Buying from Wholesalers

17 Replies

I have potentially found a property that the numbers work well. It is a wholesaled property. If you are buying from a wholesaler what is your due diligence phase before you write a big check to a wholesaler? Would you do a title check on your own?

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.

Ask yourself this: if a property is REALLY worth 100K WHY would they sell it for 70? Not because they like you....more than likely it isn't worth what they CLAIM it is. I always encourage anyone giving away 30K to call me first. I need the income:)

@John Thedford It sounds like you have had some rather negative experiences with wholesalers, I don't know for sure but you paint a rather grim picture. 

@Thomas Weidner I primarily do wholesaling professionally, that being said I am both a licensed agent and work for a licensed brokerage. We are not in the business of selling people crap but I will tell you that any wholesaler that presents a property to you "as is" often does so because the property will not pass a traditional inspection. It will be distressed, either an REO/pre-forclosure (financial distress) or the home will be in disrepair (physical distress) I wouldn't work with a wholesaler that doesn't offer you a title guarantee (warranty deed at closing) but as to the due diligence on the property itself. Run your numbers or know the area extremely well so that you can justify the purchase and the repairs.

The advice above isn't wrong or bad but it will cause you to lose out on a to of properties, I know I don't give written estimates from contractors, not that I am against it, the properties just move faster than that kind of process would involve. The comps and everything I personally pull from the MLS and show in a map and give you the links to them so you can see for yourself. That is just how I do business, I can't tell you how the boys out in Texas do it but I figured having a wholesaler's perspective would help you see what we are looking at.

If you have any questions about the process of what I am looking at when I pull properties and why they are priced the way they are, obviously I am in a different state and it will be a little different but I am open to explaining it so you can tell a good wholesaler from a bad one.

This is a local unlicensed broker criminals' record:

No active Collier County warrants found.
ARRESTS (Collier County Only) Arrest records made on or after 1/1/2007 (last 10 years) were searched.
Court Records

