Struggles with the Stigma Against Wholesalers
Real Estate Agent · Philadelphia, PA · Member since 2018 · 428 posts · 484 votes
Struggles with the Stigma Against Wholesalers
Most Popular Reply
James MasottiPro Member
Rental Property Investor · Washington Township, NJ · Member since 2015 · 1k+ posts · 976 votes@Jimmy O'Connor - Wholesaling is perhaps the hardest job in real estate investing and it's where most newbies think they can get started. Unfortunately the majority of them are completely wrong. It is hard for the following reasons.
- You need to know what the ARV is for your target market and how to actually comp properties appropriately
- You need to know what rehab costs are in order to estimate the amount of work needed for a property
- You need to be good at marketing in order to be able to find the off market deals
- You need to be good at negotiating in order to be able to win investors and sellers alike
So...why do most investors get annoyed at wholesalers? Because they bring me a deal and claim it's worth $150,000 when in reality it's only worth $120,000. They tell me it needs light rehab of about $15,000...when in reality in needs $30,000. They do all this and tell me I can "steal" the property from the seller for only $90,000 plus of course their $10,000 fee.
It's a waste of my time and the sellers. So how do you improve your "quick pitch"...the simple answer is you don't. The deal is what we're interested in. All the newbie wholesalers who are like "I'm trying to build my buyers list give me your email!" That's just spam at that point. Your system isn't any different than anyone else.
The deal is what sells us on you as a wholesaler. Most of the "good" wholesalers have only a handful of investors they work with because if you bring me a deal that meets my criteria, I'm going to close. You don't need to shop it around...and that's the mutually beneficial relationship everyone is looking for, that very few people are actually able to deliver on.
I will listen to any wholesaler who comes to me on the first deal. When they prove they know their stuff, I'll listen and keep listening...when they are clueless though I know not to bother wasting any more of anyone else's time because they'll eventually run out of marketing dollars and disappear.
::steps down from soap box. ::
72 Replies
- Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes7y
Wholesalers in general offer don't perform as they say that they will. I am on 20 or so wholesaler lists and get emails from 1 or 2 of them consistently.
Most Wholesalers do the following:
1. Use an ARV 10-15% higher than actual
2. Use renovation numbers 20-50% lower than actual
3. Don't find quality properties on a consistent basis
If you want to set yourself apart, then don't do the above.
I have wholesaled quite a few properties in my time. I haven't done it in about 8 years, but I am friends with a lot of the largest wholesalers in the Philadelphia region. Don't get discouraged. Most people's buyers lists are built online now a days.
- Real Estate Agent · Philadelphia, PA · Member since 2018 · 428 posts · 484 votes7y@Todd Dexheimer simple yet affective list! Thank you!
- Real Estate Agent · Philadelphia, PA · Member since 2018 · 428 posts · 484 votes7y@Alex Franks hahaha I love that story. The core essential being never lose the hustle. I’m 6’4 225 so sounds like you and I would make a solid volleyball doubles team
- Rental Property Investor · Montgomery, AL · Member since 2017 · 277 posts · 221 votes7y
I would say the biggest thing that has helped us establish credibility with sellers is that we aren't just wholesaler but investors as well. When talking with potential sellers we always come across as investors not wholesalers. This works for us because we do have a portfolio of rentals and are not lying when we says this. I believe the natural progression for any wholesaler is to get into rental investing at some point so maybe just taking down a few of the deals you come across yourself instead of wholesaling them will allow you to now market yourself as an investor.
- Houston, TX · Member since 2011 · 673 posts · 360 votes7y
The issue with wholesaling is there barrier to entry is ZERO which brings in all walks of life. My house buying company wholesales hundreds a year in Houston and we work REALLY hard to differentiate ourselves. I frankly don't like that we are thought of as used car salesmen. But that also creates an enormous opportunity to add value and create some big fans.
Here is what we are doing to bring credibility to our business and the industry:
All sellers know we are wholesaling their house
All buyers get a GUARANTEE for their ARV and rent comp or we write a check
We started a construction company to serve our investors and keeps us up to date with construction costs.
The hope is that we can grow large enough and force all wholesalers to conduct business this way.
- Lender · Detroit, MI · Member since 2017 · 36 posts · 30 votes7y@Jimmy O'Connor I don’t worry about it too much. I have 3 cash investors who buy almost all of my deals and a few good second string buyers. Big buyers is where you want to go. My advice? Go find the biggest buyer in your area and offer 24 hour first right of refusal. You’ll get their attention. Finally, I’ve seen the comments on licensure andI think you need to be cautious in wholesaling if you are a licensed agent. There’s a reason I’m not licensed...
- Real Estate Agent · Philadelphia, PA · Member since 2018 · 428 posts · 484 votes7y
@Sam Craven Good work!!! You're setting the standard that I want to emulate. Yeah I agree, one of the biggest issues is that "ANYONE can do it" but that is not the same thing as "EVERYONE should do it." What topic was your podcast about?
