Two wholesalers same house!

104 Replies

I looked at a property today that was listed by a wholesaler I get emails from, he listed the property at $48,000 I met him at the property and looked it over I called him later and offered him $30,000 he could not except my offer because his deal was for 37k with the homeowner and he needed to get at least 40k so he can make his 3K. I understood but felt it was too risky to add another $10,000 onto the property to purchase. Later I went home and checked my email and noticed there was a wholesale property listed by a different wholesaler it was the same property and he had it listed for $67,000 LOL I guess this means no inventory?

Nick did both wholesalers claim to have the property under contract? I'm a new wholesaler in the Charlotte, NC and I'm trying to learn the do's and don'ts (I made that word up). It sound like one or the both of them do not actually have the house under contract. Although I'm still considered to be a newbie because I have not closed on my first deal yet...I have to remind myself to not try to cut corners like it sound like they might have done.

Ok, so one of two things is likely happening here:

Either there are two wholesalers with the same property under contract. In which case, the smarter of the two should run, not walk, to county records and get his contract recorded against the property title. This will "cloud title" and make it more difficult for an unethical second wholesaler to steal the deal.

ORRRRRR....

One wholesaler has the deal under contract and he's having a difficult time moving the property and he's given a flex option contract to a second wholesaler to try to move the property before it expires. Usually, in the case of the flex option the second wholesaler's price is equal to the first wholesaler's price plus between one and five thousand dollars.

Given the math, I'd say there is second, possibly unethical, wholesaler in the mix. It's also possible that the homeowner is just clueless and thinks two wholesalers are better than one! Don't laugh too loudly, it happens.

@Jeff G. I didn't laugh too loudly but I did laugh a little :) by the looks of this seller I wouldn't be surprised. He got there late because he forgot the key, then he got there and still didn't have the right key, so he had to clime in through the basement window where someone had already broke in and stole are the wire and the copper pipes.

@Nick Stango Are you sure "your" Wholesaler is not scamming? Just about everything he did smacks of deception; and given the state of the place, the "other" Wholesaler also looks sus...

I agree with @Brent Coombs something looks about as kosher as pork chops at a bar mitzvah. My knee-jerk reaction was walk away, but now I'm thinking better of it. In this situation @Nick Stango you might consider doing the following:

  • Contact the wholesaler you've been working with: tell him you're close to making a decision and would really like a contract. Please email it to you.
  • Call or email the other wholesaler and tell him, "hey, I know the area well and I pass that house every so often please email me a contract. I'll have it back you you in a couple of days, I just have to run it by my wife..." Don't go see the place.
  • While you're waiting for Yahoo 1 and 2 to get back to you look the homeowner up on public records.

If the home owner lives nearby GREAT! When you have a copy of both contracts (and email printouts of the emails they sent) go knock on the home owner's door at a reasonable hour. Introduce yourself and let them know that you were approached by someone trying to sell their house and you're interested in buying but you're suspicious that something isn't right about the situation. You don't want to get ripped of and can't "just walk away" without being sure THEY are not being ripped off by this guy. Ask them if they have 15 minutes to talk to "compare notes" about the situation.

If they don't live near by, then it's a different ball game you'll have to try this over the phone (much harder) and might get hung up on. IF they slam the door in your face because they're not listening to what you're actually saying--then you can walk away and not before.

If, however, they actually listen politely explain the situation:

  • You had reason to be interested in 123 MAIN ST because you're an investor.
  • Yahoo 1 appeared to have the property under contract... show them a copy of the contract and Yahoo 1's email.
  • Then tell them you got suspicious when he didn't have keys to the place. I should note: it's probably unwise to admit you entered the property, even though you had a good faith belief the place was under contract and you had permission to enter... you may make the actual owner feel very violated and their response could be unpredictable and include things like police (if you're lucky) or buckshot (if you're not.)
  • Tell them your suspicions grew when you noticed Yahoo 2 also had the property "listed" at a much higher price. Show them that contract and that email.
  • Reiterate you don't want to get scammed and you'd be beside yourself if they got scammed and you found out about it later. See what they say. 

They might in fact know these guys and be able to shed light on the situation, but they'll probably be confused as heck. Leave them a copy of the evidence and your card. If you get a call from the police and they ask to "interview" (interrogate) you tell them "Not without the presence of council [a lawyer.]" No matter what they say reply, "I'm sorry sir, given the gravity of the situation I can't make statements without the advice of counsel." Period. They have enough evidence with the printouts.

As for why you shouldn't talk to the police even though you're just bringing evidence of what is reasonably likely to be someone else's wrong doing, see:

It's really up to you if you want to go through all this trouble. But if you were in the home owner's shoes wouldn't you want to know? I sure as hell would.

PS: I'm not a lawyer. I just read books and watch YouTube videos. This isn't legal advice.

