Buying from a Wholesaler, is it me?

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Buying from a Wholesaler, is it me?

Greg Grant
Hollywood, FL · Member since 2016 · 57 posts · 20 votes

So I have tried out a couple dozen wholesalers in my area (South Florida) and I can't find a single one that I trust.

A perfect example of this is one guy that posted a property for $160k, said it needed $30k of rehab and its ARV was $185k....seriously?

I'll go through my emails and get some nice looking properties (price, arv, estimated rehab) and I email them and they say its gone, or its being bid up higher than the starting asking price.  I'm extremely suspicious because of all the shady stuff I've already come across with a lot of wholesalers.

I know a lot of wholesalers are inexperienced people looking to make a quick buck, but I am focused on making sure my $$'s are invested wisely.  I'm not going to throw my money at a property on the word of some stranger and then get stuck with a crappy property.

It seems like if I don't just throw my money at it extremely fast, "it's gone".

How is it possible that an email list is sent out in the morning and less than 12 hours later the properties are gone?  Don't people want to do a little due diligence first?  I want to be able to check things and make sure I'm not buying a property that has 3 mortgages being attached to it and I'm 200k upside down in it.

Do properties really go that fast or is that some kind of high pressure sales technique to separate me from my money?

Do I put an offer on something to tie it up and then let my title insurance company check things before the closing?  Do I have contingencies to get out of it if its a bad deal?

My concern is putting up earnest money deposits too.  I don't mind doing it through my real estate agent, but can I even involve my real estate agent in the wholesaler transaction.  There's no way I would put up a "non-refundable" earnest money deposit.  And some wholesalers have said I need to do that to prove I am serious.  No way that's happening.  For all I know I put up $2,000 find out it has $250k in liens, mortgages, etc. on it and I lose my $2,000.

Am I just being too paranoid or am I missing some steps to this process?

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Rashard Alomari
Investor · Memphis, TN · Member since 2016 · 215 posts · 128 votes
8y
Wow. There is so much I would like to say regarding this topic, but I’ll abbreviate. Yes, it is very realistic that a property is sent out to an email list and is gone within hours. Especially if it is a good deal. You need to react quickly and effectively. You don’t need to put an offer on a contract without doing your due diligence, but you do need to respond promptly and look into the purchase and either pull the trigger or accept the fact that a true deal will be gone rather quickly. Regarding earnest money, you should ONLY put a deposit down if you are certain you want to buy the property and that deposit should be entirely non-refundable with the exception of title defect(liens/encumbrances/etc). That will eliminate any worry you have with being upside down(unless purchased at the wrong price point). If anyone tells you your deposit isn’t refundable even with title defect you need to tell them to fly off somewhere. Regarding trusting a wholesaler, or any investor for that matter, you don’t have to! It’s not your job to trust anyone; it is in fact your job to trust yourself and determine if this is a deal or not. Point blank. Perform your own research. View he property. Run your market analysis and analyze true comps. Then move forward or back away. It’s simple :)
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  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    8y

    Here are the facts:

    The word "wholesaler" is tossed around quite a bit. I like to distinguish them from "flippers". Flippers OWN their properties.

    Now, there are only two ways to legally "wholesale" in FL:
    1. own it (flipper)
    2. be licensed

    The rest of them are criminals operating illegally and brokering without a license. See 475.42 and 475.43. So, the next time one of these "wholesalers" pops up the relevant question is: do you own the property or are you licensed. If they say they are doing assignments, what this means it they are circumventing license law and brokering without a license. You will have a VERY difficult time finding anyone honest. So, if they are not licensed, and do not own the properties, they are UNLICENSED BROKERS. The FRAUDS AND SCAMMERS will never admit that, and the word "wholesaler" commands a bit more respect than actually admitting they are UNLICENSED BROKERS.

    475.42 specifically states that brokering without a license is a 3rd degree felony. If you are offered properties and they are not owned or the offeror is not licensed you SHOULD report the criminals here:

    http://www.myfloridalicense.com/dbpr/re/documents/...