Booking Date08/26/2016AgencyNPD
Booking Number201600006689Age at Arrest37
ChargedCountOffenseHold ForCase NumberCourt Date
08/26/2016001HEROIN-TRAFFIC 4 GRAMS - 30 KILOGRAMS24S16-1551CF09/19/2016
08/26/2016001COCAINE-POSS WIT SELL MFG DEL SCHEDULE II16-1551CF09/19/2016
08/26/2016001BARBITURATE-POSS WIT SELL MFG DEL SCHEDULE II III OR IV16-1551CF09/19/2016
08/26/2016001DRUGS OTHER-POSS CONTROLLED SUBSTANCE16-1551CF09/19/2016
08/26/2016001DRUGS OTHER-POSS CONTROLLED SUBSTANCE16-1551CF09/19/2016
08/26/2016001DRUGS OTHER-POSS CONTROLLED SUBSTANCE16-1551CF09/19/2016
08/26/2016001DRUGS OTHER-POSS CONTROLLED SUBSTANCE16-1551CF09/19/2016
08/26/2016001DRUGS OTHER-POSS CONTROLLED SUBSTANCE16-1551CF09/19/2016
08/26/2016001DRUG HLTH/SFTY-POSS HARMFUL NEW LEGEND DRUG WO PRESCRIPTION16-1551CF09/19/2016
08/26/2016001NARC EQUIP PARAPHERNALIA -POSSESS AND OR USEWIDMAN ACT16-1551CF09/19/2016
08/27/2016001VOSP/COLLIER COUNTY-WIDMAN ACT24S16-000647CF09/14/2016
08/27/2016001VOSP/COLLIER COUNTY-WIDMAN ACT16-000355CF09/14/2016
Jail Summary
09/14/2016 TIME SERVED
Bond Amount
$120,000.00
Arrested Person Name
Booking Date04/03/2016AgencyCSO
Booking Number201600002800Age at Arrest36
ChargedCountOffenseHold ForCase NumberCourt Date
04/03/2016001POSSESS COCAINE24S16-647CF04/25/2016
04/03/2016001DRUGS OTHER-POSS CONTROLLED SUBSTANCE16-647CF04/25/2016
04/03/2016001TRAFFIC OFFENSE-DUI ALCOHOL OR DRUGS 1ST OFF16-647CF04/27/2016
04/03/2016001MOV TRAFF VIOL-VIOLATE RESTRICTIONS PLACED ON DRIVERS LICENS16-647CF04/27/2016
Jail Summary
07/11/2016 TIME SERVED
Bond Amount
$12,000.00
Arrested Person Name:
Booking Date02/17/2016AgencyNPD
Booking Number201600001382Age at Arrest36
ChargedCountOffenseHold ForCase NumberCourt Date
02/17/2016001POSSESS COCAINE16-355CF03/14/2016
02/17/2016001MARIJUANA-POSS NOT MORE THAN 20 GRAMS16-355CF03/14/2016
02/17/2016001NARC EQUIP PARAPHERNALIA -POSSESS AND OR USE16-355CF03/14/2016
Jail Summary
02/18/2016 BONDED
04/03/2016 BOND REVOKED
07/11/2016 TIME SERVED
Bond Amount
$5,000.00
Arrested Person Name: 
Booking Date03/28/2014AgencyCSO
Booking Number201400002945Age at Arrest34
ChargedCountOffenseHold ForCase NumberCourt Date
03/28/2014001OPIUM OR DERIV-POSS CONTROLLED SUBSTANCE24S14-644CF04/21/2014
03/28/2014001OPIUM OR DERIV-POSS CONTROLLED SUBSTANCE14-644CF04/21/2014
03/28/2014001DWLSR DRIVE WHILE LICENSE SUSPENDED14-1085CT04/23/2014
03/28/2014001VOCP/POSSESSION OF MARIJUANA < 20 GRAMS (WARRANTLESS)13-409MMA04/07/2014
12/06/2014001FUG/CHARLESTON SC/CONTEMPT OF COURT ON SECURITY VIOLATIONSOUTH CAROLINAO2014B10001008212/29/2014
Jail Summary
12/07/2014 TIME SERVED
12/12/2014 ROR
Bond Amount
$60,000.00
Arrested Person Name: 
Booking Date08/21/2013AgencyCSO
Booking Number201300007385Age at Arrest34
ChargedCountOffenseHold ForCase NumberCourt Date
08/21/2013001OPIUM OR DERIV-POSS WIT SELL MFG DEL SCHEDULE I OR II24S13-1654CFA09/16/2013
08/21/2013001OPIUM OR DERIV-SELL SCHEDULE I OR II13-1654CFA09/16/2013
Jail Summary
08/22/2013 BONDED
03/29/2014 BOND REVOKED
12/06/2014 TIME SERVED
Bond Amount
$10,000.00
Arrested Person Name: 
Booking Date07/23/2013AgencyPRO
Booking Number201300006504Age at Arrest34
ChargedCountOffenseHold ForCase NumberCourt Date
07/23/2013001VOCP/POSSESS MARIJUANA < 20 GRAMS WARRANTLESS13-409MMA08/05/2013
07/23/2013001VOCP/POSSESS, USE NARC PARA WARRANTLESS13-409MMA08/05/2013
Jail Summary
07/30/2013 BONDED
Bond Amount
$2,000.00
Arrested Person Name: 
Booking Date06/25/2013AgencyCSO
Booking Number201300005748Age at Arrest34
ChargedCountOffenseHold ForCase NumberCourt Date
06/25/2013001DWLSR DRIVE WHILE LIC SUSPENDED 2ND CONVICTION24S13-2058CT07/19/2013
Jail Summary
No information available.
Bond Amount
$5,000.00
Arrested Person Name: 
Booking Date06/19/2013AgencyCSO
Booking Number201300005586Age at Arrest34
ChargedCountOffenseHold ForCase NumberCourt Date
06/19/2013001SYNTH NARC-POSS CONTROLLED SUBSTANCE24S13-1263CFA07/15/2013
06/19/2013001THEFT-PETIT THEFT - UNDER $10013-1263CFA07/15/2013
Jail Summary
06/20/2013 BONDED
06/26/2013 BOND REVOKED
07/17/2013 RE-BOND
03/29/2014 BOND REVOKED
Bond Amount
$4,000.00
Arrested Person Name:
Booking Date02/18/2013AgencyNPD
Booking Number201300001657Age at Arrest33
ChargedCountOffenseHold ForCase NumberCourt Date
02/18/2013001MARIJUANA-POSS NOT MORE THAN 20 GRAMS13-409MMA03/13/2013
02/18/2013001NARC EQUIP PARA -POSSESS AND OR USE13-409MMA03/13/2013
Jail Summary
02/19/2013 BONDED
06/20/2013 BOND REVOKED
06/20/2013 RE-BOND
06/26/2013 BOND REVOKED
Bond Amount
$4,000.00

