Wholesale payments, here is what I think.

26 Replies

"wholesales" are not really my thing. Not into buying or selling them really. 

Yet, occasionally I come across a deal that doesn't have enough meat for me or I am just way too busy for it; but I also want to help out whoever is trying to offload it to me.

In those cases I fret to deal with the "buyers" that will contact me. Typically they know very little, are trying to re-wholesale it, or have been lied to and don't trust anyone/anything. Its frustrating to say the least.

The next part is even more frustrating. I don't wait till closing to get paid. If I have a property under contract, and the title company says the title is clear and ready to close, then I am getting paid right then and not waiting for the closing.

I am not selling the property, I am selling the contract and thus not going to wait and see IF they buyer can/will actually close. 

Taking the deal off the market and letting my time run out for free isn't my cup of tea, and listening to "buyers" whine about me "getting paid early" isn't something I have the patient for explaining, again.
You want me to not sell the contract to someone else? Pay me. Otherwise you are just kicking tires.

*(note- Of course if this is a 20k+ wholesale fee, then a deposit is accepted and the full fee paid at closing but with the contractual obligation to pay regardless if they close. My service was provided 100% and not contingent upon another being able to do what they wanted with the contract because of reasons other than the title.)

Unlike the last discussion I actually agree with you here.  There are a lot of tire kickers and people who want to daisy chain a wholesale; enough that you might consider making it a clause in the wholesale agreement and/ or listing it wherever you post.

All it takes is one time of someone backing out for no tangible reason and leaving you to explain to your buyer why their responsibility towards a property continues while their payment delayed.

I do not make promises that aren't kept. I feel an obligation to the seller who entrusted me with contracting for their property to have it sold on the closing date. I typically will write in a "first right of refusal" clause. Allowing me to purchase the property if they can't/won't.

@Jeph R. You mentioned points from your side. Now let’s look from the buyer side: 1. I pay the wholesaler money without the property being in my name. It ain’t gonna happen. They are being paid to provide a service. That service does not end till I have the property in my name. 2. What if I paid wholesaler and the seller backs out? I am out of money and the deal. 3. What if title comes back 2 days before closing and say there is an issue (actual deal through wholesaler). Not the buyers fault but now it’s stuck for another 2 months. Yes there are pros and cons to everything in life and if it works for you, great. It does NOT work for me.
Originally posted by @Avi Garg :
@Jeph R. You mentioned points from your side. Now let’s look from the buyer side: 1. I pay the wholesaler money without the property being in my name. It ain’t gonna happen. They are being paid to provide a service. That service does not end till I have the property in my name. 2. What if I paid wholesaler and the seller backs out? I am out of money and the deal. 3. What if title comes back 2 days before closing and say there is an issue (actual deal through wholesaler). Not the buyers fault but now it’s stuck for another 2 months.

Yes there are pros and cons to everything in life and if it works for you, great. It does NOT work for me.


1. You are buying the contract to the property , not the property.
2. You have a contract and the rights to protect your investment via the legal system.
3. I clearly stated "Once the title is clear to close".

There are PROS who work and insure they get paid for their part. i.e. getting a contract for a property, and there are cons that want everyone else to be at risk while they decide if they wanna follow through with their obligations.

You are asking at least 2 other people to risk their time, energy, imagination, information, and money with no risk to yourself?
Good luck with that.

@Jeph R. I am paying for a service and the service does not end till I have the property in my name. If your buyers are fine paying you upfront good for you. I will never be your buyer. The example I provided, the title was cleared but came back with issues. I am putting EMD. I have that to lose. Unless you are not requiring your buyers to put down earned money, you have no reason to say buyers have nothing to lose.

@Avi-  lolz, nah. You are buying a contract or you aren't. Im not in the service industry. 

You seem to be mistaken.

Earnest money would require an earnest money contract, and would be tied to the sale of the property. What you don't seem to understand is that selling a contract and selling a property you own are not the same thing. 

