Wholesaler - REI Ethics? Newbie Question

[Matthew Atchley]

I'm a newbie so please be nice! :D After reading this site and being a member for a week I have a couple questions. This is my first REI deal, I have been checking the local websites for a couple wholesalers in town. Finally found a property, called the contact for that particular place. He said that him and another guy owned it and they thought they were going to keep it. We met after work to see what all I was looking for, I told him pretty much rehab the place, sell it and carry the note. I understand that I am getting a great discount by going through a wholesaler.He told me he would double check with his buddy. Turns out his buddy doesn't want to sell it but he had a couple more places in mind. One was an efficiency on a lot and the other was a house on a lot zoned commercial that might work for someone wanting to run their business from home. I said no on the first, not that much of a return and I feel the second one was too much of a niche market.
My questions:
1. Is it unusual to pay a $5,000.00 fee for him finding me a house to buy (he says he'll walk me through everything, suggest how to rehab, suggest how to sell, etc). I would assume he would be making money off of what he offered the owners and what I'm paying.
2. Is it unethical or immoral to have more than one wholesale company looking for an investment SFH for me?

In advance, I totally love this site, learned more here in a week than I have reading books, other websites, people, etc.

[J Scott]

To answer your second question first, there's nothing wrong with working with multiple wholesalers.

Think of it like this: The wholesalers are offering a service, and you are a customer of that service. Not different than if they washed cars for a living and you took your car to them to get washed. That doesn't mean you can't get your car washed from someone else, does it?

The one exception to this would be if you signed some type of exclusive agreement with this wholesaler that said you wouldn't buy from anyone else. Though in my opinion, that would be a ridiculous thing for you to do.

As for your first question, it sounds like you're saying that these wholesalers are asking for you to pay $5000 upfront just to start bringing you properties.

Don't do it!!!

The wholesaler should be getting his fee by selling you a property for more than what he's buying it for.

Also, in my experience, most wholesalers don't have very good properties; just because he's telling you he'll find you a great deal doesn't mean he will.

So, absolutely, positively don't pay him any money upfront on the "promise" that he'll find you a property.

Now, if he's also offering to help walk you through the purchase, rehab and sale of a property, that's completely separate.

If, after you have a property (whether he brings it to you or you find it some other way), you still want to pay him $5000 to "teach" you how to rehab and sell, that's up to you.

Is it worth $5000 to learn from this guy? What are his credentials? How many houses has he flipped before? If he's good at flipping houses, why is he wholesaling instead of keeping the good houses for himself?