    One give-away that these operators are not misinformed but rather criminals knowingly brokering without a license is the way they operate. Sometimes they will send out info on a house or post it on CL without an address. Often they avoid giving out their full name, their address, etc. I have turned in dozens. So, if you are dealing with criminals, I would not expect a high level of integrity, competency, licensing, E&O insurance, etc. If you want to deal with these types BE CAREFUL. I believe their motto is: ANYTHING FOR A BUCK.

    2Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    8y

    BTW: non-refundable fees are NOT the norm in the RE business. Only unlicensed broker criminals are entitled to charge them. Go through a licensed agent, and ask about non-refundable deposits. They will wonder what the heck you are talking about!

    1Reply
  • Bryan Feik
    Investor · Denver, CO · Member since 2017 · 36 posts · 33 votes
    8y
    I’ve been working with wholesalers in Denver for the last couple years. They all require non-refundable earnest money and good deals usually go the first day properties are shown, sometimes within 10 minutes. I’ve purchased two properties through wholesalers in the last year and both were great deals. You have to deal with a certain amount of shaddyness but for a heavily discounted property it is worth it.
    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y

    its a dual edge sword  lots of wanna be investors kicking tires.. so wholesaler wants to weed them out by asking for non refundable

    also have to remember they have a time specific to flip the house and if they don't hit it they lose the deals.

    personally I fund deals were I see them come through wholesalers.. but I personally will not deal with them.

    I don't have the time to wade through there BS  of over value under estimate.. and there is no way I am giving one a non refundable deposit on a home I have not even run title on.

    but that's me I don't need them I can find plenty of deals through all sorts of sources.. once many understand through public records what we do.. they start hounding us.. because we actually close  LOL.. I get all sorts of letters wanting me on their lists.. they are usually kind of taken a back when I say no thanks don't want to be on your list..

    I prefer working through agents who know what they are doing.. just have to find the good one's that is the trick. good ones who deal in distressed assets have a very short rolodex of buyers.. once your on it your golden

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  • Greg Grant
    OP
    Hollywood, FL · Member since 2016 · 57 posts · 20 votes
    8y

    Yeah its the shadyness that really gets to me.  And I just don't see any possibility of me handing over some non refundable cash and crossing my fingers the deal is good.  I completely understand they need to weed out the wannabe investors, but it seems I'm stuck weeding out the wannabe wholesalers.

    Guess I either need to find a legitimate wholesaler (getting ready to give up on that) or bypass them all together and just find my own leads.  I've already started to setup a campaign to reach out and find my own homeowners and eliminate the middleman (wholesalers)

    Let me ask you this.  Am I correct that when I have a title search done and it appears clean, and then we go to the closing and I have title insurance, no matter what, I'm covered right?  If something comes up, the title insurance takes care of it.  But if something isn't recorded at the time of the closing, tough luck for anyone trying to invoke a lien, right?

    1Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    8y

    @Greg Grant

    I hope you read my post up above. It lays out a lot of info about legal operators calling themselves "wholesalers" and criminals breaking the law. As to your question, I am not sure what you mean about filing a lien? Are you referring to clouding title?  I would not worry about that. A title company won't close with a cloud on title. 

    I just had a nice chat with another BP member from the east coast of FL. Seems that they met several "wholesalers" off BP that are simply criminal FRAUDS AND SCAMMERS and when questioned in depth, they simply disappeared. Here is what I personally don't get: if someone has such a good deal, why would they give away 30K, 50K, whatever, instead of taking ownership?  I just helped a local seller with education. It resulted in a suit by the "buyer" that really wasn't a buyer (FRAUD BY INDUCEMENT), etc...and counter suit by owner. When all was done, both ate their legal fees and walked. Here is the REAL irony: if the idiot unlicensed broker had closed and then resold, the seller would have been stuck and the unlicensed broker would have had a nice payday of 40K..maybe even 50K. But because the idiot tried to ILLEGALLY broker the deal, HE LOST. It cost him money to sue the seller and it cost him money to defend the counter suit. Not only that, he is under investigation AGAIN for unlicensed brokering. The first time he got a nolle pros, and now the state may not be so nice. The seller has sent in a letter to pressure the state to prosecute the idiot. The unlicensed broker idiot is a BP member and I know darn well he has seen these posts. He remains silent...LOL.

