What The H*** Is Wrong With Wholesalers
Investor · Fort Wayne, IN · Member since 2014 · 1k+ posts · 515 votes
What The H*** Is Wrong With Wholesalers
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Jerry PuckettPro Member
Wholesaler · Fort Worth, TX · Member since 2010 · 1k+ posts · 1k+ votesOh thank goodness!! I thought a whole week was going to go by without another wholesaler rant!!
You think wholesalers have issues? Try working with some "Investors" who think they want to buy and hold with their newly cashed out IRAs Or a whole new crew of Newbie Flippers every three months. Can't make up their minds, over pay for all their repairs, cry about a non refundable deposit, want a complete contractors write up just so they have something to nit pick, or worse, want a guarantee that's all the work to be done!
Wholesalers, here's a novel concept that has worked for me for years. Do your due diligence to be sure....you have to anyway before you can make an offer. But there's not a good reason to share that with your Buyer. They are going to do their own due diligence anyway, and any discrepancy between the way you think and the way think will ONLY put you in a negative light with them.....as demonstrated by many a wholesaler rant....(Never mind that any two Investors or contractors will have differing opinions anyway!)
Don't give them ARV, FMV or any other speculative number. Two numbers, and two only do I ever give my Buyers.....the address and the price I want. Serious buyers will have an answer for you in an hour or two and a check for the deposit by the end of business that day. If your buyers are not behaving like this, you have the wrong guys. Ditch the whiny babies and go find a real one.
I have folks lined up for my buyer's list all the way to Australia...I need more buyers like a hole in the head. I have exactly 3 on my list that buy 98% of what I get under contract before the ink is dry. Craigslist takes care of the other 2% Buyers are a dime a dozen. Those that want to rant....man up and go find your own deals; then you'll have nothing to complain about.
80 Replies
- Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes11y
- Rental Property Investor · Doylestown, PA · Member since 2008 · 1k+ posts · 1k+ votes11y
@Frank McGovern
Do you do any wholesaling in Philly suburbs? I buy in Montgomery and Bucks counties.
- Investor · Chicago, IL · Member since 2015 · 677 posts · 309 votes11y
Sellers want to sell but do not want to work hard at it and they certainly do not want to pay for the service of assistance with selling their properties. Buyers also do not want to work hard at finding good deals. They want someone who will bring them the good deals at their feet without having to work much at it at all. Wholesalers are not guaranteed to get paid so they also do not want to invest much work in putting their deals together or they simply do not have the resources to do a thorough job.
This is how the , " screw everyone mentality is born".
Yuenchi Ho,
This is what I might do if I were you. First get all 50 properties under contract. The fact that you have them under contract and available to buyers is already worth something. Lets say from $350.00 to $500.00
next start to list your prices according to how much work you put into evaluating each property. If you verify comps that is worth X number of dollars
If you verify repairs that is worth X number of dollars more
Just make a check list and every single thing more that you offer than equates to X number of dollars more you will charge for your assignment. That is fair. You can also use this method to determine if you can offer any kind of a deal and select your best deals and sell them at a premium.
- Real Estate Agent · Sacramento, CA · Member since 2014 · 73 posts · 16 votes11y
Sound like the wholesaler is not educated enough to make the right decisions. I'm certain you'll find a wholesaler with the knowledge and honesty you deserve. Cheers!
- Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes11y
I read about half of the thread and saw it turn into the typical lets dog out the wholesaler thread. Look just like anything there are good and bad. Agents, Attorneys, used car salesman, wholesalers, stores, restaurants etc.
This sounds to me like an issue with the original seller!!! He knows he doesn't have a great deal so he is bird dogging it out. I don't blame him for trying.
The whole "whoesalers are flea market employess line" come on.... I wholesale. I also flip. I also have rentals. I wholesale deals if I prefer the quick cash, am tied up on another deal, or am not comfortable with the area. My buyers LOVE me. They come back for more. In fact EVER person I have wholesaled to has asked for more. Seller's send me referrals and family/friends.
I could sit here and complain about bad deals I'm offered all day. But that's not going to help anyone. What is going to help is educating people that want to get started. Educating the crappy wholesalers and making them better. You are going to catch more flies with honey vs vinegar.
- Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes11y
Originally posted by @Rick H.:
Originally posted by @Victoria Winters:
It is interesting reading the rants and raves about wholesalers who do not have good deals or real deals, or even understand the business. We can all cry foul about investors, real estate agents and lenders too. For all I know, every business has participants who deliver less than their best effort or do they?
