Bad Wholesalers - Why we will all be getting licensed soon.

[Chris Gordon]

I am just amazed at the incompetence of some wholesalers. 

Last night I put under contract a house in Ky that "Sincere Home Buyers" of Georgia backed out of yesterday. I don't mind putting their name out here.

The sellers were supposed to close on their dream house next week contingent to selling this subject property. While I talked to them they bounced from tears to panic. The texted explanation from the wholesaler? Couldn't find a "partner" to buy the house. However this realization was made very last minute, and well beyond the month-long inspection period they specified.

They offered > 4x what I offered. Their offer was asinine. Their offer was totally ignorant, irresponsible, and put these folks in a terrible position.

Wholesalers, if you don't understand the local market, don't understand the property condition, and don't intend to honor your own contract, then stop doing business. Your incompetence creates huge issues for sellers who typically need solution to a problem and is unethical. You are the reason we get a bad name and justifiably are seeing legislation requiring licensure.

[Wayne Brooks]

@Chris Gordon Exactly…..I cringe every time a see a wannabe wholesaler asking about how to find preforeclosures…..these are the Last people they should be dealing with….leaving them hanging out to dry just before a foreclosure auction.  They have no regard for the fact that they are messing with peoples lives.

[David Lee Hall, III]

While irresponsible, how is it different than the Realtor represented buyers that back out of contracts screwing sellers? A normal buyer would have never gotten a loan on a house if that type of offer was really made. They would have been coming back to renegotiate or cancelled. Would you blame the buyer agent for their clients being jagoffs? The reality is the Pareto principle. Most people just aren’t good at what they do.

[Nathan Gesner]

Quote from @Chris Gordon:

I am just amazed at the incompetence of some wholesalers. 

Last night I put under contract a house in Ky that "Sincere Home Buyers" of Georgia backed out of yesterday. I don't mind putting their name out here.

The sellers were supposed to close on their dream house next week contingent to selling this subject property. While I talked to them they bounced from tears to panic. The texted explanation from the wholesaler? Couldn't find a "partner" to buy the house. However this realization was made very last minute, and well beyond the month-long inspection period they specified.

They offered > 4x what I offered. Their offer was asinine. Their offer was totally ignorant, irresponsible, and put these folks in a terrible position.

Wholesalers, if you don't understand the local market, don't understand the property condition, and don't intend to honor your own contract, then stop doing business. Your incompetence creates huge issues for sellers who typically need solution to a problem and is unethical. You are the reason we get a bad name and justifiably are seeing legislation requiring licensure.

When you work with amateurs, expect amateurish behavior.

[Chris Seveney]

Quote from @Chris Gordon:

I am just amazed at the incompetence of some wholesalers. 

Last night I put under contract a house in Ky that "Sincere Home Buyers" of Georgia backed out of yesterday. I don't mind putting their name out here.

The sellers were supposed to close on their dream house next week contingent to selling this subject property. While I talked to them they bounced from tears to panic. The texted explanation from the wholesaler? Couldn't find a "partner" to buy the house. However this realization was made very last minute, and well beyond the month-long inspection period they specified.

They offered > 4x what I offered. Their offer was asinine. Their offer was totally ignorant, irresponsible, and put these folks in a terrible position.

Wholesalers, if you don't understand the local market, don't understand the property condition, and don't intend to honor your own contract, then stop doing business. Your incompetence creates huge issues for sellers who typically need solution to a problem and is unethical. You are the reason we get a bad name and justifiably are seeing legislation requiring licensure.

Its unfortunate because its such an easy business for amateurs to get into. I do not know how many emails I get from a wholesaler selling an MLS listed property... Thinking ok, they just put offers in all day on MLS assets... A few bad apples spoils the bunch 

[Natalie Schanne]

@Chris Gordon - incompetence of wholesalers?