    Two relevant statutes:
    475.42...which classified brokering without a license as a 3rd degree felony
    475.43...which puts an end to using contracts to circumvent licensing laws.
    A BAR SALE is the acronym from brokerage activities
    Advertise
    Buy
    Appraise
    Rent
    Sale
    Auction
    Lease 
    Exchange
    FOR ANOTHER...so these unlicensed individuals using contracts to SELL FOR ANOTHER...are brokering without a license. Get licensed..and assign all day long if you want. On top of that, HOW can they tell others about their unlicensed brokerage deal without ADVERTISING...which again...for another...is a brokerage activity.

    2Reply
  • Greg Grant
    OP
    Hollywood, FL · Member since 2016 · 57 posts · 20 votes
    8y

    @John Thedford

    I did see your post and I have seen many others you've posted relating to the same issue.  In fact, your posts have helped get me become concerned about finding a legitimate  (having a real estate license) wholesaler and not dealing with the shady high pressure "hurry up and give me a deposit or you'll lose it" types.  I appreciate you taking the time to list the statutes so people know you're providing actual proof that what they're doing is illegal.

    I am not interested in getting wrapped up in some BS because of a shady SOB.  That is why I'm so frustrated about trying to find an honest (and licensed) wholesaler and most likely will just do my own motivated seller searching to avoid some BS.

    0Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    8y

    Even some agents cannot be trusted and the question remains why would somebody give away 30 or 40 or $50,000  I know I would not

    2Reply
  • Bryan Feik
    Investor · Denver, CO · Member since 2017 · 36 posts · 33 votes
    8y

    With the wholesale deals I have done, the earnest money is 5 - 10K which is not awful but more money than I want to simply throw away.  Supposedly it is refundable if the wholesaler is unable to deliver good title but I have not ran into that situation.  There is no loan or inspection objection. 

    0Reply
  • Rashard Alomari
    Investor · Memphis, TN · Member since 2016 · 215 posts · 128 votes
    8y
    Wow. There is so much I would like to say regarding this topic, but I’ll abbreviate. Yes, it is very realistic that a property is sent out to an email list and is gone within hours. Especially if it is a good deal. You need to react quickly and effectively. You don’t need to put an offer on a contract without doing your due diligence, but you do need to respond promptly and look into the purchase and either pull the trigger or accept the fact that a true deal will be gone rather quickly. Regarding earnest money, you should ONLY put a deposit down if you are certain you want to buy the property and that deposit should be entirely non-refundable with the exception of title defect(liens/encumbrances/etc). That will eliminate any worry you have with being upside down(unless purchased at the wrong price point). If anyone tells you your deposit isn’t refundable even with title defect you need to tell them to fly off somewhere. Regarding trusting a wholesaler, or any investor for that matter, you don’t have to! It’s not your job to trust anyone; it is in fact your job to trust yourself and determine if this is a deal or not. Point blank. Perform your own research. View he property. Run your market analysis and analyze true comps. Then move forward or back away. It’s simple :)
    5Reply
  • Brian Garrett
    Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
    8y

    @Greg Grant Finding a legitimate wholesaler in South Florida is like finding a needle in a haystack.

    1Reply
  • Greg Grant
    OP
    Hollywood, FL · Member since 2016 · 57 posts · 20 votes
    8y

    @Bryan Feik Yeah $5-$10k I would be willing to pay a wholesaler as a finders fee.  

    But I've seen where local wholesalers are trying to get up to $40k where I would be "lucky" to make $25-30k on the flip. That to me is ridiculous and I will not pay someone more than I'm going to make when I'm taking all the risk of the renovation.

