Possible purchase from a wholesaler

19 Replies

This could be my first purchase from a wholesaler. His asking price and his ARV both seem good. What I'm wondering is if his expectations are normal since I've not dealt with a wholesaler before. He wants the asking price to be his net, so the buyer (me) is to pay all closing costs and unpaid property taxes for the year (Indiana pays taxes in arrears). He wants a no contingency contract, purchase in cash, as is, and a $2500 non-refundable deposit along with the purchase contract.

Is this normal? If we don't use a realtor it still adds at least $3000 to the asking price...

If I get it, I'm also considering using a delayed financing option to then free up my cash again to do the necessary rehab work.

Any insights for me? Thanks in advance!

What they are asking isn't too out of the way. Part of it may be what the wholesaler committed to in the original purchase contract, but honestly... most wholesalers in Indy are marking deals up by $5,000-$10,000+. My last wholesale purchase had a $9,000 assignment on an $18,000 purchase. That's a 100% mark up. The home owner's actually walked away with $4,500 for their house after paying back fines to the city and some of the other closing  costs. 

With that being said... I would lower the offer by $2,000-$3,000. Basically, that shifts the closing costs to come out of the wholesalers profits instead of your initial investment. I am seeing too many deals where the wholesaler is making more money than the rehabber who is doing the actual work. This is exactly why so many markets are starting to regulate real estate wholesaling.

With the no-contingency, I would recommend having a contractor walk-through the property with you to ensure that there is nothing you need to be concerned about before sending in the earnest money deposit. Just make sure that you don't have any problems that will through your rehab budget way off.

I don't see the need to have a realtor for closing, but I would recommend having a realtor run some MLS based comps to ensure that you are numbers are accurate. Super important to ensure you understand all of the different ways to fail on your first deal. How much retail sales activity is going on in your area? Who are your targeted buyers? How long with the project take? What are your monthly carrying/holding costs? Do you understand the level of finish you need to support the comps you have established as the ARV? If your ARV is $185k, but all of those comps have granite countertops, stainless appliances, hard surface flooring, recessed lighting, etc, you have to ensure that you are providing a similar finish and ensure that it is reasonable in the budget that you have allotted. Are you working with a mentor? I would recommend finding someone to walk you through some things. Even if you pay them a consulting fee or percentage of the back end, it may actually make you more profitable after the fact. Experienced investors make 20%-30% more profit on deals than they did when they started (sometimes even A LOT more.)

Thanks for the great info Ross! This will be my second flip, I purchased the first through a regular listing last year. This potential deal is in my neighborhood so I know it well and my realtor is crunching numbers for me today as well. Having not worked with a wholesaler before it's good to know that what he's asking isn't too far off base and helps set my expectations appropriately moving forward whether this deal works or not. Now if I could just get him to return my calls so we could try to put something together.... :).

And my realtor is pretty cool about helping me (if needed) to get the purchase done even without her because she knows she'll get the sale in a few months.

I'm a bit surprised that I'm having a hard time getting sellers to respond to my offers the last couple of weeks. I have an offer on the table for a foreclosure that the bank is just taking in offers (for 9 days so far) and giving no indication when they will make a decision. I asked a couple questions about making an offer on another owned by an investment group 5 days ago and haven't gotten a response, and now I can't seem to get the wholesaler that sent me this deal to return my calls (and I'm not lowballing, I've been offering at or above asking price with no contingencies, all cash)...It's weird but the right deal will work out at some point.

Thanks again for the helpful info!

@Kasey Newbold :

I concur 100% with what Ross has said and would add to put particular emphasis on the contractors evaluation of the property and cost to rehab. There are some whole seller who provide pretty accurate numbers but we've found that a lot rehab estimates from whole seller are lower than what is actually required. There are also differences of opinion regarding what is needed or wanted on a rehab. Remember, the whole seller is trying to sell the property and it is certainly in their best interest to make the rehab numbers as low as possible.

Also, ask if you can submit the earnest money/deposit to the title company vs. the whole seller. In most cases they are not licensed and will not be holding those funds in an escrow or trust account.

Thanks Todd! Good advice about escrow!

He finally got back to me that someone else has a purchase agreement on it sight unseen...I'm bummed but I'll be patient for the right deal.

This post has been removed.

From my perspective as a slightly more seasoned flipper and a Realtor, I would recommend a great deal of caution when proceeding with any wholesaler if this is only your second deal. Totally agree with Ross and Todd, make sure you really know what your ARV and rehab costs are- don't let the wholesaler paint that picture.

Also, it's great that you have a Realtor but as Ross said, a comp analysis is only part of the picture. Understanding the end buyer is key, design and rehab to the standards expected but not more, etc. You and Realtor should have an agreement that if they want to sell the house when complete- they should help with the buy. Not just comps- have them give you a detailed market analysis which details trends in the market, average days on market, similar sales and similar listings, and the absorption rate currently and in the past in that specific zip code (not the city as a whole). These factors are all very crucial if you really want to know your ARV. I would even go so far as to suggest you ask the Realtor to take you on a tour- go see 3-4 houses- one or two in the market that are pending, and maybe one or two that have not sold - see what is done right and what is done wrong. Unless it is a very cookie cutter area, this is all part of the ARV picture. Making sure you have accurate rehab #s as well as a good ARV are the crux of a good deal.

If a wholesaler gets a deal for a good enough price he deserves his profit. If you try to cut into the profit too much the wholesaler will find another buyer. Buyers talk a big game but are a dime a dozen in this market. Have wholesaled 500 deals and none to people who act like Ross.

