Do wholesalers only work with cash buyers?

10 Replies

Hey all. I heard a wholesaler on a podcast recently say that she only works with cash buyers. Is that normal? I'm still in the process of saving up a down payment for my first deal and it seems like if I plan to use conventional financing then I'd lose the advantages and deals that wholesalers could offer. Thoughts?

@Sam T.

In most markets are starving for undervalued property, so there are lots of cash buyers. She could get fussy on who she wants to deal with and could be in a market where there are multiple offers and plenty of investors with cash. 

The problem is that conventional lenders don't like wholesale dealings. If its an assignment, they often use the original contract price as the "value" for their LTV calculations so you have to come out of pocket for the assignment fee. Or, if its a double close, they will pull title and discover the seller doesn't own the property and nix the loan.

In general, from the wholesalers point of view, there are lots of hassles to dealing with a conventional lender.  Cash buyers, or those using hard money lenders, are much easier to deal with.

I wouldn't be too concerned, though.  Many wholesale deals aren't really deals at all.

Most wholesalers also get their houses under contract by agreeing to a cash purchase by either them or one of their "partners/investors". I imagine the expectation is the end buyer being a cash buyer 99% of the time.

Originally posted by @Steve Haight :

@Sam T.

In most markets are starving for undervalued property, so there are lots of cash buyers. She could get fussy on who she wants to deal with and could be in a market where there are multiple offers and plenty of investors with cash. 

 Ok that makes sense, thank you. I didn't know if it was some hard and fast rule that I hadn't heard of before. So it just depends on market conditions and the wholesaler then.

Originally posted by @Jon Holdman :

The problem is that conventional lenders don't like wholesale dealings. If its an assignment, they often use the original contract price as the "value" for their LTV calculations so you have to come out of pocket for the assignment fee. Or, if its a double close, they will pull title and discover the seller doesn't own the property and nix the loan.

In general, from the wholesalers point of view, there are lots of hassles to dealing with a conventional lender.  Cash buyers, or those using hard money lenders, are much easier to deal with.

I wouldn't be too concerned, though.  Many wholesale deals aren't really deals at all.

 Thanks, good points. I'm still new to this so this is all great info to think about.

@Sam T. More times than not wholesalers want to work with cash buyers. Csh transactions are less complicated and close faster than a sale using traditional forms of financing, also in markets where houses are inexpensive a wholesale deal might be for an amount so small that you wouldn't be able to get a traditional mortgage. Be careful with wholesalers, there are a few that offer "deals" they find on Zillow at a low price and add their fee to the sellers asking price or they offer you deals that aren't deals at all as they are offered at prices a shade lower than the MLS.

If you are good you can find a seller who will finance the property. For example, someone wants out and does not need money.  The probability finding someone is very low though.

Originally posted by @Sam Shueh :

If you are good you can find a seller who will finance the property. For example, someone wants out and does not need money.  The probability finding someone is very low though.

 Do you suggest just simply asking every seller I come across if they're interested in seller financing? Or is there a better approach to finding them?

Cash buyers in my experience always make life a bit easier then dealing with conventional lenders. As long as you can show an investor a good deal they’re more then likely going to invest.

I am a "cash buyer" because I use a Hard Money lender but the problem is I can't find 'true good deals'  the lender will approve of. If you find any great deals and need funds, maybe we can partner up!