    Thank you Marcus - this is very helpful. Any suggestions on filter questions that get rid of the pretend buyers? With a lot of the networking online during this pandemic, it seems it is easier for pretend buyers to hide and thus making about 50% of the people I talk to are pretend buyers!