People working in the real estate industry at large bring different skills and knowledge levels to the table. There is no rule that says every one must conform to one way of doing business. There is also no rule that states how anyone is supposed to go about gaining knowledge. This industry works as a whole and is inclusive of all things good and not so good.
We all benefit from both sides of the spectrum. There is not a person among us who has not made mistakes, blown it at least once and had to learn something new. Thank goodness we get to encounter situations that teach us something, either good or bad.
The wholesale business is a vital part of real estate just as any of the other fields one can choose in which to participate. The "bad" deals or inadequate deals will continue but finding the solutions to the problems these create is another opportunity.
At issue is the lack of standards of training, competency and ethics, not to mention any indication of the ability to perform.
I've known plenty of people who possess real estate sales licenses who are clueless and I was one myself. We all have to start somewhere. However, at least there's a licensed broker involved so that a rogue agent doesn't stray to far.
Anybody can call themselves a wholesaler. Just as curious, same is true with a the term 'investor'. Just as you can go to lots of school PTA meetings but that doesn't make you a parent, you can sit at lots of REIA meeting but that doesn't make you a competent wholesaler or an investor, either.
If you want to debate semantics, I'm up to the task however the better solution, in my mind, is to better define the role and deferent use yourself from the boneheads. My friend Mike Cantu is one of the most active and successful wholesalers that I've known in nearly 40 years in this business. His would be a standard few would reach.
So, how do you differentiate yourself from the incompetents? How do you distance yourself from the people who only create chaos rather than solve problems? Ain't my problem because I steer clear.
Agree 100%. I have yet to find a single wholesaler whose "deal" was anything near what they represented. Yes, we have good agents and bad agents but as you state they are supervised by their broker. Of as much if not more importance to me is the number of sleazy "wholesalers" that lie to homeowners to get a contract. When they cannot find someone to assign it to, they feed the homeowner more lies with garbage like "it didn't pass inspection" or "my partner said no". Anyone that operates like this is a crook...nothing more. We recently saw what happened to a lot of these sheisters in Ohio and I am told Florida is working on shutting them down as well. Get educated. Get licensed. Operate honestly. This will generate goodwill and respect. Go read some of the posts in the "wholesaling" forums and note the number of idiots that admit via their own posts how dishonest they are. Sad!
- Accountant · West Melbourne, FL · Member since 2015 · 44 posts · 7 votes11yWhat would be the characteristics of an ideal wholesaler? I imagine that having actual inspections done, conservative yet realistic estimates on repair costs(provided by contractor possibly), among other things. Why would a wholesaler not want to be a great wholesaler instead of tarnishing his/her reputation by being a mediocre wholesaler?
- Investor · Reynoldsburg, OH · Member since 2015 · 36 posts · 3 votes11y
I'm starting to realise that wholesaling has a low barrier to entry but a steep learning curve
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes11y
I would rather run my own marketing campaign with my own cash and do my commercial deals that way.
Wholesalers over the years have just been a waste of time. Why review 500 properties to find 1 decent wholesaler when I can do tons of transactions getting direct deals myself??
- Wholesaler · Columbia, SC · Member since 2015 · 123 posts · 15 votes11y
I am a new wholesaler and really enjoyed reading the comments. I enjoy seeing how other investors think as I think it's a great way to develop systems for your business that will benefit your target audience. Thanks, guys...keep the comments coming!
Ashley J.
- Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes11y
Recent case less than 2 weeks old: local fast talking BS'ing "wholesaler" tied up a property. He then promptly advertised it on Craigslist. "This one won't last" and all the sales stuff. His contract expired. He didn't close. He left the homeowner hanging. I drove by the property earlier this week and it is now listed with a Realtor. This guy lied to the homeowner, tied up the property, and wasted time for the owner. Who knows what their situation is. Maybe they are being forced to sell and need a fast deal? This is the second property this guy tied up and failed to close on. I have no idea how many other homeowners he has victimized but I am aware of at least these two in the past 3 months. There is the answer to the question! Dishonesty. Misleading homeowners. Brokering without a license. Many thanks @Brian Gibbons for posting the video of the Ohio commission. The attorneys for the state said that advertising a property not owned by the "wholesaler" is indeed acting as an agent. I am glad to see Florida cracking down on these illegal dishonest practices. The local guy was indeed acting as an agent with statements in his ad such as "homeowner motivated". Nuff said.....
