Process for working with wholesalers

3 Replies

Hey BP!

I'm looking for my next investment to be a BRRRR, and am looking for my cash purchase to be through a wholesaler. I think for the most part I understand the points of "what to be aware of" in working with a wholesaler from the standpoint of the deal itself, but I'd like some guidance on the actual process of working with a wholesaler from PSA to closing. This might include, but is not limited to, the following:

1. PSA - I assume a PSA through a wholesaler is different than your standard PSA that's signed if you're using an agent for an on-market deal. Anything to be particularly aware of here? (My next purchase will be in Tennessee for what that's worth.)

2. Inspections - if I have an inspection contingency, how does coordinating the inspection + any post-inspection follow-up with the wholesaler (or maybe even the end seller if they [or tenants] are living in the home) work? I've had no issue with this in purchasing my on-market deals in the past, as the seller's agents and my agents have typically worked together pretty seamlessly to coordinate the logistics of my inspections, but I imagine this will run a bit differently when working with a wholesaler?

      ^ same question for having my PM go out to look at the property pre-inspection in order to get an idea of a scope of work - do wholesalers allow the buyer (or my PM in this case) to walk the property before signing a PSA?

3. EMD - does earnest money work similarly with wholesalers as it does with a traditional on-market transaction? Assuming I have an inspection contingency, aside from backing out post-inspection if the rehab isn't what I initially thought, are there other ways to get out of a wholesale and recoup my EMD if needed?

4. Closing - I assume once inspection etc. have been taken care of that the rest of the transaction, for the most part, is in the hands of the title company, but anything else I should be keeping in mind related to closing as it differs from that of an on-market agent-represented transaction?

Lastly, and this might be a catch-all for one or a few of the above questions, is there a point pre-closing where the buyer is put in touch with the seller, or is the goal for there to be zero buyer-seller contact throughout the process?

Thanks so much for the help!

Hi Alex!  Below is what my experience with wholesale purchases in the Chattanooga area has been.

1- PSA- wholesalers have their own contracts, they're typically very short and cut and dried.

2- Inspections- you do not have inspection contingencies on a wholesale contract.  You can often have a walk-through by a PM or contractor, but no contingency on that.

3- EMD- typically $1-2k for wholesale, since you have no contingencies on the contract, you don't get it back.

4- Seller Contact- it doesn't happen.  Your contact is the wholesaler 99% of the time.

"Lastly, and this might be a catch-all for one or a few of the above questions, is there a point pre-closing where the buyer is put in touch with the seller, or is the goal for there to be zero buyer-seller contact throughout the process?"

When I wholesale deals that I've put in contract, I try to have zero contract between buyer and seller.  Nothing good can come of it.  Plus, I would prefer both seller and buyer only focus on the portion of the transaction that they're involved with me.  Ie, they view the transaction more like a double close.

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