Problems with wholesalers
Real Estate Agent · Phoenix · Member since 2025 · 6 posts · 1 vote
Problems with wholesalers
Most Popular Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesQuote from @Peter Mckernan:
The real reason wholesalers are bad (not all, but most) is because they create the numbers for ARV for the end buyer that will get their deal sold not take care of the end buyer to get repeat business. This goes the same for the owner, they tell them we can close in 15 days no issues, give a high price to close it because the seller pushes back on the first numbers they give the seller and it never is offloaded or falls apart in escrow.
I have an example, there is a lady that wanted to get a deal.. She is great, very nice and a go getter.. She really wanted a deal, and to get into flipping because she left her job and wanted an active income. So, we started looking, and after about a month of not closing on a deal or getting in contract because we were sticking to numbers that would get her a return; the client got a deal sent to her by a wholesaler. The deal was in a good area with good comps, but not comps that supported the wholesalers purchase price. The comps they sent this lady were comps where same square footage, a mile away, and same bed/bath count. The catch is that the two great comps that were supporting the wholesaler's number was in a historical district which was a different area feel, different make up of houses, different architecture, and houses that sell for more due to all that stuff. I explained this to the client and that it was not good move to buy the house due to all the factors and she would not make money due to the purchase price and where the true ARV was for the property.
The end of the story for her is that she is currently still on the market 114 days later trying to get her price she will not get, and that market is DOM average of 30 days. She also has holding costs with this property and is desperate to sell the place due to high holding costs that have been dragging her profits even lower.
This is a prime example of what wholesalers due to newbie buyers and buyers that do not know what is a true comp. Which, this ends up giving wholesalers the bad name they have today. So, make sure the ARV is true to what that house is, make sure the repairs are what the wholesaler says, and make sure you would with someone that knows what they are doing.. Vetting everything a wholesaler tells you before buying...
One of the major risks and especially in a high priced market like So cal.. is if this is a cash sale as many are and the wholesaler is making an assignment fee on the settlement statement cash buyers do not realize they do not have title insurance for the assignment fee.
so in practice you have a 800k as is sale wholesaler making 50 to 100k ( pretty common in high priced markets) being the nature of the beast you now find out you have a buggered title and make a claim.. title insurer is only going to pay the underlying contract price your going to EAT the 50 to 100k and if you think the nice wholesaler is going to send you back that money I have a bridge to sell you :).
U can get some title and escrow companies to write a policy for the full amount but it takes calling around to find one.. Most will just say no.. But the first time your stung for this U get the picture.. just another reason working with wholesalers is dangerous.. with a realtor commish is out of proceeds and those dollars are covered in the event of a title claim
6 Replies
- 10moJoe S.Pro MemberInvestor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
Quote from @Esteban Olivares:
Investors — real question:
What’s the biggest issue you’ve had working with wholesalers?
Bad comps? No access? Daisy chains? Overpriced deals?I’m trying to understand what matters most so I can serve my buyers better.
Drop it below or DM me.
You do realize there’s way more real estate agents than there are wholesalers.
By and large wholesalers don’t last that long unless they’re professional real estate investors that do a lot of marketing and end up wholesaling some of their deals because they can’t keep them all. People that start in the business for the sole purpose to whole selling not a lot of them make it. - Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes10moI stopped working with them because many have never seen the property. Have no idea how to estimate cost to repair and typically have an ARV from the nicest home in an exclusive neighborhood where typically the home they have is not located.
7e investments53 Reviews - Rental Property Investor · Perry Hall, MD · Member since 2016 · 586 posts · 598 votes10mo
Quote from @Esteban Olivares:
Investors — real question:
What’s the biggest issue you’ve had working with wholesalers?
Bad comps? No access? Daisy chains? Overpriced deals?I’m trying to understand what matters most so I can serve my buyers better.
Drop it below or DM me.
Yes, yes, yes and yes.
What matters most is bringing deals that match your buyer's criteria at a price that works for them. Then facilitating the transaction so that it closes with no funny business. Let's toss good communication in the pile as well.
- 9moPeter MckernanBusiness MemberResidential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
The real reason wholesalers are bad (not all, but most) is because they create the numbers for ARV for the end buyer that will get their deal sold not take care of the end buyer to get repeat business. This goes the same for the owner, they tell them we can close in 15 days no issues, give a high price to close it because the seller pushes back on the first numbers they give the seller and it never is offloaded or falls apart in escrow.