Yes incompetent if:

1. Offers more than reasonable comps / zestimate because that’s the “lowest price” the seller will agree to take and they are unable to negotiate them down (as you were)

2. Unwilling to drop contract immediately after noticing the contract needs a price reduction due to condition of the property (inspections) or lack of buyer interest (namely because they got it under contract for too much)

3. Unable to guide the buyer partner through to closing. Agreed to a deal with a newbie flipper who didn’t have the cash money to buy it from them and/or was likely to get skiddish.

Not totally incompetent if:

1. Buyer partner dropped the contract last minute, potentially forfeiting some non refundable deposit. Wholesaler is unable to negotiate an extension so they exit before their contingency expires

2. Talked to seller multiple times to reduce the price and seller did not agree until push came to shove and they needed the money asap. I’ve talked to many sellers who are like, I won’t sell this for a dime less than $400k, but if they died their heirs would sell it for $200k tomorrow.

Ultimately here the sellers lost big. It’s likely that you got a great deal. The sellers probably could have had a better outcome selling through an agent as is at let’s say 1/2 of the price they were offered by buyer 1. But ultimately you profited by them selling to you last minute at 1/4 price. And you provided a necessary and valuable service, and convenience, by offering to buy their property and then closing as you said you would.

I have plenty of conversations with sellers who take a higher offer and then circle back with me later because I’m a real buyer. Or they even sell for a lower price (if I’m not following up) to someone else because they never messaged me again. (For example, I offered $200k cash, they take an offer at $250k cash but that never closes, and they sell for $180k cash 3 - 6 months later without messaging me again.)

[Dustin P.]

Quote from @David Lee Hall, III:

While irresponsible, how is it different than the Realtor represented buyers that back out of contracts screwing sellers? A normal buyer would have never gotten a loan on a house if that type of offer was really made. They would have been coming back to renegotiate or cancelled. Would you blame the buyer agent for their clients being jagoffs? The reality is the Pareto principle. Most people just aren’t good at what they do.

 Can confirm, there's just as many incompetent realtors out there. Although I do think the license is at least somewhat of a barrier to entry that I think all wholesalers should have

[Dustin P.]

@Natalie Schanne Is also correct, OP likely did benefit from the wholesalers as he likely got a smoking deal out of the fact that the sellers were desperate to close

Also Natalie to your last point, that's all about follow up! If you aren't in the seller / agent's ear every single week figuring out exactly what's going on with the current escrow then you're doing it wrong. If they knew Natalie is a pain in the *** who calls them every single week telling them she's still good to go at her $200k number they would have never sold it for $180k months later. Food for thought!

[Don Konipol]

Quote from @David Lee Hall, III:

While irresponsible, how is it different than the Realtor represented buyers that back out of contracts screwing sellers? A normal buyer would have never gotten a loan on a house if that type of offer was really made. They would have been coming back to renegotiate or cancelled. Would you blame the buyer agent for their clients being jagoffs? The reality is the Pareto principle. Most people just aren’t good at what they do.

I think the point is whether you conduct your business honestly, or you don’t.  If as a wholesaler you explain to a seller that you will be trying to flip the contract to an end buyer at a greater price, and if you don’t you won’t close, then the seller knows what to expect.  On the other hand if, as a wholesaler you let the seller believe you are the end buyer, or you have a “partner” who will provide the money, your lying or at least intentionally misleading the seller.  Probably because the seller would have to have to either have a property nobody wants, or be mentally challenged to agree to sell you his property once he learns these facts. (  okay, wholesalers keep telling me that they run into people so scared of human interaction that they don’t want (a) to deal with Realtors (b) potential buyers coming into their house and (c) negotiating price or anything else, and they just want to deal with those wholesaler who are obviously doubling as mental health professionals). 

