What Value Have Wholesalers Brought You as an Investor?

65 Replies

We are currently seeking investors' opinions on wholesalers & what Value have they brought you? Have they brought you any value?  Do you think that having a wholesaler relationship is a benefit to you as an investor? I know markets are different than where I am at in Indianapolis, Indiana, and do you think there is a need for wholesalers in all markets in the US?  Are Wholesalers really the scum of the earth...as some say?   We are currently writing something about the "Value of Wholesalers" and would love to here from all different types of investors around the US? 

Do you consider a Wholesaler Relationship as valuable as have a good contractor, or a good CPA?

Thanks for the Replies...  

Brett

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@Brett Snodgrass and others. I don't think there is any doubt as to the value Ws is to the RE market place. Nearly every industry has a Ws mechanism to distribute market opportunities. The only beef I see and is possibly legit is whether the Ws takes title or not. This to me really legitimizes  the transaction. Once you are the owner , you are free to Ws or retail or do whatever with the property as all other property owners do. Brett, your firm always take  title before wholesaling and therefore set a higher standard. 

@Brett Snodgrass  I love working with GOOD wholesalers... The problem is the GOOD ones are VERY few and far between... 

MOST people go the wholesale route because it's preached that it's quick cash for those with none... What they don't preach is how much hard work is involved, or how reputation is EVERYTHING.... They don't preach you need to know your numbers(ARV, Repairs, etc).

I don't wholesale as much anymore because I am mainly looking for myself and my clients. I have bought probably 10-15 properties over the past year from wholesalers. I love working with the good ones.. In fact most of my good ones call me up and drag me along in the car to review the properties the first time...


My favorite example of a bad wholesaler:

him: I got a property over at 123 main st I want to sell you for 18k...

me: Ok, how much work does it need?

him: They say it needs like 5k of work...

me: Who is THEY?!?  Have you seen the property?

him: Well the Realtor told me it needs 5k of work...

me: ........  What kind of work does it need?

him: Can't you just like go out and look for yourself?

me: /sigh Do you have it under contract and what is your wholesale fee on this deal?

him: I get 5k....

me: Do you even have it under contract yet?

him: I need a letter of intent before I can get you in to see it..

me: Well it sounds like you don't have it under contract, and if it's listed with a Realtor I can sidestep you out of the deal, IF I wanted to... AND it doesn't seem like you have really done ANYTHING worthy of 5k.......................

Originally posted by @Don Harris :

@Brett Snodgrass and others. I don't think there is any doubt as to the value Ws is to the RE market place. Nearly every industry has a Ws mechanism to distribute market opportunities. The only beef I see and is possibly legit is whether the Ws takes title or not. This to me really legitimizes  the transaction. Once you are the owner , you are free to Ws or retail or do whatever with the property as all other property owners do. Brett, your firm always take  title before wholesaling and therefore set a higher standard. 

 Thanks Don, I agree with you and thanks for the insight coming from a very established investor. I appreciate you taking the time to respond.  Brett

@Lee Smith

Thanks Lee for the play by play, I liked your conversation, and will definitely take note of that...  Great advice on what not to do and for wholesalers to do a little more homework on deals before putting it out there.   Brett

@Lee Smith ..WOW! That is horrible...But you know something....(from the perspective of a new and learning investor) in this business I have learned very quickly that the unethical "guru" wholesalers are far more visible and influential than the ethical wholesaler who really has all the real wealth in their knowledge and experience of the business. Unfortunately, their influence is forming an army of "gurus" rather than honest wholesalers. By the time a new wholesaler reaches you they are determined to do what they have been taught by the "guru," mostly because they have paid for it...sigh....My desire is the ethical and honest way because that is my nature and the ONLY way I will do business...@Brett Snodgrass For me, an ethical and honest wholesaler is not only valuable but seemingly priceless...

As a newbie investor (last flip 15 yrs ago), I thought buying from wholesalers would be the way to get great deals. As a realtor, I know it's tough to find on the MLS.

What I have a gripe with is that some wholesalers price their properties close and some at MLS pricing. They under estimate repairs and over estimate ARV.