- Landlord and Rehabber · Newton, MA · Member since 2010 · 2k+ posts · 877 votes11y
Originally posted by @John Thedford:
Recent case less than 2 weeks old: local fast talking BS'ing "wholesaler" tied up a property. He then promptly advertised it on Craigslist. "This one won't last" and all the sales stuff. His contract expired. He didn't close. He left the homeowner hanging. I drove by the property earlier this week and it is now listed with a Realtor. This guy lied to the homeowner, tied up the property, and wasted time for the owner. Who knows what their situation is. Maybe they are being forced to sell and need a fast deal? This is the second property this guy tied up and failed to close on. I have no idea how many other homeowners he has victimized but I am aware of at least these two in the past 3 months. There is the answer to the question! Dishonesty. Misleading homeowners. Brokering without a license. Many thanks @Brian Gibbons for posting the video of the Ohio commission. The attorneys for the state said that advertising a property not owned by the "wholesaler" is indeed acting as an agent. I am glad to see Florida cracking down on these illegal dishonest practices. The local guy was indeed acting as an agent with statements in his ad such as "homeowner motivated". Nuff said.....
I'll start off by saying that I am in no way trying to defend this a$$hole. He was obviously playing fast and loose with peoples situations with little regard to any damage he might do to them. Also just based on those snippets you gave he was pretty clearly advertising the property not the contract, which of course is offering to sell a property for someone else... or real estate brokering.
Okay hopefully I made my thoughts on that turd burger clear.
So the angle I want to point out is that agents don't walk on water. What if the Realtor got the listing by saying it was worth way more than it is? If the place is still on the market in 6 months with 3-4 price drops will you say that this agent has totally screwed over the homeowner by wasting 6 months marketing an overpriced listing?
I mean get the listing 101 says promise the seller the highest reasonable price and then hope they don't get to pissed off when you suggest a price drop if you don't get lucky in the first couple weeks. Sure a good agent that can sell their services and knowledge will give a good starting price that in fact should sell and they don't want to take on an over priced listing, then you have the majority of agents that just want to get any clients and will deal with those issues after the fact.
Remember other than wholesaling there is no easier and cheaper way to get into real estate than getting a licence. So you have lots of new inexperienced agents and crappy half assed part time ones. They don't know what they are doing and they mostly burn out and give up pretty fast.
So while there are a lot of craptastic wholesalers out there there are MANY more crappy agents (Since there are probably 2 orders of magnitude more agents in any given area than wannabe wholesalers). Even bad wholesalers usually only dick the seller around for 2-4 weeks until they can't assign it and they back out of the contract. I have never seen a listing agreement for less than 3 months and rarely less than 6, so the lousy agent ties a place up far longer than most bad wholesalers will.
This isn't meant purely to poop on agents. Just want to keep some perspective before we totally crucify one group while canonizing another.
*Licensed agent for 5+ years
**Never wholesaled a house owned by a human (as in I have, but only REOs)
- Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes11y
The barrier to entry is pretty low for agents and the ethics of wholesalers are, well,what can you say about that.
Being licensed as a wholesaler I think gives you credibility, and also something to lose if you're not completely honest with the home seller.
How do you discipline a wholesaler for lying to the home seller? can you bring them to small claims court for lying?
There's no fiduciary relationship with the wholesaler to the home seller. The only thing you can do is to report the wholesaler to the Better Business Bureau or to the real estate board.
At least you can report a bad realtor/agent to the real estate commission.
If more wholesalers would get transactional funding or at least buy the property subject to and get on title, then sell it, you own something and you are within your rights as an owner.
And homesellers can get on with their lives.
And an ordinary realtor without using creative financing is stuck with Cash Buyers being their only option to make a transaction and to make a living.
I wish more agents thought outside the box and used lease options, sub 2, installment sales, etc. to complement their "listing only" business
Gary Keller of KW wrote a book called "Shift" and in chapter 10 of that book is on creative financing including lease purchase and wraps.
Go Red Sox Nation!
