What The H*** Is Wrong With Wholesalers

80 Replies

Ok I am just going on a rant tonight. I get an email from a guy trying to sell me a house I have already looked at and know who is selling it. The price has dropped but I explain to him that I know who is selling it and they only give quit claim deeds, and I wouldnt accept a quit claim deed. He says no problem so I ask him if he has pulled title on it yet, as I know there are liens on it, and he says no but I will. I HAVE LOOKED AT THIS HOUSE AND PULLED TITLE, I KNOW THE OWNER, WHY THE H*** WOULD I LET YOU WHOLESALE TO ME? He then sends me 4 more listing from the same seller and ask if I want to see them. IF YOU DONT HAVE A CONTRACT YOU CAN NOT WHOLESALE!

WHOLESALERS NEED TO BRING VALUE TO A DEAL!  Even  if I wanted this I could cal the seller and not have to worry about his markup!

@Jeremy Tillotson   That's why I alway say, figure out what the cost is and if it is worth it to you. For many a wholesaler offers a good they can't get themselves. Others they had incredible value J. M. 

@Elizabeth Colegrove I have bought from wholesalers, I am closing one next week, and sold as a wholesaler, just my little rant. I edited it as I forgot to say that there are liens on the property to. I did email the seller to let him know this guy just tried to sell their property. 

Wholesaling seams to be the easiest and cheapest avenue to get into REI, and from what I've seen the most likely sector to be flooded with people who don't know what they are doing. The concept is sound, but I have found 1 decent and honest deal out of about 300 I have been sent in the last 6 months. Between inflated ARV's and clueless renovation estimates, I can't imagine any of these get actually picked up by investors, unless there are as many clueless investors as there are wholesalers. (I doubt it because when your money is at stake you tend to learn pretty quickly) I am sure there are some wholesalers who are good at their jobs that are just as annoyed because the unreliability of others gives the whole practice a bad rap.

What I gather from this is, wholesaling is like any other profession you got good ones bad ones.  

This post has been removed.

@Jeremy Tillotson  Same issue in Jax.  I get the same deal from multiple WS, all different prices.  My ratio is like @Jeff West  1 per 300 for a deal that actually has sound numbers. Whenever I get an email, the first question I ask is 'do you have equitable interest'.  If they don't, I let them know I only deal with the person under contract.  If they don't have equitable interest, it's not wholesaling it's dealing without a license.  We are initiating our own wholesale business to create more legitimate opportunities. 

William Byers, Broker
904-710-9871

I don't think WS are intended to be the punching bag here Account Closed 

The issue we are talking about is legitimate WS first of all, and my particular take is, besides people shopping deals they don't own, most of the WS deals I get are generally not good deals. The repair values are not anywhere near accurate, and ARV simply wrong.

Really good WS can do well, but they need to start by working with someone who knows what they are doing before shopping deals.  

I give anyone credit who goes out and works hard to put together a deal.  I am happy to pay a WS for the value they create finding and getting a true deal under contract. But I pay them for "value created" not effort. 

William Byers, Broker
904-710-9871

As a wholesaler myself, not wanting to ever be the target of a frustrated investor's rant, I always love reading about what cash buyers have to say about their experiences dealing with wholesalers.  I have a question (and I will also post this question on the forum) regarding a situation I am currently in right now.  I've only started this investing venture less than a month ago and have not done one deal so I'm terrified that my first deal will go terribly wrong.  I have a question for the end buyers on this thread: currently I have a seller (also an investor, I'm sure) who wants to sell to me about 50 of his properties.  I asked if any of his properties are listed and he said no.  This is true, I looked it up.  I looked up his profile and this guy owns like half of Northern California.  So my question is how do I approach this?  Do I go through one property by one property (will be extremely time consuming to physically inspect all the properties since they spread all over the Bay Area - and that I'm still working full-time at my current job - and make each offer one by one?  I have a list of about 15 cash buyers who are waiting for me to bring them deals (I have one who owns 500 plus properties and said he's waiting for me to bring him more.)  Based on the comments on this thread, I shouldn't bring these properties to my cash buyers unless I actually have them under contract.  My fear of getting these 50 (or even 20) properties under contract and my cash buyers don't want them.  I don't want to be stuck with 20 contracts/properties.  How do you recommend I approach this situation?  Any thoughts would be greatly appreciated. 

Thank you.

There are a few ways to handle this

1.  Option contract - how much for an option to buy, and how long with that option be good for.

2.  Bring in a more experienced partner 

In my earlier post I said "Really good WS can do well, but they need to start by working with someone who knows what they are doing before shopping deals."