 

End of detail.Top of Page

@Zachery Buffin

We are overrun with unlicensed brokers. They were using contracts to broker without a license and the state put an end to that. Now the unlicensed FRAUDS AND SCAMMERS have to hide in the shadows. It must be pretty tough to advertise a property, avoid pictures, giving address, and contact info. Doing so would make it easy for the state to issue a cease and desist and they are sent out every day of the week. The guy listed above contacted me about a property. I got curious and put his name in the arrest records and look what showed up. No wonder he is unlicensed: he has no chance in hell of getting a license..and I believe that is a GOOD thing. My experience even with licensed ones is often over zealous figures. We have a new guy advertising on BP. His figures are WAY out of whack..making it sound like the deal--that they truly aren't. 

looks like he should be in drug rehab.. not real estate.  @John Thedford

@Thomas Weidner   there are some new disclosure laws in Texas that wholesalers must follow I would get familiar with those.. its the wild west there.. and so many houses there have major issue I would be quite cautious.

Originally posted by @Jay Hinrichs :

looks like he should be in drug rehab.. not real estate.  @John Thedford

@Thomas Weidner   there are some new disclosure laws in Texas that wholesalers must follow I would get familiar with those.. its the wild west there.. and so many houses there have major issue I would be quite cautious.

 This thug started calling and texting me. I suspect he got my info from CL. He was involved in a local case. The original "purchaser" took this idiot through the property representing him as an inspector. Unlicensed broker sued after seller reneged. They just settled and dropped their suit. It cost the owner some money to save his house. I am helping seller draft a letter to state attorney's office as well as to DBPR urging them to prosecute. It is his second time he is in trouble for brokering WITHOUT a license. He could EASILY made great money by closing and then selling what he owned, rather than acting as a broker. 

Sure I can understand that, I mean believe me wherever money is involved criminals will be. The thing is that wholesalers, good ones, are able to provide more deals more consistently to investors. I am not saying you can't find deals on the MLS or even on your own, I do it every day, I am just saying that we aren't all bad haha.

I always encourage my clients to show up to properties with a contractor they trust or if they are experienced to come walk the properties with me to verify that we are seeing the same kinds of repairs needed and have a similar vision for the scope of work. When I put out comps they are always of the property finished out and rehabbed to the level we recommend. If you don't do the work we agree it needs I am not responsible for the lower resale. 

All in all we have very happy, repeat customers that can verify the way we do business and that we stand behind our properties. That would be another piece of advice, seek out other people who have done business with that wholesaler and see if he is doing legitimate business. Look to see if his name or his company's name appears on the projects he said he has done. If your state is full disclosure that is. 

@zacherybuffin thankyou for your insight. I also believe that there are good and bad people in any business.

@Thomas Weidner not all wholesalers are bad...I do lots of wholesale deals just make sure you do your own homework on your deals.....sounds like @John Thedford Had some bad experiences with a wholesaler but that doesn't mean they are all bad....there's a lot of people who have had bad experiences with agents/brokers also and that doesn't mean that they are all bad either. I'm a investor I do fix and flips, wholesale deals and have rentals and in this business it's all about reputation....I've wholesaled many deals and everyone I've sold to is happy and making money...I've also bought wholesale deals and have good relationships with many agents and brokers. Wholesaling is not "illegal brokering" i market for "off market property's" and close on the ones I want to keep and wholesale the ones I don't want....I'm happy and my buyers are happy and my sellers are happy

@Thomas Weidner There are some solid wholesalers out there. but only about 5 % of them are actually good mostly because most of them don't know what they are doing. Check your numbers and make sure you get several bids from General contractors. Don't trust their comps. Don't trust their rehab numbers. Most likely ARV is inflated and repairs are lower. If you're going to run ARV numbers through a realtor, make sure he is an experienced listing agent in the area. Good luck.