    0Reply
  • Greg Grant
    OP
    Hollywood, FL · Member since 2016 · 57 posts · 20 votes
    8y

    @Rashard Alomari Exactly the way I feel.  Just haven't had a good experience with the process form local's yet.

    @Brian Garrett tell me about it. 

    1Reply
  • Gerardo E. Saldana
    Perris, CA · Member since 2017 · 20 posts · 15 votes
    8y

    Hmmm... Two thoughts come to mind. 

    1.) Have you tried getting a referral for a good wholesaler from other investors or REIAs?

    2.) It sounds like you found an opportunity! If there are no (LEGAL) wholesalers in Florida, maybe that is an opportunity to be taken advantage of. Just make sure you keep it legal and either close on the property or else get licensed just like some of the other members discussed above.

    Also, just like Jay Hinrichs mentioned, there are real estate agents that deal in distressed assets out there. If you can find them and build a relationship with them, they could become your source for deals.

    1Reply
  • Brent Coombs
    Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    8y
    Originally posted by @Bryan Feik:

    With the wholesale deals I have done, the earnest money is 5 - 10K which is not awful but more money than I want to simply throw away.  Supposedly it is refundable if the wholesaler is unable to deliver good title but I have not ran into that situation.  There is no loan or inspection objection. 

    Firstly, I believe you have the right to place the earnest money into escrow (of your choosing/agreement). Secondly, there are many other cancellation-clauses that you could include in the purchase contract besides "unable to deliver good title", such as: "the following undisclosed faults were found with the property, which now allows me to cancel"). 

    [Such clauses could also be the reason why all the good deals are gone within hours!] Cheers...

    1Reply
  • Anthony Aguillard
    Investor · Las Vegas, NV · Member since 2012 · 289 posts · 74 votes
    8y
    I'd recommend u team up with another flipper to learn before u jump into this business. There are shady people in all professions. Conduct your due diligence once you've become experienced and your learning curve will be easier. Preparation and hard work is the key.
    0Reply
  • Lesley Resnick
    Real Estate Agent · Jacksonville, FL · Member since 2015 · 1k+ posts · 1k+ votes
    8y

    The fundamental issue (good and bad) is that we are in a seller's market.  The supply of distressed and high quality properties is constrained.  Everyone is looking for the same deal.  There are a lot more people out there who call themselves flipper and/or wholesalers.  There seems to be a notion that wholesalers, forgetting the legality, have the best deals.  There is no regulation, so inherently you are going to see questionable activity.  Since it is now a sellers market, "grandma who must sell her house this week!", will now have 10-20 offers on her house.  The national companies, regional and the bandit sign people.  If the deal is a home run, the wholesaler will,l market it up, keep it for themselves, sell it to their best customers.  By the time it reaches the masses it its unlikely to still be a home run.  If it is a solid deal it will sell  immediately.      

    2Reply
  • Bryan Feik
    Investor · Denver, CO · Member since 2017 · 36 posts · 33 votes
    8y

    @Brent Coombs

    Wholesalers will provide a purchase contract of their choosing, you cant just add objections.  Do your own due diligence and determine if the purchase price is worth dealing with the shaddyness and potential risk.     

    0Reply
  • Greg Grant
    OP
    Hollywood, FL · Member since 2016 · 57 posts · 20 votes
    8y

    @Brent Coombs what you said its partially true, but keep in mind - a contract isn't a contract until both parties sign it.  Anything can be added or crossed out before its signed.

    The problem is mainly with the arrogance of the wholesaler, not the piece of paper itself.

    1Reply
  • Dustin P.
    Realtor · Tempe, AZ · Member since 2017 · 541 posts · 442 votes
    8y

    In the Phoenix market it's common to see good wholesale deals sell within 24 hours, and really it's more like 3-4 hours. If it's a good deal (In this market I would define that as 80% ARV minus rehab) then investors are not going to pass on it. It doesn't take too long to comp a property, check out the neighborhood and do a quick walk through. There is inherent risk in any investment but you can do quite a bit of due diligence in a short period of time.