But, if you are willing to risk 20k for a 500.00 earnest check at the title company and a pissed off seller for the word of a buyer then  you should start your own service company. You would be servicing TONS of investors in no time.

@Jeph R. No I would start reaching out to sellers directly than going through your service. Also you are providing a service. No matter what you think you are providing. Providing the access to purchase a contract is a service. The sooner you realize it, the sooner your business will grow.

@Avi Garg i - Nah, I know my business better than some fella on the interwebs. But thanks for not only feeling entitled to telling others how they structure their deals, that they should wait on you, but what their business is as well.  I'm sure you are a delight to work with. What makes your money more green I wonder?

And I'm not surprised that you believe you could "go directly to the seller"....lololz, its like you don't know what a contract is, or think you are entitled to ignore them. Seems like you think the world revolves around your wants in all aspects.

The sooner you realize that an investor doing deals isn't going to put up with entitled behavior from strangers, the sooner you will have a business.

;) have a good day!

@Jeph R. It’s not entitlement it’s called opinion. You mentioned yours and I did mine. And read my statement again. I said I will reach out directly .. not to your seller but others ... do my own direct mail marketing than dealing with “contract” sellers like you. Fortunately for me there are a lot of other wholesalers who are willing to take my money and easy to work with. Anyways as I saId earlier, Its great If your buyers like your business model.

@Avi Garg - I'll call it entitled in my opinion.

My business model is to flip real estate and buy/hold real estate. 

That business involves contracts and is not a service industry. i.e. I do not do work for a customer. 

You should certainly learn the difference between a business that provides a good and one that provides a service. You seem to have the two confused.

Thats why I say "entitled". You feel you are entitled (as you repeatedly claimed to demand service as you want, or else) to the service you want. When you are in fact purchasing a good.

@Brian Pulaski - There is only one "fee" and its just the price I sell the contract for. 

If I get a deal at 60% of value that needs nothing. And I sell the contract for 10% of its value then thats it.

I typically will have a first right of refusal to purchase the deal in order to avoid daisy chain wholesellers and to avoid wanna be's tying up deals and hoping they can do them themselves or wholesale them again..but then the sellers left hanging. I have bought several deals after someone bought the contract, couldnt' get financing, and I took it to not screw the sellers AND because it really was a good deal.

Originally posted by @Jeph R. :

"wholesales" are not really my thing. Not into buying or selling them really. 

Yet, occasionally I come across a deal that doesn't have enough meat for me or I am just way too busy for it; but I also want to help out whoever is trying to offload it to me.

In those cases I fret to deal with the "buyers" that will contact me. Typically they know very little, are trying to re-wholesale it, or have been lied to and don't trust anyone/anything. Its frustrating to say the least.

The next part is even more frustrating. I don't wait till closing to get paid. If I have a property under contract, and the title company says the title is clear and ready to close, then I am getting paid right then and not waiting for the closing.

I am not selling the property, I am selling the contract and thus not going to wait and see IF they buyer can/will actually close. 

Taking the deal off the market and letting my time run out for free isn't my cup of tea, and listening to "buyers" whine about me "getting paid early" isn't something I have the patient for explaining, again.
You want me to not sell the contract to someone else? Pay me. Otherwise you are just kicking tires.

*(note- Of course if this is a 20k+ wholesale fee, then a deposit is accepted and the full fee paid at closing but with the contractual obligation to pay regardless if they close. My service was provided 100% and not contingent upon another being able to do what they wanted with the contract because of reasons other than the title.)

So basically pay you your fee and have the risk of seller going MIA and not closing

No thank you

Getting a property under contract, dealing with fake "investors", and getting the title company to clear title has value. 

Again, I misused the word "Fee" in my initial post, as that would imply a service or advice being given. I am not providing a service or advice. 