I think it's just a situation where one wholesaler is helping the other, i've dealt with both of these guys before, but didn't know that they were in cahoots with each other. The homeowner has lived there for two years it's been in his family since forever it was his aunts house. I talked to the homeowner when the first wholesaler showed it to me. I am probably going to pass on this deal anyway being that I would have to pay 40,000 for it and it would need at least 40,000 worth of work and I'd be lucky if I could get 120k, after closing cost and loan fees and other fees it's cutting it really close plus the neighborhood is not good, someone already broke in once and stole all that stuff I wouldn't want that to happen to me after repairs.  I'm looking at another deal tomorrow. 

Ok, @Nick Stango I just didn't want to see good people get screwed.

Shame, shame, shame... Shame #1 on seller, shame #2 on wholesaler 1, shame #3 on wholesaler 3.

@Jeff G.

 - That is pretty bad advice that you're giving out. I understand that you don't want the seller to get hurt, and that's good on you. They're the people we should be looking out for the most within this business. However, going behind a wholesaler's back like that is bad business. If you have proof that one or more of the wholesalers is scamming the seller or doing something moderately unethical, then by all means - do something about it. But @Nick Stango  doesn't have that proof, and you're telling him to potentially completely tarnish his relationships with two wholesalers based off of speculation, and he almost definitely could ruin those valuable relationships by just going to the seller to gather information. That's how one ruin's transactions, and wholesaler's, or anyone for that matter, won't think kindly of  someone for hurting or even sabotaging their deal. 

Nick is most likely right, the wholesalers are probably just working together. But even if they're not - there are many other scenerio's to take into consideration other than one that involves the seller just getting scammed or taken advantage of.

Whoa whoa whoa pump your breaks everyone. @Jeff G. this is a pretty common situation. I wouldn't consider this to be a scam at all. Wholesalers tend to work together in markets. In my market most wholesalers know each others inventory at all times and help each other shop it around. The smart ones work together to avoid situations like this, but its not uncommon for some investors to get shopped the same property by two different wholesalers.

@Kyle Bigger  I'm glad I made that mistake here--where there are others to speak up and say there is more than one interpretation of the facts--and not in real life.

Sorry @Nick Stango I didn't realize you knew these guys.

A friend of mine was recently caught up by a real estate related scam and I have that a little too fresh in my mind... Long story short she put a house on Craigslist for rent and then noticed a rogue ad a week or two later with different contact info--offering to rent her house at a different price. She called the guy up and he pretended to be the owner, yadda, yadda yadda. I read your post and got ticked off and just didn't want to see somebody go through anything similar. I apologize for the overreaction.

I'm going to chalk this up to a "cheap lesson." Thanks again guys... I'm still learning and I'm humble enough to know I'm not a Jedi yet. :)

Good luck finding your next deal Nick!

You're right @Micah Copeland , thought in my area the prices tend to be a lot closer when someone else has an option on an already existing wholesaler contract: a few thousand bucks here or there. I over reacted.

Originally posted by @Jeff G. :

Ok, so one of two things is likely happening here:

Either there are two wholesalers with the same property under contract. In which case, the smarter of the two should run, not walk, to county records and get his contract recorded against the property title. This will "cloud title" and make it more difficult for an unethical second wholesaler to steal the deal.

ORRRRRR....

One wholesaler has the deal under contract and he's having a difficult time moving the property and he's given a flex option contract to a second wholesaler to try to move the property before it expires. Usually, in the case of the flex option the second wholesaler's price is equal to the first wholesaler's price plus between one and five thousand dollars.

Given the math, I'd say there is second, possibly unethical, wholesaler in the mix. It's also possible that the homeowner is just clueless and thinks two wholesalers are better than one! Don't laugh too loudly, it happens.

 You are promoting clouding the title? If so, what if the "wholesaler" doesn't close? Why not BUY the property and then resell it. To me, that is the difference between a "wholesaler" and a scam artist playing games with peoples lives and their home.

@Jeff G. I agree with you about the prices. That one bold second wholesaler.

Oh, boy. @John Thedford I over reacted with my first post. But, on the point of clouding title:

If you have a legitimate contract with the seller to buy (and/or assign to by) a house with a clear expiration date, you're not "playing games." I've never personally clouded a title with a wholesale contract. Some wholesalers do it, other's don't bother because it's an extra step. Wholesale contracts are good for a limited period of time, they expire, typically in 30 to 90 days. It's only a "problem" for someone else who comes along and tries to sell the house from underneath you during that limited time period.

Somebody please correct me if I'm wrong and this is a bigger problem than I think it is.

I don't personally do it and I probably won't for the foreseeable future. It's an extra step that isn't strictly required. Now, the first deal that falls through because somebody else sells it out from underneath me because I didn't take the time to cloud title for a whole 60 days (tops) is probably going to do a lot to change my mind.

