What to expect when buying from a wholesaler

3 Replies

Why would you want to deal with people that skirt laws? Most of them are operating illegally. Here is what I warn people about before they deal with these types:
BEFORE you deal with any unlicensed broker consider these ideas:

1. Always require WRITTEN comps that can be substantiated

2. Always require WRITTEN bids from LICENSED contractors

3, Always require WRITTEN comps to substantiate ARV

4. NEVER pay a non-refundable fee

5. Always correspond via email so there is written record to bring suit in the event of misrepresentation.

Remember, these are middlemen trying to play RE agent without a license. Make sure they provide GOOD comps. Make sure if they are representing an ARV value make them provide ARV comps. If they make claims about rehab costs, make them provide WRITTEN bids from contractors. They are brokering real estate so make them PROVIDE good quality information like you could get from a licensed broker. Many of these unlicensed brokers simply make up figures that sound good but cannot back them up.

Unlicensed brokers generally have no insurance. From personal experience most just pull their ARV out of thin air. Lets see: claim it costs x and it will sell for y. If someone uses an agent, an agent won't provide or should NOT provide the BS an unlicensed broker does. They should not or do not provide rehab figures (to protect themselves). They should tell a prospective buyer to get their own bids. They can provide comps in some situations on an updated unit vs an original unit. Agents have something to lose, can be fined, and have their license suspended or revoked. Unlicensed brokers, acting as fringe operators skirting the laws have nothing to lose. They are acting as an agent without the laws, ethics requirements, education, and insurance that are vital IMO.

With a wholesaler you are basically buying his contract for the house, not the house.  Do not buy unless you see the actual house contract you are purchasing.  They also try to insulate you from the seller even though you have a contract from the house.  If you have questions about the house don't let them threaten you to not contact the owners.  Wholeseller is not an agent for the seller.  Read over the assignment contract carefully.  Don't hesitate to negotiate out unreasonable terms.  Terms of the assignment should not be worse than the actual contract other than assignment fee.