No different than selling a lease to mineral rights. I am going to sell that lease, but then wait to get paid till after the buyer is cashing his check on his first drill?

I think the issue here may be lack of experience, seller going "MIA" happens all the time; if you invested your own time or are buying a contract as a shortcut. As the owner of the contract you decide if its worth pursuing based on your investment.
I would find it no easier to walk from a deal that I worked for 6 months to get under contract than one I bought for 20k. I would pursue my contractual rights either way.

Maybe you find it easy to devalue your own time, but I want to get paid for efforts I make and not work hard to hand off that entire prospect of getting paid to someone who thinks I am a service that is just charging fee's.

Paying a wholesaler before closing can work but it usually is highly relationship based.  There are bunch of different circumstances here but I have found and currently see most wholesale deals are paid at closing.  If you are able to receive payment in full before that, good on you.  We used to do quite a few of these about 10 years ago and it was very rare to be paid prior to closing.  The biggest wholesalers I know now (100-150 deals/year) mostly get paid at closing as well.  

Originally posted by @Chris Purcell :
Originally posted by @Jeph R.:

"wholesales" are not really my thing. Not into buying or selling them really. 

Yet, occasionally I come across a deal that doesn't have enough meat for me or I am just way too busy for it; but I also want to help out whoever is trying to offload it to me.

In those cases I fret to deal with the "buyers" that will contact me. Typically they know very little, are trying to re-wholesale it, or have been lied to and don't trust anyone/anything. Its frustrating to say the least.

The next part is even more frustrating. I don't wait till closing to get paid. If I have a property under contract, and the title company says the title is clear and ready to close, then I am getting paid right then and not waiting for the closing.

I am not selling the property, I am selling the contract and thus not going to wait and see IF they buyer can/will actually close. 

Taking the deal off the market and letting my time run out for free isn't my cup of tea, and listening to "buyers" whine about me "getting paid early" isn't something I have the patient for explaining, again.
You want me to not sell the contract to someone else? Pay me. Otherwise you are just kicking tires.

*(note- Of course if this is a 20k+ wholesale fee, then a deposit is accepted and the full fee paid at closing but with the contractual obligation to pay regardless if they close. My service was provided 100% and not contingent upon another being able to do what they wanted with the contract because of reasons other than the title.)

So basically pay you your fee and have the risk of seller going MIA and not closing

No thank you

ya clear to close is not the same as doing a date down day of closings lots of stuff comes up last day.. especially out east.. might work in his market and for small dollars I guess its not that big of risk.. but in all the deals I fund and I fund a lot of them with wholesale fee's attached its always paid at closing.. Although my Vendors are not one off folks they are volume players so maybe they have different arrangements..   Really depends on the asset and asset class..  distressed real estate with distressed sellers there is always going to be some risk that it wont close no matter if you have a clear title commitment..  But from the OP point of view I get it.. so buyer can choose to do it or just pass..  No one is forcing anyone to transact... although I can see this model leading to a ton of fraud.. IE bad wholesaler just walks off with buyers money and deal dies never to hear from wholesaler again.. or if the deal cant close wholesaler already spent your money and does not have it to give back.. 

But for sure there are a ton of tire kickers out there.. and it works both ways when your brokering real estate or contracts its never done till its done.

A modified solution to the wholesaler, buyer and seller all being covered and showing good faith may be like my last larger deal.

It was 4 single families on a large, developable lot.  Not being a developer, I wholesaled it to someone that could.  The non-refundable deposit/ right to have a chance to close, was $5k.  The seller and I split that.  Now that some consideration was exchanged, the seller was more involved and more vested in a satisfactory conclusion.  

To protect myself, I had a notarized but not yet recorded option to buy.  I brought a quitclaim deed to the closing.  Buyer gave me the balance of my fee, I gave him my option and a qcd.  Similar to a ROFR, but maybe more easily understood and with more teeth.

There are ways to protect your contract, your time and your seller other than being paid in full up front. 