I educate all potential sellers about "wholesalers" and why they should avoid them. I have seen several people victimized by these fly by night scammers. Why let someone tie up your property for 30, 50, 60 days and then walk away. There is only one reason a homeowner would ever give a contract to a "wholesaler": they don't know any better. Find a qualified buyer that intends to buy....and avoid these people playing games. A true buyer will put skin in the game, spend money and get inspections done, and make a legitimate attempt to close the deal if the inspections clear. If an inspection fails, they walk away quickly and move on, and let the homeowner continue to market the property. BTW, I do record contracts AFTER I PAY for an inspection and know I will close on the deal. 

@Kyle Bigger Yep, I think this is a hands off situation unless I was absolutely sure of everything that was going on. Even if it was a bad situation, I wouldn't want to put myself into that mess especially if it turned into a legal one. Homeowners need to do their due diligence just as investors do. I'm not a lawyer and I don't know the seller from Adam, so why would I want to go behind anyones back especially wholesalers that I may do future business with. It's my job to make sure the wholesalers I'm dealing with are doing business in an ethical manor. So talking to both wholesaler to see what up with this deal and who actually has the contract, asking for references from them by other investors who have done business with them would be a start. Checking them out on a Google search or on a rip off report site would be another thing that I would do before signing any type of contracts with these guys. Having a RE lawyer look over the contracts, going to the county courthouse to look at anything I could find out about the property/owner/leans would be all good due diligence on my part, not sure about going to the homeowner who potentially has a contract with a wholesaler. Communication and information first, accusations after proof of wrong doing next, and i'll leave that to the lawyers and stay as far out of it as possible. The first thing I need to know is can I buy the house for the price I want to pay, the answer was no, so I'll just move on and look for one that is, when I find one that is I will make sure everything is in order before I sign. I'm still a newb so I don't want to get burned on my first deal. But thank you to all who have expressed their concerns, and keep the discussion going. Nothing like a little point-counterpoint, and I'm not trying to be an instigator either. Fight nice!!!;)

I had 2 properties under a single contract. I double closed it to a buyer who repeated my process FIVE times. That's right 10 double closings on 2 properties. I have no idea what the guy at the back paid but I know that I made 20k while the guy after me only made 4k. I could not care less what they did with the property. Hell I even gave them keys to market the home. (vandalized vacant homes) 

@John Thedford

 Ok, now who's overreacting? Wholesalers serve a legitimate purpose in the market. I'm new to this game and I quickly found that the best source of deals are homes that can't get mortgages because they're to dilapidated.

I'm new, I'm still learning, and I occasionally don't know as much as I think I do as a result. Experience and fruitful conversations like this one with people who've been at this a lot longer will solve all of that in time.

Each house I get under contract gets inspected and if the scope of work from the inspection comes back with a price point that's just too high to be profitable for my end-buyer, I move on. 

People like to malign us sometimes--and my misplaced anger and bad advice early on in this thread didn't help. But, we serve a legitimate function in the market place. Without us, damaged inventory would stay put a lot longer and both the individual home owner and the market as a whole would suffer for it.

@John Thedford I understand how some RE agents might feel that wholesalers are not good for the seller, but keep in mind a good wholesaler has some positives to offer a seller in distress. Most motivated sellers are not going to want to market their property or pay a realtor to market it. And keep in mind there are good and bad RE agents too. A good wholesaler will have a nice list of investors they can market the property to, who can pay cash and close quickly, take a fee for their services and everyone is happy. As investors (or soon to be investors) we all want to buy low and sell high, that's just how we make money. Anyone who could legally help out in that process should be welcome in that picture, In my opinion. I've never done a deal yet, and my goal is to fix and flip my first deal, but if I knew i could wholesale a deal and make a quick $5-10K I would gladly pay a seasoned wholesaler to help me with the process or I could just come here and get the info I need to do it myself, being that some wholesalers might not like me moving in on their turf. I'm using a realtor tomorrow to look at a foreclosure, I just want to get a first deal going soon. My wife is getting her 75hrs of RE schooling started in April, maybe she will have her license by the time I need to sell my first flip. That would be nice. Ok so sorry about rabbling on and again thank you to everyone for your thoughts on this matter, It's always nice to here different opinions.

@Jeff G. Don't worry about your first reply, I've been know to stick my foot in my mouth on may occasions, usually after to much alcohol though, JK, not really!

@Michael Askew @Micah Copeland @Jeff G. @Brent Coombs Okay, so I talked to the 1st wholesaler the on that showed me the property, and I asked if he new about the other wholesaler and he said yes, and that he is just helping him sell the property. He asked me what he had it listed for so I told him 69k (not 67k like I previously posted) and he was like wow! But didn't seem to care all that much. I'm tempted to see if I could find a buyer for 45k and then go to the first buyer to see if I could get 3-5k out of it, why not jump on the band wagon right? If I do this, what type of signed agreement should I have in place? 

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here