- Real Estate Agent · Philadelphia, PA · Member since 2018 · 428 posts · 484 votes7y
@Daniel Campbell Thanks for the response! Right now I have a small but growing list with a couple of Cash Whales but I can never put all of my eggs into a single basket so I am using any tip I have yet to hear, like your 24 hour right of refusal, to buff up the quality, efficiency, and quantity of business I am able to perform.
- Real Estate Agent · Philadelphia, PA · Member since 2018 · 428 posts · 484 votes7y
Originally posted by @Joseph Back:
I would say the biggest thing that has helped us establish credibility with sellers is that we aren't just wholesaler but investors as well. When talking with potential sellers we always come across as investors not wholesalers. This works for us because we do have a portfolio of rentals and are not lying when we says this. I believe the natural progression for any wholesaler is to get into rental investing at some point so maybe just taking down a few of the deals you come across yourself instead of wholesaling them will allow you to now market yourself as an investor.
@Joseph Back - That's something I have never considered. That allows me to "talk shop" with my investors so I can be able to empathize with them on any of their pain points. Also, as I dip my own long term, nest egg properties, I will be able to relate to them on a much deeper level. Good looks!
- League City, TX · Member since 2016 · 63 posts · 26 votes7y
Originally posted by @Jimmy O'Connor:
@Sam Craven Good work!!! You're setting the standard that I want to emulate. Yeah I agree, one of the biggest issues is that "ANYONE can do it" but that is not the same thing as "EVERYONE should do it." What topic was your podcast about?
He has been on two that I know of and possibly a third. I highly recommend them from a wholeselling, as well as, an overall business perspective.
- Houston, TX · Member since 2011 · 673 posts · 360 votes7y
thanks @Chris Nowlin
yea i have been able to be on the podcast 3 times. 33, 127 and 271.
They are an insight into my mindset at the time and where our business was. I tried to deliver high level business strategies as well as insight into our successes and failures as a company. Originally posted by @Jimmy O'Connor:
Hey BP Community!
I work in Philadelphia and Delaware County as a Licensed agent that specializes in wholesale for REI opportunities. As I have been reaching out to potential investors and doing the cold call grind (like many of you are probably all too familiar with), I keep getting pushback when I say "wholesaler." Over the phone I find it difficult to differentiate me from the people only looking to make a quick buck because some Youtube Personality says they can do it with 5 simple steps. I personally have, and continue to thrive off of repeat investors but I am always looking to grow my network of relationships.
So for all of my wholesalers and investors out there~
Legitimate Wholesalers- have any of you experienced this dilemma and what has your solution been to establish legitimacy in a time where our profession is being too loosely equated to the "get rich quick" mentality rather than
Investors-
What are some of the pain points that you have run into with wholesalers? What can I focus on with my quick pitch to establish value that differentiates me from the wholesalers that have left a bad taste in your mouth?
Investor here: I used to deal with wholesalers all the time. I still do in a way. But now the ones I work with know I don't want to play the game where they put something under contract and I buy it from them. Instead, they bring me the deal (a seller) and I work it all out myself, put it under contract, and close. I give them a % of the deal when I close. And for some, I also give them a bonus 'kicker' when I sell or refi.
But yeah, I don't want to deal with the guys that put things under contract and sell the contract. That's super cheese. Not that I think it should be illegal. Unlike that one dude that comments on every wholesale thread (thedford?), I could care less if someone is working without a licence as I don't think a licence should be required to deal with RE (or almost anything). There should be private groups that give people credentials to show the public that they know what they're doing -- then the public can decide if they want to only work with people that have that credential (and I say this as someone who's licences)
Originally posted by @Jay Hinrichs:
JImmy I could write your script I would elevate myself so far above the rabble that is most wholesalers.. it would be quite easy as well. especially to larger buyers who are looking for some level of sophistication.
Most of the larger OREO distress brokers that would have been considered in the wholesale realm are licensed they need to be they don't want to get sued for brokering without a license.
but there are some substantial companies that are not licensed. this should be quite easy for you.
I deal In philly you would be my go to type of guy.. when I get a letter or call from a philly non licensed wholesaler I don't give it the time of day.. but that's.. me I tried over the years.. but the industry is plagued by beginners who are trying to do as @James Masotti described the very hardest thing to do in real estate.. and like anything sales related.. there are a certain amount that will make it work.. but those folks would make any business work.. the rest they just do what others mention they get whopped up on Hey I am going to wholesale so I can buy and hold.. blow what marketing money they have then just fade away.. seen it for decades.. especially in the foreclosure realm.
The reason someone who's licenced would want to wholesale vs. simply broker the deal is the margins. If you find a $100k property you think you can flip to someone for $120k, that's a wholesale opportunity. If you just list and sell that $100k home to an investor, you've made 1/5th as much.