I have an example, there is a lady that wanted to get a deal.. She is great, very nice and a go getter.. She really wanted a deal, and to get into flipping because she left her job and wanted an active income. So, we started looking, and after about a month of not closing on a deal or getting in contract because we were sticking to numbers that would get her a return; the client got a deal sent to her by a wholesaler. The deal was in a good area with good comps, but not comps that supported the wholesalers purchase price. The comps they sent this lady were comps where same square footage, a mile away, and same bed/bath count. The catch is that the two great comps that were supporting the wholesaler's number was in a historical district which was a different area feel, different make up of houses, different architecture, and houses that sell for more due to all that stuff. I explained this to the client and that it was not good move to buy the house due to all the factors and she would not make money due to the purchase price and where the true ARV was for the property.
The end of the story for her is that she is currently still on the market 114 days later trying to get her price she will not get, and that market is DOM average of 30 days. She also has holding costs with this property and is desperate to sell the place due to high holding costs that have been dragging her profits even lower.
This is a prime example of what wholesalers due to newbie buyers and buyers that do not know what is a true comp. Which, this ends up giving wholesalers the bad name they have today. So, make sure the ARV is true to what that house is, make sure the repairs are what the wholesaler says, and make sure you would with someone that knows what they are doing.. Vetting everything a wholesaler tells you before buying...
The McKernan Group4.957 Reviews- 9moJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Peter Mckernan:
The real reason wholesalers are bad (not all, but most) is because they create the numbers for ARV for the end buyer that will get their deal sold not take care of the end buyer to get repeat business. This goes the same for the owner, they tell them we can close in 15 days no issues, give a high price to close it because the seller pushes back on the first numbers they give the seller and it never is offloaded or falls apart in escrow.
I have an example, there is a lady that wanted to get a deal.. She is great, very nice and a go getter.. She really wanted a deal, and to get into flipping because she left her job and wanted an active income. So, we started looking, and after about a month of not closing on a deal or getting in contract because we were sticking to numbers that would get her a return; the client got a deal sent to her by a wholesaler. The deal was in a good area with good comps, but not comps that supported the wholesalers purchase price. The comps they sent this lady were comps where same square footage, a mile away, and same bed/bath count. The catch is that the two great comps that were supporting the wholesaler's number was in a historical district which was a different area feel, different make up of houses, different architecture, and houses that sell for more due to all that stuff. I explained this to the client and that it was not good move to buy the house due to all the factors and she would not make money due to the purchase price and where the true ARV was for the property.
The end of the story for her is that she is currently still on the market 114 days later trying to get her price she will not get, and that market is DOM average of 30 days. She also has holding costs with this property and is desperate to sell the place due to high holding costs that have been dragging her profits even lower.
This is a prime example of what wholesalers due to newbie buyers and buyers that do not know what is a true comp. Which, this ends up giving wholesalers the bad name they have today. So, make sure the ARV is true to what that house is, make sure the repairs are what the wholesaler says, and make sure you would with someone that knows what they are doing.. Vetting everything a wholesaler tells you before buying...
One of the major risks and especially in a high priced market like So cal.. is if this is a cash sale as many are and the wholesaler is making an assignment fee on the settlement statement cash buyers do not realize they do not have title insurance for the assignment fee.
so in practice you have a 800k as is sale wholesaler making 50 to 100k ( pretty common in high priced markets) being the nature of the beast you now find out you have a buggered title and make a claim.. title insurer is only going to pay the underlying contract price your going to EAT the 50 to 100k and if you think the nice wholesaler is going to send you back that money I have a bridge to sell you :).
U can get some title and escrow companies to write a policy for the full amount but it takes calling around to find one.. Most will just say no.. But the first time your stung for this U get the picture.. just another reason working with wholesalers is dangerous.. with a realtor commish is out of proceeds and those dollars are covered in the event of a title claim
- 9moErik EstradaBusiness MemberLender · Member since 2022 · 6k+ posts · 1k+ votes
Quote from @Esteban Olivares:
Investors — real question:
What’s the biggest issue you’ve had working with wholesalers?
Bad comps? No access? Daisy chains? Overpriced deals?I’m trying to understand what matters most so I can serve my buyers better.
Drop it below or DM me.
A lot of them are a pain in the butt to work with, especially if their hefty commission is on the line...
One thing to be mindful of, is that certain lenders have restrictions on the amount you can finance on a wholesaled transaction. If the borrower doesn't want to pay you out of pocket, many lenders will cap the commission to 20%. Some won't finance it at all. I do recommend you speak to your clients first about commission charges, instead of finding out later when we request the A to B contract....
This is is what frustrates me the most as a lender. The lack of transparency
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