- 11yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Account Closed:
I find it odd that wholesalers seem to be the punching bag in REI, the target of those who have had some sort of success in REI. IMO, I dont think anyone understands something till its done, wholesalers want to get paid for their efforts regardless of how reckless they go about doing it. If one gets rejected and gets back up and tries again after each rejection, he or she gains more from the rejection than babying.... In the process of being rejected is the gain of buyers and sellers and sometimes educators--for the wholesaler, knowledge. And in that process of learning their goals are set, carved from stone.
problem is they waste both buyers and sellers time.. its great for them they get a hard knock education but it sucks for everyone they touch
- 11yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
agree with you with the exception. of SUB TOO Sub too in the hands of a rookie non capitalized wholesaler I like handing a child a loaded gun... VERY VERY dangerous for the seller and far more dangerous than having the ( don't know crap wholesaler with no real money) just tieing it up on contract. Now your going to these same wanna bee's on title and they can really foul up a seller but good.
Transactional funding is the answer.. no doubt ,, go into contract BUY the property.. ( don't market it until you own it) then resell... that's what I have done for 40 years... and its treated me pretty dog gone good.. plus I have brokers licenses in 3 states along with a NMLS mortgage bankers license.. So if you want to make it in this industry get into the freakin industry don't play around on the fringes doing semi illegal deals. or in many states totally illegal.. LOL I know it goes against the grain.. but I bet not 1 out of a thousand that try wholesaling make it one year..
- 11yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Account Closed
bulk sales of deals is a far cry from what we are talking about.. IE the person who decides one day that they read BP and want to wholesale houses one at a time like a RE broker.
your more in the commercial institutional end not to be confused with the other types of wholesalers.
its like one of my buddies from my country club.. he owns a golf merchandise distributorship plus he manufactures one of the top of the lien golf caddies.. One day he see is golf caddie in Costco for less than he sells them to his distributors.. he bought everyone of them. and took them all out of Costco to protect his brand.
- Investor · Santa Rosa, CA · Member since 2012 · 402 posts · 96 votes11y
These posts about wholesaling are like old "Threes Company" reruns, very unique thinking, not redundant whatsoever.
I was a terrible wholesaler, I never really wanted a seller to sell their house for 50 cents on the dollar but I think I learned a little and am happy for those struggles.
I'll admit to being a little naive, but when people make offers; homeowners, investors, or whomever; do they always have the money in the bank? Or do they sometimes have to depend on a third party?
- 11yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
In this context many who are starting out probably struggle to write 100 dollar EM deposits. I see them all the time in the deals I fund.. its a regional thing
your not going to buy much RE in Santa Rosa with 100 bucks as a deposit.
I was just down to KSTS 2 weeks ago its really grown. .went to Healdsburg for lunch then landed at Healdsburg airport for cheap AV gas... I have 4 acres right next to the graton casino that I hope to build about 35 homes on in 2017... I will move there for 24 months to build them out.. I bought that land in 1992.. and if I listed to all the buy and hold folks that you HAVE to have cash flow I would have never bought it.. its never produced a dime of income.. but I only paid 27k for it.. and well you know what its worth today.. beats the crap out of any buy and hold by a factor of 100 LOL
- Landlord and Rehabber · Newton, MA · Member since 2010 · 2k+ posts · 877 votes11y
I totally agree with you. It isn't good for someone to only have 1 MO (In this case the lower all cash offer type) and especially if they can't possibly perform on that contract.
I have a licence and totally am on the side of it being an asset in the business and does give you some extra credibility. However I do get the people that don't want to get them since there are costs associated with it (and if you aren't doing "agent stuff" as a regular part of your business they might be hard to justify, especially if you are starting out and money is tight), I can also see the side of those that think it is a detriment since it isn't uncommon for a seller to be winning to work with an investor after having a bad experience with on of those numerous crappy agents in the past, as in they specifically do not want to work have a Realtor sell their house.
I think that last one, along with the stuff about taking on extra liability risk, is very overblown but it isn't just ridiculous blathering either.
The way to go is to have an understanding of many different strategies to be an actual problem solver and to also have the resources to perform on a contract if you get into one. Ironically if you are only putting things under contract you are willing to close on yourself you will probably do better in finding wholesale buyers since 99.99% of the time if a wholesaler can't sell a "deal" it is because it is a crappy deal. If one of your exits is buying it yourself you are going to do those numbers a hell of a lot better and even if you puff it up for the investor buyers you are just puffing a good deal to look great, not a POS to look doable...
As far as ethics go you either have them or you don't. Getting an RE license won't turn a scumbag into a saint and just not having one but working in real estate doesn't mean you are automatically looking to screw people over for sport. I would say that any rookie wholesalers that intend to try to do right by the people they are working with would do well to read the Realtor Code of Ethics to get a feeling for what is normal and expected around professionals in the industry and make sure you meet or exceed those ethics in your business (sans anything directly related to an agency relationship since, if you are doing things right you should NOT be doing anything that looks like an agency relationship.).