Glad I do my due diligence. 

Waiting to close on my 1st property which is a short sale. 

Don 

All wholesalers are not created equal. Some offer value, some offer the same chewed up garbage that's made the email rounds. Here's another play by play @Lee Smith

him: emails out 123 Main St, active on MLS, ARV is actually $100k, needs $30k of work, he is asking $80k. He says ARV is $150k, he says it needs $15k in repairs.

2nd wholesaler: emails out same house asking $85k, says ARV is $160k, needs $10k in repairs.

3rd wholesaler: emails out same house asking $90k, says ARV is $165k, needs $5k in repairs.

Then multiple emails of the same house come out with a mixed up combination of all the numbers above. 

@Brett Snodgrass   in my mind totally market dependent.

and generally speaking if you have no other way to get properties one probably relies on them and you wade through the garbage to find a gem.

those that tie up MLS properties and then try to resell then like happens in Texas I have ZERO respect for... to me its bush league.

I know my clients get deals from wholesalers but me personally I don't have time for them. far to many are brand new and do not have a clue and the one's that are experienced have their buyers already...

Not to mention they have no basic sales skills  IE they don't answer the phone they hid behind text messaging.. or call you a week later.. I get all manner of direct mail each week from these folks and will call some just to see what they have or if they are different only to be disappointed again.

Its not an industry.. its just a bunch of people out there doing their own thing there are no rules for them to follow half of what they do is selling RE without a license etc..

Most all are a public nuisance assigning contracts. 

Before you write an article about valuations of services, make sure you understand how services are valued. Otherwise, you may look like you're justifying the value of a drug dealer to an addict. 

Again, understand that without the intent or ability to buy under a contract, the contract is voidable, what is the value of a bogus contract?

Now, if they take title or they partner with a real buyer group and close with that buyer they can certainly be an asset to that business. 

Professional services are generally valued based on expertise, knowledge, length of time they have practiced, success rates in comparison to similar alternative services. The alternative to a wholesaler is a real estate agent who facilitates transactions, their fee structure should be  in line with what they accomplish, not a number out of the blue. 

IMO, most wholesalers here are not just new to real estate they are new to business. Regardless of what business you go into you need to know some things about the business world, and it sure isn't what the gurus spit out!

You can never justify doing the wrong thing regardless of your intentions. 

All the best :) 

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Originally posted by @Don Colagrossi :

As a newbie investor (last flip 15 yrs ago), I thought buying from wholesalers would be the way to get great deals. As a realtor, I know it's tough to find on the MLS.

What I have a gripe with is that some wholesalers price their properties close and some at MLS pricing. They under estimate repairs and over estimate ARV.

Glad I do my due diligence. 

Waiting to close on my 1st property which is a short sale. 

Don 

 Congrats Don, on the Short Sale...   And Thank you for "Gripe"  I understand that mindset, because they want to property to look the most attractive to their end investor but when the investor does their due diligence like yourself, it looses credibility quickly.   Thanks again, I wish you well on your property.  Brett

@Jay Hinrichs

Thanks Jay on the response and you had a lot to say about this subject.  I like the word "Bush League", I haven't heard that in a while....I agree that many wholesalers do sell other people's property's and call it "co-wholesaling", but in my mind it really is pretty much selling without a license as they don't have any interest in the property.  Thanks again, it's always a pleasure hearing from your wisdom.  Brett

@Bill Gulley

Thanks, I definitely like 

"Before you write an article about valuations of services, make sure you understand how services are valued. Otherwise, you may look like you're justifying the value of a drug dealer to an addict."

That's good, You just gave me a lot of insight.  Appreciate it.  Brett

Originally posted by @Nick C. :

All wholesalers are not created equal. Some offer value, some offer the same chewed up garbage that's made the email rounds. Here's another play by play @Lee Smith

him: emails out 123 Main St, active on MLS, ARV is actually $100k, needs $30k of work, he is asking $80k. He says ARV is $150k, he says it needs $15k in repairs.

