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