what do you hate about wholesalers?

47 Replies

This is a question that has been on my mind a lot lately, What to buyers/investors hate the most about wholesalers? Why do wholesalers have a bad name? Are all wholesalers cast in a negative light? Lets hear it from the buyers and investors alike what don't you like about wholesalers and what is your past experience with wholesalers?

Hate is strong. More dislike... The bandit signs I don't like because they don't improve communities (in the short term). Secondly, I wish they knew the spreads that investors need to make to ensure a good investment. Focusing only on the spread they can make, does not focus on their customer - the investor.

@Kalim Kalla

I don't hate them. I would prefer they not try to tell me that a $10k margin on a flip is a good deal, when I know they are at least 10k over on their purported ARV, while shorting the rehab cost another $10k.

Let's say 10 percent of wholesalers are good at their job. Those ones I absolutely love. The other 90 percent? Here are my gripes:

- Every single time ARV way too high and using the wrong comps AND reno budget way too low

- Blasting every deal out to everyone so you show up and it is a cattle call of unverified investors muddying the waters

- Not informing the seller about the assignment

- Wholesaling without money of their own or money backing making only an assignment viable for the seller to have success

- Telling you about a property they don't yet have under contract, but say they do

- Not providing full photos of the things wrong with the property, good wholesalers take pics of the worst things so we know

- Offering you a deal, then it's gone. Then two days later, they want you to do the deal again, but only in the next hour. YAWN.

All reasons i have read so far make sense. 

My take aways so far:

1. There are good guys out there, were just working against a negative notion and have to prove ourselves to be in that top 10%

2. Wholesalers don't understand what it means to be an investor and try to abuse flippers whether intentionally or due to the lack of experience (cost/price) expectations. 

3. Wholesalers tend to focus on the profits prioritizing short term gains rather than long term relationships. 

4. Plain And Simple lack of understanding of how to conduct business in real estate. 

@Kalim Kalla

Never disappointed by one, but expectations are usually exceedingly low for these interactions. For the reasons you mentioned plus the seller facing injustices. "I'm an investor, so we can't pay market price for your property." is a statement that I've heard from people cold calling on our rental properties. There is no experience or knowledge behind a statement like that. The wholesalers that are worth it understand their niche and what it is worth to the end investor and the seller.

Wholesalers don't understand what it means to be an investor

Umm, because wholesalers aren't investors?   You could be selling a used car with their skill set.

It's like someone placing a bet on a game and thinking they're an athlete.

Constant nonstop "I want to buy your house" calls from rude, pushy virtual assistants that do not listen, and call repeatedly when you tell them you aren't interested or they have the wrong number.  Constant SMS spam but I never reply to those. 

I'm not a distressed seller, I am actively buying!  If you are pulling all that data, you should see I bought a few within the last year.  But they never check. They probably don't even know how to do that level of analysis.  I have not gotten a single call asking if I am in the market to buy, but I get at least 3 per day now asking if I want to sell.

Regardless, it's no use talking to the brain-dead virtual assistants, sometimes I think they are just there to rip off the wholesalers. I called one once trying to tell the guy he was sending me postcards for the wrong addresses, trying to save the guy money and check his mail merge or whatever, and the foreign VA was just rude and short with me. I continue to get a bunch of postcards for the wrong homeowner from that wholesaler to this day.

Wholesalers that want me to tell seller that I am looking at the house to provide a rehab estimate, trying to deceive seller about assignment. Wholesalers trying to pretend that they are all knowing about re contracts and processes when most are completely clueless.

that and the endless robocalls, texts and letters saying we will buy your house, at about 50% value of course.

I'd be overlapping on some previous comments if I gave my gripes about wholesalers so I'll tell a recent story. 

I see a Craigslist post with a headline of Must Sell - Rehab Duplex - Great Price

I send a message and receive a response with photos. They guy says he'll let it go for 30K. I look up the owner to see if it's this guy (it's not - it's a widow) and get in contact with her and she tells me someone is going to buy it for 25K and she's waiting for him to secure financing. 

