Investors who try to steal your deal/seller

12 Replies

What does everyone here think about investors who try to cut you out of the deal you're wholesaling? I personally think they are a disgrace to our industry. Although its technically legal there should be a moral code among investors IMHO. This would be the second time this year an investor goes direct to seller and shows them we are marketing the property. This has caused me to believe we should end our advertising and market privately only to those who have done business with us or have a very strong referral.

At the same time, deals come and go, but any advice/suggestions on how to handle the seller? They understand its a cash deal and knew it would be discounted but when they see you trying selling their property for more they feel they are leaving money on the table (among other things).

The practice is very short-sighted indeed @Hasan Hamdan .  Cutting out a potential long-term partner/relationship for a few grand is stupid and wrong.  There is an un-written 'bro code' in all real estate dealings.  Do not back-stab or steal from your peeps!

Alas, you are in a shady industry with no barriers to entry, all seeking easy money.  No knowledge, no money, no licensing or accountability required.  Expect to get stabbed in the back a bit.  Still doesn't make it right, but every time I do a hush-hush deal in the back alley in the shady part of town at night, my probability of getting shafted  or worse rises!  Cheers!

Originally posted by @Hasan Hamdan :

What does everyone here think about investors who try to cut you out of the deal you're wholesaling? I personally think they are a disgrace to our industry. Although its technically legal there should be a moral code among investors IMHO. This would be the second time this year an investor goes direct to seller and shows them we are marketing the property. This has caused me to believe we should end our advertising and market privately only to those who have done business with us or have a very strong referral.

At the same time, deals come and go, but any advice/suggestions on how to handle the seller? They understand its a cash deal and knew it would be discounted but when they see you trying selling their property for more they feel they are leaving money on the table (among other things).

 Oh, the irony...

Get a license, and sign a listing agreement instead of a wholesale contract, and this problem goes away.

Put up you own funds, or get a private lender involved, or JV, and take title to the property and re-sell it, and this problem goes away.

You don't get the benefits of the law and the regulatory system if you operate outside of the law and the regulatory system.

So either get a license if you want to sell something you don't own, or make sure you own what you are selling.  Otherwise, people going around you occasionally is simply a cost of doing business in the manner you are doing business.

Richard C. is right, but I think people often believe that what wholesalers and agents are doing is essentially the same thing.  In theory, perhaps it is.  In practice, they are quite different.

There is a huge part of the real estate business that exists outside of the MLS and the FHA. Distressed properties need a cash buyer who can invest the funds to make the repairs and return the property to retail condition. Those cash buyers do NOT buy via real estate agents, because real estate brokers don't have the distressed properties for sale in the MLS, because these properties are being found, "brokered", purchased, and rehabbed completely outside of the world the RE agents/brokers live in.

And perhaps my biggest point is this: The big players that are licensing our WeBuyHouses.com brand are almost all broker/agents AND investors, and those guys wholesale deals to cash buyers. They have their license - why aren't they just listing their distressed properties on the MLS and selling them the cash buyers there? Because that is NOT where these deals happen.

So - all that said - if your cash buyer goes around you and pushes you out of the deal, you'll never bring him another opportunity.  Over time, you'll get a good group of buyers that you can trust.   In the end, this business is all about relationships.

"Our own success, to be real, must contribute to the success of others." ~ Eleanor Roosevelt

I had never heard this one till now; but I love it...

"Our own success, to be real, must contribute to the success of others." ~ Eleanor Roosevelt

Akin to one of my all-time favs...

"You will have everything you want in life, if you will just help others get what they want in life." ~ Zig Zigler


@Hasan Hamdan I think the easiest way around this problem is that you need to be honest with the home sellers. Most wholesalers are lying to home sellers. The home seller thinks you are the end buyer of the property, when you are not. If they understand that you are getting the property under contract to sell it to someone else, then an investor can not cause you trouble by bypassing you and going directly to the homeowner.  

Also shoot for being the best wholesaler. If you are getting your property under contract at the right price, and you know your ARV and repair costs...you are going to be able to sell the contract on the property to an investor before anyone else can get in and screw up the deal. We only have a few good wholesalers in the area...and they have great relationships with the local investors...so when they have a property, their reputation preceeds them and they are able to move the property quickly.

Originally posted by @Hasan Hamdan :

This has caused me to believe we should end our advertising and market privately only to those who have done business with us or have a very strong referral.

You need both sellers and investors. Doing this, and you cut out your business' blood line (unless you can find & offer really good deals that investors are willing to bend over backward to get the deals from you) .

Thank you all for your responses!

Just to clear things up, I am licensed. But as @Dev Horn mentioned it is not the same thing. And the whole point of wholesaling is you are assigning or "selling" the contract. We have our trusted buyers. We market the deal to test the market of buyers and at the same time we prefer wholesale. This buyer was on our list but I have no idea who it is. They went BACK to the seller letting them know we are trying to sell, they were on of the original people trying to get the deal, but I beat them out. @Russell Brazil you are 100% correct, and I explained it is up to our discretion what we do with it and all they need to worry about is our agreement which does not change. 

@Richard C. mostly right but the type of investing I am speaking of is tried and true. My main point/question to all was not  "I'm so mad be mad with me"....I know it can and will be done....the question here was if anyone else has experienced this and how did they deal with the home seller and/or the investor if they found out who it is.

At the same time I should have given more detail as this does include the law, where I understand once AR is complete it doesn't matter what anyone does to sabotage the deal. In addition there is no operation outside of the law as some people have mentioned, wholesaling is perfectly legal when done right. We went under contract and will close, whether its a double close, a LLC sale, or whatever.

@Hasan Hamdan how are you marketing your properties? If you have a buyer's list that you email properties to, and one of  your buyers does this - just remove them and never do business with them. If you post it on a public site like Craigslist, then there is not much you do to stop this if you go that way. I have clause in my contracts that state that I have the right to market this property using signs, etc. When I explain the contract with my seller, I go line by line. I tell them that "I will be assigning the contract to a business partner of mine that will close on the property, but you be will be getting your cash at closing. That doesn't matter to you as long as you get your money, does it? I will be marketing your house to sell it as soon as possible because I may rent it out or fix it up to sell."

I've never had a seller tell me they had a problem with marketing the house or assigning the property to another buyer.

I also call/text my best cash buyers (how do I know, they call me often looking for properties) first to let them know about a deal & shoot it to them first, before I blast it to my full list.

It also sounds like that was a wholesaler on your list. I try to separate my buyers into 2 lists - true cash buyers and wholesalers/JV partners.

I you have a signed contract then go down to the courthouse to record it, so at least they can't sell the property to someone else, until your contract expires.

Here is what I do:

Place ad on craigslist of the property.

Buyer responds asking for property address.

I respond saying lets get together at a cafe & I will show you more pics & video of the property (especially important as deal i have currently is occupied, so trying not to bother them). Now you can ask face-to-face questions. Get to know them. Relationships :)

Now if they decide to go Around you, you know who it is that is trying to spin circles on U. If it happens once shame on them :)

A screening process, yes... does it take time yes. Does it deter the kind of people that you don't want to work with & gravitate the kind you do want to work with to you, yes. Can it save time/help prevent problems like the one you mention down the road, YES.

Sincerely,

-Kelly

@James Green @Kelly Arneson Thanks! We email. The problem here James is I do not know who it was. The seller hasn't told me...this was someone she met before me. They went back to her after they got the email. 

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