This is a perfect example of a deal you don't have the resources to pull off without huge risk.  Be wise and take a small piece of a huge deal, and learn from your partner.

As Brandon T. likes to say, part of a good deal is better than 100% of no deal.  Or worse, 100% of a bad deal. 

 

William Byers, Broker
904-710-9871
Originally posted by @Elizabeth Colegrove:

@Jeremy Tillotson   That's why I alway say, figure out what the cost is and if it is worth it to you. For many a wholesaler offers a good they can't get themselves. Others they had incredible value @J. Martin 

 You have to kiss a lot of frogs to find that prince!!!

I've seen so many "dog" deals with no margin, "wholesalers" trying to re-sell on-market properties at big premiums, and I've also bought one great deal from a wholesaler (had its reasons w/ tenants in tenant-friendly Oakland). Also...

Peace Jeremy :)  Anger will just make you die sooner, and you'll have less time to enjoy all the money you're going to make in real estate.

Spend your time and energy on the people who have deals you want!

Wow 1-300 deals thats horrible! I would suggest attracting better wholesalers to your business, those are the best deals you can buy right now.

However, you have newbies that will cross your path sometimes that don't know how to calculate APV, repairs, or just don't have the resources..  but i think as a good investor it maybe in your best interest to point those newbies towards your target areas along with a price range for each. 

Good Investors have Good wholesalers, wholesalers always send deals to their top buyers first and maybe at a little cheaper rate then their other buyers, at least I do. 

----

The only way I see a wholesaler should be marketing another's property is if their is a option or a relationship built their. This doesn't mean to jack the price up 5k, unless you can find hidden value in the property the original wholesaler did not see, for instance you have wholesalers that never go out to look at a property they make offers directly from street views and public records and they get the deal. A couple months back, a wholesaler sent me a deal that was listed as a 2/2 but in fact was a 3/2 just a error in public records, by me spending the time to go look i was able to sell this property to one of my buyers 7k over the orginal price and have the wholesale discount it by 3k. So i made a total of 10k, assigning my contract on this property to a buyer that turned it down from the original wholesaler because his marketing noted this to be a 2/2. 

By the way the wholesaler only made $500.

1 in 300? Wow, I could do better pulling from the MLS and using the phone!

Only the naïve follow guru tactics. Being good at anything is not easy and requires education, guru stuff is not an education, learning the industry you deal in is a business education.

The approach of moving properties like bags of sea shells at a price, profit, bing, bang is silly. Properties are not widgets!

If they would actually learn real estate, they would move on up to make better money, it's the pitch that wholesaling is easy, done without money or credit and is quick that attracts the dreamers and naïve.

What's the average age of a wholesaler? Twenty something? Poor souls, how much business awareness can one possibly get in just a few years out of high school trying to go into business for the first time? I'm cutting them some slack as to their screw ups, but if they can't see the forest for the trees, then there are other issues at work. :)

Originally posted by @Jeremy Tillotson :

Ok I am just going on a rant tonight. I get an email from a guy trying to sell me a house I have already looked at and know who is selling it. The price has dropped but I explain to him that I know who is selling it and they only give quit claim deeds, and I wouldnt accept a quit claim deed. He says no problem so I ask him if he has pulled title on it yet, as I know there are liens on it, and he says no but I will. I HAVE LOOKED AT THIS HOUSE AND PULLED TITLE, I KNOW THE OWNER, WHY THE H*** WOULD I LET YOU WHOLESALE TO ME? He then sends me 4 more listing from the same seller and ask if I want to see them. IF YOU DONT HAVE A CONTRACT YOU CAN NOT WHOLESALE!

WHOLESALERS NEED TO BRING VALUE TO A DEAL!  Even  if I wanted this I could cal the seller and not have to worry about his markup!

Your subject and your post sounds like you have a problem against "wholesalers". In the little time I have been a part of real estate I've learned not all wholesalers work the way you are describing. Yes, some do try and find some goat that will just buy and in the end... I'm sure they are not really having any success.

I'm learning there are some reputable wholesalers out there. Focus on working with them. They are not all like the one wholesaler you are describing in this post. 

Manny

Okay everyone I have dealt with good wholealers and am closing a good deal next week, so I am not completely against them, I was just ranting. @Uyenchi Ho I would take down one property with an option and try to market that, if it works heck yes get options on all of them, but yes you have to see a property first. Often times these other investors want to much for there properties. Thanks for all the comments.