Hi @Kasey Newbold

You had mentioned that you were paying all associated closing expenses. This isn't a normal thing for the end buyer to do. If you are getting a really good deal I would say it might be worth it. You should always run your own comps and speak with multiple team members with different perspectives. Make sure you know your numbers. We pull comps in house along with asking the realtor to do the same. Knowing your rehab cost can be just important as your ARV. Working with multiple contractors and doing your due diligence online for average rehab cost for each section of the property that needs work is a good place to start.

My husband and I flip and wholesale among other strategies and have found the wholesaling part of things as a positive way to create a win-win-win situation. We wholesale when we have too much inventory to fit into our portfolio (we have 3 available in Indy now) which fills the needs of the investor that wants to start a new project and doesn't have the inventory. Some people are upset when others make money but that is their cross to bear. One of the most important things we have learned is TIME IS MONEY.  We buy from wholesalers when we are in need of inventory. For example, we may be looking for a rehab project near another that we have going in Bates Hendrix but all we have available is in Noblesville. 

Non-refundable fees are not the norm in the RE industry. Just curious what makes an unlicensed broker entitled to one??


  Nonrefundable fees are used in the case where the wholesaler does not know the buyer
well enough or trust the buyer enough to close. When I ask for them I will always refund them in the case of
failure to deliver marketable title or if the house is damaged before closing. If the wholesaler is reputable the wholesaler will give to the option to escrow the fee at the title company.

Alright... I'll jump in. 

It is totally standard for a wholesaler to ask you to pay the closing costs as they're paying the closing costs on the A-B transaction. So they're not going to pay them twice. 

Make sure they're pro rating taxes for you. In Indiana taxes are billed in arrears but we make sellers pay them for the time they've owned it. If you don't request this you're leaving a free $1000-1500 on the table. Most legit wholesalers offer this up without asking as it's understood how taxes work here. 

They are requesting a non refundable deposit because they haven't dealt with you. As a new buyer you're going to have to be prepared to follow through on what you sign. Now... You could always opt to do your inspections prior to going under contract (and any other due diligence your heart desires) but that doesn't stop me, or another buyer from coming in and buying it right as you decide you do want it. 

Once you've got an established track record as a "buyer" the legit guys won't even really care about your deposit. I buy stuff from the top names in Indy and I'm not asked to provide it or POF. They know if I sign I'm going to close.

As far as countering... I wouldn't do it on the grounds of the deposit but literally everything in this business is negotiable. You want to pay 97k for a home they're asking 100k for... Doesn't hurt to ask. 

Again.. Just don't get the reputation of being the guy who beats people up on price. I simply ask what can I get it for? We have trust... So if they can't come down a hair they will. If they can't... And I can make the #'s work it's still a deal. 

On the downside... There are some downright knuckleheads in this line of work. If you have questions or concerns on someone you're dealing with just ping one of us and we can give you an honest answer. 


  Everything is negotiable. Including tax proration. I understand as a buyer you want to get
prorated taxes. Negotiate this if you can. My contracts that I assign do not prorate taxes.
I tell buyers to offer less to compensate for this if they want. The reason I do this is because
many times sellers are not as sophisticated as buyers and when they see a whopping amount
being deducted from their proceeds at closing they can throw fits or back out of the deal.
I got sick of this 7 years ago. I have never had a problem with a seller at closing since. I am a broker
and a legit wholesaler and know how Indiana taxes work. I have laid out my case so you can see there
can be good reason for not prorating taxes. 

You are 100% correct about reasons for a deposit. I rarely collect deposits anymore because like
you said my buyers have established themselves. Even for new buyers I will waive the fee until they
give me a reason not to.

One more thing.......Knuckleheads abound in Real Estate. Many are wholesalers or at least think they are.
But the knucklehead ranks are filled with sellers, contractors,buyers, property managers, Realtors (sadly-

I love the Code of Ethics), etc

@Andy Rumple Totally agree with both of the above. I should clarify... We pass it on whenever we're able to get it. Which is about 98% of the time. But we do an extremely thorough explanation at contract signing so there's no... Why is this missing? Drama. Been there.... Done that. 

What a wholesaler makes on a deal shouldn't bother the buyer. I've wholesaled deals where the buyer knew I was most likely making more than they would. Buyers aren't in demand at the moment, good deals are! 

It's standard practice to prorate taxes here, the home owner pays any delinquent taxes and the buyer pays the remainder. The wholesaler doesn't pay any because they aren't holding it for even a day. 

I ask EMD for the first transaction, after that I don't really ask. It's a trust thing :]

Sound normal to me. What is the expected profit and ROI if instantly put it back on the market?

Normal and standard are not in my vocabulary. EVERYTHING is negotiable.
Telling a buyer or seller that something is normal, standard or customary
is leading them and in my opinion not 100% ethical.

Thanks again for the insights and advice everyone. As I noted earlier I missed out on this house with the wholesaler but I now have a better idea for the next time. The next day the bank finally responded and accepted my offer on a foreclosure that I had placed a couple of weeks ago so here we go again!


Andy is right in more ways than one. Be careful who you buy from. There are way too many crooks out there and they'll take you for a long ride off a short cliff, if you let them. Make sure you complete your own due diligence. Don't believe what they tell you on rehab costs and arv's.  Check it for yourself. Andy is one of the few wholesalers out there that is reputable and can find you a good deal. Just make sure you do all of your homework, before you buy! Best of luck to you.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.