 
Seems like this "partner" fantasy is being used to try to mislead customers and clients through numerous service industries. Hard money mortgage brokers claim they aren't brokers because they have a money "partner" so they're actually lenders; wholesalers are actually investors as they have buying "partners", real estate brokers claim to be principals because they've learned to spell "syndication", etc. And the fantasy I see that tries to pass for personal financial statements! LOL. Reminds me of a guy who had been a real estate reality star and went bankrupt. Well some guy who trains these people to go on the road and sell mentorship's, turning them into gurus spent 5 weeks training this guy in, of course Las Vegas. He then goes to REIA clubs with his wife (soon to be ex) who introduces him and as one of the "selling points" of why you should buy his mentorship for $40,000 was because he's already made every mistake as evidenced by his bankruptcy! I may be a wee bit leery of the hype.

[Jay Hinrichs]

Quote from @Don Konipol:

Quote from @David Lee Hall, III:

While irresponsible, how is it different than the Realtor represented buyers that back out of contracts screwing sellers? A normal buyer would have never gotten a loan on a house if that type of offer was really made. They would have been coming back to renegotiate or cancelled. Would you blame the buyer agent for their clients being jagoffs? The reality is the Pareto principle. Most people just aren’t good at what they do.

I think the point is whether you conduct your business honestly, or you don’t.  If as a wholesaler you explain to a seller that you will be trying to flip the contract to an end buyer at a greater price, and if you don’t you won’t close, then the seller knows what to expect.  On the other hand if, as a wholesaler you let the seller believe you are the end buyer, or you have a “partner” who will provide the money, your lying or at least intentionally misleading the seller.  Probably because the seller would have to have to either have a property nobody wants, or be mentally challenged to agree to sell you his property once he learns these facts. (  okay, wholesalers keep telling me that they run into people so scared of human interaction that they don’t want (a) to deal with Realtors (b) potential buyers coming into their house and (c) negotiating price or anything else, and they just want to deal with those wholesaler who are obviously doubling as mental health professionals). 

 
Seems like this "partner" fantasy is being used to try to mislead customers and clients through numerous service industries. Hard money mortgage brokers claim they aren't brokers because they have a money "partner" so they're actually lenders; wholesalers are actually investors as they have buying "partners", real estate brokers claim to be principals because they've learned to spell "syndication", etc. And the fantasy I see that tries to pass for personal financial statements! LOL. Reminds me of a guy who had been a real estate reality star and went bankrupt. Well some guy who trains these people to go on the road and sell mentorship's, turning them into gurus spent 5 weeks training this guy in, of course Las Vegas. He then goes to REIA clubs with his wife (soon to be ex) who introduces him and as one of the "selling points" of why you should buy his mentorship for $40,000 was because he's already made every mistake as evidenced by his bankruptcy! I may be a wee bit leery of the hype.

 Don this is one of your many great posts, but I am going to put this one in a top 10. loved it!!   

All these wholesalers are taught by the same guru's that come out of Utah Vegas AZ  FLA  etc. in all these industries. bottom line they are dealing with folks who usually dont know any better or are honest hard working and can't imagine that when someone says their partner That this statement is a lie or at the least a gross fabrication.

I have bought many a courthouse steps properties over the years .. went to knock on the door as the new owner only to have them say this could not have happened this company or that nice guy had it all taken care of you know the topflight service wholesalers provide. 

[Nate Marshall]

For the most part wholesaling is nothing more than grifting equity. The sad thing is how many gurus teach them pitches, defenses and provide scripts. "We perform a service" "$100 is adequate to secure the contract" blah blah blah. 

You can responsibly wholesale but less than 1% do this! 

[Nate Marshall]

Quote from @Don Konipol:

Quote from @David Lee Hall, III:

While irresponsible, how is it different than the Realtor represented buyers that back out of contracts screwing sellers? A normal buyer would have never gotten a loan on a house if that type of offer was really made. They would have been coming back to renegotiate or cancelled. Would you blame the buyer agent for their clients being jagoffs? The reality is the Pareto principle. Most people just aren’t good at what they do.