Respectfully disagree with you needing full payment before closing.  As many have stated several things can go wrong and a wholesaler is being paid once I get full title.  Have you considered wholetailing?   While I don't wholesale, I do wholetail which makes me 100% accountable to seller.  Here is my last wholesale payment and no way would I have given this large of an amount without clear title.  I ended up wholetailing this home and was able to close within 30 days to another cash buyer.  

@Jeph R.

I am entitled to my opinion and definitely entitled when I am putting my money down to buy something. If your business is flipping and buy and hold, why did you come here complaining about wholesaling? 

If you post in a public forum, be prepared to take the good and the bad and make logical arguments than saying "I know my stuff". If you know your stuff, why bother posting here. We are all here to learn from each other and looks like you were just trying to drum up business than anything else.

Anyways I have wasted a lot of time in this thread. Time for me to move on. I will say again that if your business model works for you, its great.

Originally posted by @Rocky V. :

Respectfully disagree with you needing full payment before closing.  As many have stated several things can go wrong and a wholesaler is being paid once I get full title.  Have you considered wholetailing?   While I don't wholesale, I do wholetail which makes me 100% accountable to seller.  Here is my last wholesale payment and no way would I have given this large of an amount without clear title.  I ended up wholetailing this home and was able to close within 30 days to another cash buyer.  

nice work close the deals then resell hold your head up as a proud investor  all for it..  

Correct me if I'm wrong, but if you come across tire kickers, why don't you just refuse to do business with them and only do business with people that are proven to be serious buyers? Like referrals and previous business associates.

"The next part is even more frustrating. I don't wait till closing to get paid. If I have a property under contract, and the title company says the title is clear and ready to close, then I am getting paid right then and not waiting for the closing."

Jeph, let's put you on the other side of the fence for a minute. You still good with this arrangement? Not going to any specifics, just in general.

@Ian Walsh - I am not in the business of wholesale so I don't have a list. I have people I know and have done business with. If I was wholeselling in mass I may have a different approach.

@Jay Hinrichs - These are typically smaller deals as I stated in my "note" in the OP, I take a deposit on larger deals and wait to get paid on the bigger ones. "Tirekickers" don't bother me as much as people who will string you along and act like your deal isn't under a timeline with no intent or ability to buy it.

@Steve Vaughan - I am sure there are other ways, maybe even better. This is how I choose to do things with deals I invested time into but don't want to execute. Typically they have at least 40% after repairs and can close the same day I am asking to get paid.

@Rocky V. I said in the OP. Once the title is clear and ready to close. I wouldn't expect someone to pay me w/out knowing if they could close the deal. Also, never seen a real check with "your name here" as the payee...Seems shady.

@Avi Garg -This is a forum, for discussion, on how people do business, so I posted about something involving the way I do business. Its not complaining, at all. Why are you complaining about my posting about the only reason this site exist?
Considering I have stated I am not in the service business and have no service to offer, repeatedly, your claim that I seem to be seeking business makes me chuckle.

@Dylan Barnard - I do refuse to do business with them, tire kickers argue about how my arrangement isn't fair instead of working to make the deal happen. I only deal with referrals and unfortunately that doesn't always lead to quality investors.

@Victor S. - Yup. I have bought several deals this way. I have bought dozens that were contract for deed or taken over a mortgage. Those all require cash w/out closing.

Originally posted by @Chris Purcell :

So basically pay you your fee and have the risk of seller going MIA and not closing

No thank you

That is the risk everyone takes as a buyer or seller. The wholesaler has many hours and thousands of dollars in marketing costs to get that contract. What if the buyer of the contract backs out at the last minute? That leaves the original home seller in a bad place and harms the reputation of the wholesaler as well as cost him the profit of that deal. Everyone has skin in the game and something to lose.

Deals can be structured in many ways. It's up to each individual to come up with language and terms that fits their needs.