    Non-refundable down payments are also common here. Consider the wholesaler position: If you have 10-20 people willing to buy a property and you have a set time period in which to sell it, you need the investor to have some skin in the game.

    If you are not comfortable with those terms you may find better luck going through a real estate agent and finding MLS deals. You'll get an inspection period in which to check out plumbing/roof/HVAC/etc. and if it's not to your liking you can walk with your earnest money.

    2Reply
  • Michael Plante
    Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes
    8y

    I believe in wholesalers

    I just bought 2 mobile homes from a wholesaler 

    one with 2 acres the other with 1 acre. 

    For 29k

    The house next door is 4,000 sq foot $575k house 

    From my experience I would say put 35k to rehab the mobiles and they will sell for approx 140k

    0Reply
  • Stan Hill
    Investor · McKinney, TX · Member since 2014 · 189 posts · 93 votes
    8y

    I bought a house from a big name wholesaler in Fort Worth. I thought the price was too high and the repair budget optimistic. We partnered with an *experienced* flipper. She was a crook. Trust your gut. If I had listened to mine, I would have saved a lot of money. Do YOUR due diligence. Don't let someone who doesn't have any money to put into a deal they know how to do it.

    0Reply
  • Stan Hill
    Investor · McKinney, TX · Member since 2014 · 189 posts · 93 votes
    8y
    Originally posted by @Michael Plante:

    I believe in wholesalers

    I just bought 2 mobile homes from a wholesaler 

    one with 2 acres the other with 1 acre. 

    For 29k

    The house next door is 4,000 sq foot $575k house 

    From my experience I would say put 35k to rehab the mobiles and they will sell for approx 140k

    Thanks for posting this, as I had posted only a negative experience. We did have a good experience with a wholesaler. We bought a house for $44,000 with a tenant in place for years, paying $675 per month.  They were an older couple. We were hoping they would stay their until death instead of defaulting.

    Anyway, the day of reckoning was that they smoked in that house and had pets for 11 years. We knew it was coming and factored that into our decision to buy. We put about $14,000 into the house, but now it rents for $995 per month. And in the DFW area, it's hard to find a place where properties aren't appreciating nicely.

    So where we are now: have about $58,000 into a house worth at least $75,000 and rented for $995. Oh and it sits on two lots so we can always build another house there.

    1Reply
  • Brent Coombs
    Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    8y
    Originally posted by @Greg Grant:

    @Brent Coombs what you said its partially true, but keep in mind - a contract isn't a contract until both parties sign it.  Anything can be added or crossed out before its signed.

    The problem is mainly with the arrogance of the wholesaler, not the piece of paper itself.

     Nope. As Judge Judy is fond of saying: "if it's not written down on the contract, it never happened"! Why should "arrogance" have to do with whether it's a deal or not?

    0Reply
  • Greg Grant
    OP
    Hollywood, FL · Member since 2016 · 57 posts · 20 votes
    8y

    @Brent Coombs

    Originally posted by Brent Coombs:

    Originally posted by @Greg Grant:

    @Brent Coombs what you said its partially true, but keep in mind - a contract isn't a contract until both parties sign it. Anything can be added or crossed out before its signed.

    The problem is mainly with the arrogance of the wholesaler, not the piece of paper itself.

    Nope. As Judge Judy is fond of saying: "if it's not written down on the contract, it never happened"! Why should "arrogance" have to do with whether it's a deal or not?

    @Brent Coombs

    @Brent Coombs   ?? - Maybe you should re-read what I wrote.   Because that's exactly what I said.  A contract is not a contract until both parties sign it.  Meaning, you can add or remove whatever conditions/terms you want before both people sign it, then once both people sign it - that means both people agree to it.  And in your case, it would make Judge Judy happy.  Changing a contract is very common, it helps make both parties feel they are getting the fairest deal.

    What I meant in regards to "the arrogance of the wholesaler" is that it seems many of them feel that they can ask for whatever they want in regards to terms and investors "have to" agree to it.  

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