@John Thedford @Thomas Weidner I'm a wholesaler and investor....I'm not a "middleman playing the part of a agent without a license" I do lots of deals...I have rental property's, do rehabs and wholesale lots of deals. To answer John Thedford question "why would someone sell a 100k house for 70k and give away equity ? I do it all the time...here's a example, recently I sent out 24000 post cards....I negotiated 5 deals...once I had them all contracted I decided to keep 1 as a rental and keep 1 for "fix and flip" so the other 3 I "wholesaled" ..... I sold those 3 property's to another investor I know....here was the numbers
Property #1 ARV 260 sold wholesale for 188
Prop #2 ARV 250k sold wholesale 188k also
Prop # 3 ARV 230k sold wholesale 175k

I could have done all of them myself but I made $50k between all three assignments so I used that money to offset what I'm spending on my other deals and post cards.... I wholesale deals to buy rentals and fund my own fix and flips it's a great system....I think it's wrong and ignorant to stereotype all wholesalers as non trust worthy people. Every industry has good and bad. Go to your local REI meet up and connect with a reputable wholesaler and you will save yourself a lot of money on your investments....
good luck guys

@John Thedford   John that is an incredible reply and very informative

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:........

I can tell you here in the NY market, specifically the city, queens, brooklyn, bronx - there are so many investors a wholesaler wont do any of those things, actually here its like you have to beg these guys(gals) to even give you a call, and they flip it fast to somebody they usually know and have been working with, in other words here the responsibility is on the buyer, like if you told the guy to give me a comp or whatever - he will hang up on you, yes they will say "the house is $300k, you need to put $80k into it, and you can sell it for $450k"  but your right, they have no idea and their numbers make it look good, where it might cost way more to repair it, (actually now that you mention it I am sure their are great wholesalers here that might do some of what your saying, but they wouldnt waste their time with somebody like me yet because I am not known yet, or like the big guys that do 20 - 30 properties at a time)

or I had one guy offer me one (after I kept calling him) and "This is a 2 family house, etc etc" and when I looked it up "it was actually an illegal conversion from 1 family to 2 family - very common here, and from what I am gathering very costly to and time consuming to fix"

@Kristopher Gomez

What most of these guys are doing in FL IS ILLEGAL> Laws vary state to state. Call yourself anything you want, but being the middleman in a RE deal is acting as an agent. In some states it is legal-and other states it is not. Some are cracking down on this practice due to the number of people being victimized by unlicensed brokers. I do get it. Calling yourself a "wholesaler" sounds a LOT more respectable than calling yourself an unlicensed broker. I see licensees in FL calling themselves "wholesalers" as well as unlicensed brokers operating ILLEGALLY in this state calling themselves "wholesalers".  The word "wholesaler" implies value..which often is NOT the case.  Most of the deals I see locally, even the ones offered by licensed operators, have little real value except to those willing to overpay:)

One basic thing I will tell you is you NEVER give the seller earnest money.  Think about it, if you were buying a house to live in, would you give the seller the earnest money?  No, the realtor or a third party would hold onto the earnest money.

If you give sellers / other wholesalers earnest money chances are you will never see it again.  And if you have multiple deals going on you will spend all your time chasing your earnest money.

Hope that helps, if I can be of any other assistance please do not hesitate to PM me directly.

Peter Vekselman

@John Thedford being a real wholesaler is not being a “middleman” or acting as a “unlicensed agent” agents represent sellers and buyers and bring the two together for commissions...as a wholesaler I negotiate below market deals buy them and then sell them for a quick profit... sometimes I use hard money to close my deals and then quickly resale them and sometimes I assign my contractual rights to the purchase for a fee....I don’t “market” property’s on Craigslist or Zillow....I sell my property’s to other investors I have personal relationships with...different states have different laws and the term “wholesaler” is a broad term...however buying off market property’s for a deep discount and selling them for a profit is 100% legal in every single state. There is no law that says you can’t buy a property cheap and sell it for a profit. That’s what “real” wholesalers do. I know there is a lot of fake wholesalers out there that give guys like me a bad name but there’s also a lot of bad agents out there that give agents a bad name...I’m not one to stereotype....real estate is a reputation business and everyone I’ve ever sold a wholesale house to loves me...sellers included...I have one seller that has sold me 7 houses this year...all 7 around 65 cents on the dollar because I close quick and cooperate with his exchange...John Thedford try to have a open mind about the wholesale concept maybe it can help you in your business...don’t be one of those guys who’s to smart for his own good... good luck and I wish all you guys well.

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