@Jeff West "Wholesaling seams to be the easiest and cheapest avenue to get into REI". Where did you get that? I would really like to know. I did real estate for 30 years before I felt I could wholesale. You need experience, money, and experience. It is a very complicated venue. Don't believe these GURU's. Start with something very simple. Buy a bread and butter 3/2.

This is such a difficult concept for me to wrap my head around. It seems like wholesalers get trashed as soon as their analysis does not line up with the end buyer and basically looks like the "good wholesaler" if the end result is the end buyer making over $30k and giving the wholesaler as little as possible. When the end buyer gets a deal from the wholesaler it must be in this complete package of deal analysis, or contractor writeup, agent comps determining ARV, AND a clean title? And isn't this after the wholesaler spent money marketing for distressed sellers, d4d, cold calling, sifting through ads, writing offers and whatever other means to construct a deal. I'm so confused about this hate/love relationship with wholesalers. I understand the discontent for those doing bad things but honestly it sounds like the bad things are coming from both ends of the spectrum here. JAT. Why do wholesalers do this?

@Tiffany Noble  This really is the idea of two things, I am active in the market so bring me something new, and YOU CANT SELL WHAT YOU DONT AT LEAST CONTROL, unless you are licensed. I have no problem with legitimate wholesalers and am closing a deal next week. So in order to wholesale you at least need an option, or a contract to purchase. If you need help about the wholesaling idea let me know, I have done it on a good size scale before. 

Originally posted by @Uyenchi Ho :

 I have a question for the end buyers on this thread: currently I have a seller (also an investor, I'm sure) who wants to sell to me about 50 of his properties.  I asked if any of his properties are listed and he said no.  This is true, I looked it up.  I looked up his profile and this guy owns like half of Northern California.  So my question is how do I approach this?  Do I go through one property by one property (will be extremely time consuming to physically inspect all the properties since they spread all over the Bay Area - and that I'm still working full-time at my current job - and make each offer one by one?

If you don't contract the properties you run the risk of doing business without a license.  I would look at the numbers and start physically looking at the most attractive property.  Also if he could give you an idea of the "class" of property that could help too.

If you have any interest in getting your real estate agent license?  I think 50 potential listings would be a good place to start.  If he is willing to accept wholesale prices, that may not be necessary but have multiple options could be helpful.

If you get licensed, you probably want to do your deals as off-MLS deals and you would have to pay a broker something. You lose some potential upside since you would have to be commissioned based, but you might make up for it in selling properties faster.

Or if you want to swing for the fences, organize the properties into logical bundles and contract them as packages.

Originally posted by @Jeremy Tillotson:

 I did email the seller to let him know this guy just tried to sell their property. 

 What would be the purpose behind doing this?

@Cameron Ellis  you are spot on Cameron.  And in your example, you created value thru knowledge and due diligence.  Worth every penny to the end buyer.

I just agreed to a purchase a wholesale deal this morning, and it's a wholesaler I know and have developed a relationship with.  And he IS young, but he worked with another local WS while learning how to evaluate and negotiate.  

I also agree with the statement that good investors have good wholesalers, getting the best deals first, and best price.  And the wholesalers that send me garbage data do get constructive criticism from me as to where to find comps, as well as the areas that I focus on.  

I am also working with some newbies and I provide guidance on how to put a deal together. I give them a full package of information on how to do deals , research property data, and offer to mentor them thru their first deal. My info includes a simple spreadsheet calculator that calculates CAP rate and has taxes, insurance, maintenance, and management fees so they present at least a reasonable estimate.

And ARV is more critical to me for a flip than a B&H. For a B&H, I am buying cash flow not necessarily appreciation or equity. Know your market, know how to estimate repair cost, and shop your own deals. That's all a buyer really expects.

William Byers, Broker
904-710-9871

YES! I love it. I had a reply to Jeremy earlier but couldn't reply since I was driving. I'm military and have definitely had my fair share of "constructive" criticism over the years. I just think its way to easy for wholesalers to be thrust into a negative category as a whole over a few bad ones when I know there are wholesalers that bring good deals every day. I'm going to call it weird but how can you slam all wholesalers in one rant and say you are closing a good deal with one in the other? @William Byers  , I can appreciate you leading your wholesalers in the right direction ESPECIALLY if in the end you will reap the benefits of providing education. You didn't have to but I'm sure there was something there that made you think it could be a great relationship for both of you.

Wow, just adding negativity to his brand. Hopefully he learns from his mistakes.

@Joseph Ball  What is this 3/2 you speak of? I'm a newbie investor interested in starting with wholesaling to build capital, but I really just want to do something and get my first deal done so that I can have a bit of experience under me.

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