- Landlord and Rehabber · Newton, MA · Member since 2010 · 2k+ posts · 877 votes11y
OMG @Russell Ponce Shhh....
Nearly as saintly as the RE agent is the retail buyer!
Don't allude to the fact that most of them don't have a pot to piss in and make their offers contingent on a nebulous 3rd party agreeing to give them a $hitload of money to buy the property. Or to the not uncommon occurrence of a seller taking their place off the market for 6+ weeks only to have a bank say "umm... NO" to the buyer 43 days after getting a contract and 2-3 days before that seller thought they would be selling their place. Or how since it was a contingency that they have to just give that EMD back to the buyer.
So remember this scenario, unlike a wholesaler, has no negative effect on the seller and neither the failed buyers, the various real estate agents nor the loan officer did anything to wrong this person and should feel no guilt, and the seller should realize this and just accept it as just one of those things that happens to you sometimes and buck up to try again.
- Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes11y
Originally posted by @Jay Hinrichs:
agree with you with the exception. of SUB TOO Sub too in the hands of a rookie non capitalized wholesaler I like handing a child a loaded gun... VERY VERY dangerous for the seller and far more dangerous than having the ( don't know crap wholesaler with no real money) just tieing it up on contract. Now your going to these same wanna bee's on title and they can really foul up a seller but good.
Transactional funding is the answer.. no doubt ,, go into contract BUY the property.. ( don't market it until you own it) then resell... that's what I have done for 40 years... and its treated me pretty dog gone good.. plus I have brokers licenses in 3 states along with a NMLS mortgage bankers license.. So if you want to make it in this industry get into the freakin industry don't play around on the fringes doing semi illegal deals. or in many states totally illegal.. LOL I know it goes against the grain.. but I bet not 1 out of a thousand that try wholesaling make it one year..
Getting on title with a wrap or a sub 2 with financial resources in case the loan gets called is not a bad idea.
I remember Jay you talking about that one kid in Oregon that did like 100 sub2s with a lease to own exit strategy, and got nailed with screwing things up
I remember in Texas in 2003 there was this guy who did over 700 subject to and never paid the mortgage companies
Theres fraud fraud fraud everywhere.
I never do a subject to unless I want to own it and I have resources to buy it
So if there's such a need for transactional funding, so people can get on title and then resell, let's get a hedge fund going, OK?
- Investor · Santa Rosa, CA · Member since 2012 · 402 posts · 96 votes11y
Jay, I'm going to take a wild guess and say that just might work out for you, when you get settled in I'll give you some tips on places to eat.
You make great points, human nature can cross all boundaries and classifications.
I agree with a lot of the anti-wholesale crowd in theory, there's a lot of amped up, unregulated newbies with dollar signs spinning in their eyes that are being unleashed upon unsuspecting citizens. Shoot, I was one of them, still am I guess, trying to carve out a niche in this industry.
I feel pretty good about my actions but from 10,000 ft I imagine it looks like the wild wild west down here and it does seem like its getting a bit out of control, a lot of people with a little bit of knowledge. I have great respect for some of the more established and conservative voices here on bp, but I personally like at least some of the free wheeling nature of the game. I just discovered Jack Miller's books and I love it, there's wheeling and dealing, and haggling and trading.
Whatever a cat burglar has for guts, I think I have the exact opposite. I can't talk to a seller with the idea of "closing" them or hypnotizing them into giving me half their equity, but I do hope to make a deal if I think there's one to be made.
Anyways, the anti-wholesale crowd makes some good points and its been constructive for me, personally, but I think there's way too much focus and bitterness towards some of the technicalities. Two established vets can "partner" on a deal with a handshake but if a wholesaler calls his buyer his "funding partner" without approval from congress he's a verified scumbag?
I definitely think that rules, laws, and regulations should be heeded for practical purposes, but if we let them govern our morals what happens when the rules change?
- Austell, GA · Member since 2015 · 10 posts · 2 votes10y
Originally posted by @Jeremy Tillotson:
@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.
Hi Tiffany hope ALL is well.
This original post was from a while back but I was wondering in your opinion which do you think is better to do an option contract or an assignment contract and why?
Thanks in advance.
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