I put 1 and 1 together - the wholesaler gave her the impression (to put it lightly) he's going to buy it and of course in reality he's looking to wholesale it. 

The property is still on the wholesaler's website a month later. 

This shadiness is why wholesalers have a bad reputation - acting like they're going to buy and not wholesale. Maybe some wholesalers are honest about it but this one wasn't. And I'm convinced the majority of wholesalers quit after less than six months. 

They just irk me. Postcards and generic text messages; I tell them to leave me the heck alone and get the same text message a month later from them wanting to buy my house. Yeah - I'm going to wholesale my Los Angeles house in a hot market. Or maybe I'll rehab it and have my agent sell it for 3.5X what I paid for it. That'll do. That'll do. 

Most wholesalers are simply the carnys of the real estate world. I think a successful wholesaler would become so not only by working hard and by building a solid reputation but also by being transparent with both buyers and sellers.

In closing, one of the greatest videos ever is when Meet Kevin crashes a wholesaler convention after they made fun of him (on Youtube) and Kevin shows up and owns them. And one of the wholesalers is rapping at the convention (I'm not kidding) and he trips over a stage light or something of that effect and falls down, which is amazing to watch. 

Originally posted by @Kalim Kalla :

@Steve Morris did you deem it would be a possibility that some wholesalers are flippers themselves and thus could better understand the needs of an investor?

Kalim, well yes.  That's how it all came to be.  Flippers would do their own lead gen....

I do marketing. Steve does marketing. I get a few leads, and Steve also gets a few. But for whatever reason, I get 3 deals and Steve doesn't get any of his to close. So realizing I cannot possibly take all three projects down at the same time, I decide to hand off one to Steve - and maybe one is more in his area, or more his profile, more his type of flip/rental or whatever. Steve's glad to slip me a few dead presidents. I go do my deal, he goes off and does his. The third one goes to some other REI buddy in our herd.... or maybe I wholetail that one.

In short - dealflow doesn't happen in a nice linear rate.  They come in bursts.  This month I got more than I can do, next month I got nothing.

As long as the contracts happen, it's all good.  Sellers get their property sold as agreed... it's all bueno.

But see this works because Steve is a real buyer, and I am a real buyer.  We know market values, we know renovation costs, and we know them because (shocker) we've actually done a flip/renovation project ourselves.

I got nothing against somebody assigning a deal here and there, to make sure that deals get closed and sellers get taken care of.

But's now how it is portrayed to so many...

It is this concept of wholesaling as a path to start out - a way to build capital, by hustling and grinding and putting in the work - it's just not realistic.  You can do that but ONLY if you got a little capital (not even that much in some areas) and ONLY if you really know your numbers.  Or if you partner with some real buyers that are willing to help you along..  

It is actually easier, in my view, to get some financing and learn marketing and just go buy some houses (and just that is hard enough).  Take your lumps, learn from it and keep going.  You gain a lot of confidence and credibility this way, you get the social proof... which makes you so much more believable when talking to sellers.

I don't know... there are dozens of buyers within of 10 miles of where you sit right now.  Partner up with them.  They need deals, you need marketing capital.  Work something out.

Also Kalim, this is BP where all the realtors hang out.  Wholesalers don't really eat their lunch per se, but they do nibble at it some...  So there's that.

Originally posted by @Joseph Firmin :

Hate is strong. More dislike... The bandit signs I don't like because they don't improve communities (in the short term). Secondly, I wish they knew the spreads that investors need to make to ensure a good investment. Focusing only on the spread they can make, does not focus on their customer - the investor.

 The spread is determined by the market (the end buyer). If the end buyer is willing to pay it, that’s the wholesalers fault?