(not defending the practice, but I can see why an agent would want to chose one option on a deal vs. the other)Originally posted by @Joseph Back:
I would say the biggest thing that has helped us establish credibility with sellers is that we aren't just wholesaler but investors as well. When talking with potential sellers we always come across as investors not wholesalers. This works for us because we do have a portfolio of rentals and are not lying when we says this. I believe the natural progression for any wholesaler is to get into rental investing at some point so maybe just taking down a few of the deals you come across yourself instead of wholesaling them will allow you to now market yourself as an investor.
Actually I'd rather deal with a broker/wholesaler that wasn't also an investor. If I'm sent a great deal, I don't want to second guess myself as to why this investor sent it to me vs. buying it themselves. But if I know their gig is just to make some $ by finding the deal, and don't want to be involved on the buy side, then I can understand why a good deal comes my way.
A wholesaler brought me one of my best deals. I bought it for $3.8m, sod it for $5.7m 2 years later after almost no capital improvements. Some of that was due to market appreciation but for sure I got it at a good price.
- Realtor and Investor · Scottsdale, AZ · Member since 2017 · 1k+ posts · 1k+ votes7y
So you have back pain. You have 2 choices; You can go to the Dr, who will give you a prescription, OR you can go on the street, behind the alley, and visit "Joe" to get the same (seemingly) pain pills. Is there any question of which option most people will choose?
Since it is illegal to actively participate in real estate transactions without a RE license, in most (if not all states), many people do not want to be associated with any type of illegal trouble.
For me, the answer to your issue is simple. You are licensed. Why are you burying the lead? Why are you in the alley pushing pills when you have a legit license and an RX pad?!
Take Jay's advice, change your title. You are a licensed REO specialist, or Licensed Distressed Property Specialist, or even Licensed Wholesaler! Just don't forget the most important part of your title.....LICENSED.
- Real Estate Agent · Philadelphia, PA · Member since 2018 · 428 posts · 484 votes7y
Originally posted by @Cara Lonsdale:
So you have back pain. You have 2 choices; You can go to the Dr, who will give you a prescription, OR you can go on the street, behind the alley, and visit "Joe" to get the same (seemingly) pain pills. Is there any question of which option most people will choose?
Since it is illegal to actively participate in real estate transactions without a RE license, in most (if not all states), many people do not want to be associated with any type of illegal trouble.
For me, the answer to your issue is simple. You are licensed. Why are you burying the lead? Why are you in the alley pushing pills when you have a legit license and an RX pad?!
Take Jay's advice, change your title. You are a licensed REO specialist, or Licensed Distressed Property Specialist, or even Licensed Wholesaler! Just don't forget the most important part of your title.....LICENSED.
Your comment seems to align with an underlying theme of that I should act and leverage the fact that I have something that the "back alley" wholesaler can't offer- Certified Legitimacy. Today speaking with potential investors I was way more welcomed with the change in vernacular. Thanks!
Originally posted by @Jimmy O'Connor:
@Cody L. I appreciate the input from the investors prospective. And good work on that investment man that's whale for how short of time period!
There have been better deals, but this one happened to be from a wholeseller. The others (better) were sourced by me or legit brokers I know.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Cody L.:
Originally posted by @Jay Hinrichs:
JImmy I could write your script I would elevate myself so far above the rabble that is most wholesalers.. it would be quite easy as well. especially to larger buyers who are looking for some level of sophistication.
Most of the larger OREO distress brokers that would have been considered in the wholesale realm are licensed they need to be they don't want to get sued for brokering without a license.
but there are some substantial companies that are not licensed. this should be quite easy for you.
I deal In philly you would be my go to type of guy.. when I get a letter or call from a philly non licensed wholesaler I don't give it the time of day.. but that's.. me I tried over the years.. but the industry is plagued by beginners who are trying to do as @James Masotti described the very hardest thing to do in real estate.. and like anything sales related.. there are a certain amount that will make it work.. but those folks would make any business work.. the rest they just do what others mention they get whopped up on Hey I am going to wholesale so I can buy and hold.. blow what marketing money they have then just fade away.. seen it for decades.. especially in the foreclosure realm.
The reason someone who's licenced would want to wholesale vs. simply broker the deal is the margins. If you find a $100k property you think you can flip to someone for $120k, that's a wholesale opportunity. If you just list and sell that $100k home to an investor, you've made 1/5th as much.
(not defending the practice, but I can see why an agent would want to chose one option on a deal vs. the other)I totally get the why I paid 125k assingment fee to a dirt dog last summer on 90 lot project here in PDX.. so I understand it.
but the guy worked on it for 2 years got it through a lot of the land use approvals etc he just does not have the 9 mil its going to take to develop it.. so he took his money and we took the deal.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.