I think the point is whether you conduct your business honestly, or you don’t.  If as a wholesaler you explain to a seller that you will be trying to flip the contract to an end buyer at a greater price, and if you don’t you won’t close, then the seller knows what to expect.  On the other hand if, as a wholesaler you let the seller believe you are the end buyer, or you have a “partner” who will provide the money, your lying or at least intentionally misleading the seller.  Probably because the seller would have to have to either have a property nobody wants, or be mentally challenged to agree to sell you his property once he learns these facts. (  okay, wholesalers keep telling me that they run into people so scared of human interaction that they don’t want (a) to deal with Realtors (b) potential buyers coming into their house and (c) negotiating price or anything else, and they just want to deal with those wholesaler who are obviously doubling as mental health professionals). 

 
Seems like this "partner" fantasy is being used to try to mislead customers and clients through numerous service industries. Hard money mortgage brokers claim they aren't brokers because they have a money "partner" so they're actually lenders; wholesalers are actually investors as they have buying "partners", real estate brokers claim to be principals because they've learned to spell "syndication", etc. And the fantasy I see that tries to pass for personal financial statements! LOL. Reminds me of a guy who had been a real estate reality star and went bankrupt. Well some guy who trains these people to go on the road and sell mentorship's, turning them into gurus spent 5 weeks training this guy in, of course Las Vegas. He then goes to REIA clubs with his wife (soon to be ex) who introduces him and as one of the "selling points" of why you should buy his mentorship for $40,000 was because he's already made every mistake as evidenced by his bankruptcy! I may be a wee bit leery of the hype.

Was this the guy in Arizona who was on American Greed? 

[Mike Dymski]

Unfortunately, the 'bad wholesaler' posts all fall on deaf ears...pissing in the proverbial wind.

[Leo R.]

That's a sad situation @Chris Gordon --really makes you feel for the sellers whose lives have been turned upside down because of these unscrupulous wholesalers.  

I get contacted by wholesalers on a fairly regular basis (both on the buy and sell side), and I'm always struck by how completely out of line their deals are from the market.  I always find myself thinking "holy cow, you need to sell the house for THAT much to make your deal work? ...good luck!"  I can't remember a single time a wholesaler has ever pitched me a deal that even remotely made any sense on paper...

I'd be interested to hear how many experienced investors get pitched deals by wholesalers that make sense....

[Chad McMahan]

Quote from @Chris Gordon:

I am just amazed at the incompetence of some wholesalers. 

Last night I put under contract a house in Ky that "Sincere Home Buyers" of Georgia backed out of yesterday. I don't mind putting their name out here.

The sellers were supposed to close on their dream house next week contingent to selling this subject property. While I talked to them they bounced from tears to panic. The texted explanation from the wholesaler? Couldn't find a "partner" to buy the house. However this realization was made very last minute, and well beyond the month-long inspection period they specified.

They offered > 4x what I offered. Their offer was asinine. Their offer was totally ignorant, irresponsible, and put these folks in a terrible position.

Wholesalers, if you don't understand the local market, don't understand the property condition, and don't intend to honor your own contract, then stop doing business. Your incompetence creates huge issues for sellers who typically need solution to a problem and is unethical. You are the reason we get a bad name and justifiably are seeing legislation requiring licensure.

The problem, is, wholesalers don't care about buying a property, and 99% of the time do not intend on purchasing. They only intend to hand the bag to someone else that can hopefully buy the property. This is why most people hate this absurd process with wholesalers. A small number of wholesalers are upfront about their intentions and clarify that they do not intend to purchase. But most wholesalers are not upfront about this. If they are upfront about it, and sellers say "Yes", then that feels ethical to me- everyone is informed about what's going on and making decisions, accordingly. But in most cases, when they do not properly inform all parties, it's unethical and deceptive trash. Unfortunately, many wholesalers are deceptive most or all of the time, and have diluted themselves into thinking they offer an important service, in helping to sell properties, and give themselves pats on the back.