I love good wholesalers.

bad ones drive me batty:

  1. Laziness. They want to assign contract and not put any work in. Did you clear title first? Have you even seen the inside or are you just hoping I buy and get it off your hands before you have to do anything? I had one guy tell me 6 units can be built on a lot. I sent him a snippet of zoning code showing only 2.5 can be built. He couldn't explain why he thought 6. He just put a contract on it without doing any research and blasted it out. That's lazy, man!
  2. Bad financial analysis. Repairs are usually 50% more. Arv 10% less.
  3. Misrepresentations. True story: their email said landlord pays all utilities. Bought the place only to find out there's $300 of utilities every month and only one meter for 4 units. My fault for not verifying, but wow that wholesaler.

@Mark Sewell i understand that perspective Mark it is more so that people entering the real estate industry have a false notion that wholesaling is the “easy” place to start. Thank you for the insight on your Views.

@Chris Purcell True. These end buyers many times fall prey to their own ignorance and end up with a bad deal. Like you said, not the wholesaler’s fault, but I’d say 90% of the deals I see from wholesalers are this kind. This is why you see many wholesalers adjusting the price on properties again and again when no buyer shows up also... If they understood the market, the true rehab costs or what their customers (investors) needed, then it would help... just my opinion, I’ve seen some good wholesalers out there who know all this, but most do not.

@Kalim Kalla in many states wholesaling is borderline legal or even flat out illegal. In those cases, people who do it anyways either don't respect the law or they are the type of person who has the mentality "it is not illegal if I don't get caught". On top of that becoming a wholesaler doesn't require a license, doesn't require education and doesn't require money. The person cutting my hair for $15 has more schooling and licensing requirements than a wholesaler doing $100K+ transactions. That is why most states require a real estate license, even for wholesaling.

That being said, wholesaling is a very general term and covers a variety of different business models. Some that are perfectly legal and many educated people do it honestly and legally. I really hate to generalize and would not use the word hate at all.

Bottom line is the bad apples spoil the reputation for the good people. Low barriers to entry makes it worse in wholesaling. I would tell any wholesaler, worry about your own reputation more than the industry as a whole: 

1. Don't lie to people. Don't tell them you have cash to close in 5 days if you don't have cash and know you can't close for over a week.

2. Follow through on your commitments. If you agree to buy a house, make the deal happen. 

In any business, you will succeed or fail based on reputation. Protect it at all costs. Shady wholesalers don't last in the business very long. 

Originally posted by @Kalim Kalla :

@Steve Morris did you deem it would be a possibility that some wholesalers are flippers themselves and thus could better understand the needs of an investor?

OK, my definition of a wholesaler (which may be wrong) is someone that offers on a property with no intention of taking title or risking $0.01 in escrow with the sole intent of selling to an unknown (at time of M/A by seller) 3rd party and pocketing the margin as his profit.

If someone took title with the intent to flip the property, I wouldn't call them wholesalers then.

Correct me where I'm wrong, but I don't even consider them investors, but more like used car sales guy (however, they do have to own the used cars for a while, so maybe I'm being generous). 

The primary reason wholesalers get a bad wrap in my view is because of these "guru" wholesalers who sign up a bunch of eager newbies to go out and get deals under contract that they then sort through and sell off the good deals to their investors.  This creates a pool of uneducated "acquisitions specialists" out there who know little about their market and are just there to farm for the head person who makes either a big chunk of the assignment fee or a montly fee for "services" off of these people, usually both.

Wholesalers are a critical part of the ecosystem.  They allow investors and flippers to focus on the area of the value chain where they add the most value.  There are legitimate gripes about wholesalers, however most of them hinge on working with inexperienced people.  Investors are usually quick to forget they at one point in time lacked experience as well.

@Kalim Kalla I like some of the comments but let’s be real - wholesalers provide a service for us cash buyers and investors alike. My motto is If you can’t find it - make it. I am spending continuous time and effort training working and helping my small team of wholesalers get better single day. I am accessible available and provide great insight in their business. When you do that great things happen. It would be any investors and buyers dream just to sit there and let the wholesaler do all the work - not even help or build a relationship then beat them down when they aren’t up to par. You have to invest in your people and business and great things happen.

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