2nd wholesaler: emails out same house asking $85k, says ARV is $160k, needs $10k in repairs.

3rd wholesaler: emails out same house asking $90k, says ARV is $165k, needs $5k in repairs.

Then multiple emails of the same house come out with a mixed up combination of all the numbers above. 

I'm about to be one of these new wholesalers and I'm trying to avoid nonsense like this. In your opinion, what level accuracy do you expect when it comes to estimating repairs? 

Originally posted by @Bill Gulley :

Most all are a public nuisance assigning contracts. 

Before you write an article about valuations of services, make sure you understand how services are valued. Otherwise, you may look like you're justifying the value of a drug dealer to an addict. 

Again, understand that without the intent or ability to buy under a contract, the contract is voidable, what is the value of a bogus contract?

Now, if they take title or they partner with a real buyer group and close with that buyer they can certainly be an asset to that business. 

Professional services are generally valued based on expertise, knowledge, length of time they have practiced, success rates in comparison to similar alternative services. The alternative to a wholesaler is a real estate agent who facilitates transactions, their fee structure should be  in line with what they accomplish, not a number out of the blue. 

IMO, most wholesalers here are not just new to real estate they are new to business. Regardless of what business you go into you need to know some things about the business world, and it sure isn't what the gurus spit out!

You can never justify doing the wrong thing regardless of your intentions. 

All the best :) 

I'm trying to start wholesaling, so I'm asking this out of a genuine desire to be educated. Are you saying that assigning contracts is an all-around bad business practice? I have heard people say that you should always be ready to buy the property and then sell it as is. 

Being a good wholesaler is a tough business. You have to really understand your market, have to be able to realistically (not optimistically) comp a house, have to have a solid understanding of reno costs. It's NOT an entry level position.

After several years as a remodeler and six years as a real estate investor, I finally thought I might have a good enough knowledge to be an effective wholesaler. Unfortunately, I ended up keeping all the good deals for myself!

Around here, I see three categories of wholesalers:

A. There are a couple of wholesalers in DFW who I buy from and consider worthwhile. I'm always happy to look at a deal they send me. Their ARV and reno costs are in line. Their deals are solid. There are a couple others who are "pretty good" and sometimes I see a deal I think is really worthwhile.

B. Then there are all the newbies who may have a good heart, but got told they could make money in real estate with no money down, and just don't have the experience or resources to really do it right. 

C. Then there are a couple of huge companies that I (and several other BP members - I know I've seen @Hattie Dizmond talk about this a lot) consider simply fraudulent - they're always flacking inflated ARVs and underestimated reno costs. They're big churn & burn operations. In my GC capacity, I've worked with their victims - the newbie investor who trusted them, and now has a house he can't make money on. Those guys are no better than Bernie Madoff - they're selling the same false promises and telling themselves it's OK.

Category A - I love working with them.

Category B - I feel sympathy for them, but they're really not doing the world any good.

Category C - I hope they get syphilis.

Originally posted by @Nick C. :

All wholesalers are not created equal. Some offer value, some offer the same chewed up garbage that's made the email rounds. Here's another play by play @Lee Smith

him: emails out 123 Main St, active on MLS, ARV is actually $100k, needs $30k of work, he is asking $80k. He says ARV is $150k, he says it needs $15k in repairs.

2nd wholesaler: emails out same house asking $85k, says ARV is $160k, needs $10k in repairs.

3rd wholesaler: emails out same house asking $90k, says ARV is $165k, needs $5k in repairs.

Then multiple emails of the same house come out with a mixed up combination of all the numbers above. 

Do these people actually succeed with this "business model?" It hardly seems sustainable.

Originally posted by @Michael Hayworth :

Being a good wholesaler is a tough business. You have to really understand your market, have to be able to realistically (not optimistically) comp a house, have to have a solid understanding of reno costs. It's NOT an entry level position.

After several years as a remodeler and six years as a real estate investor, I finally thought I might have a good enough knowledge to be an effective wholesaler. Unfortunately, I ended up keeping all the good deals for myself!

Around here, I see three categories of wholesalers:

A. There are a couple of wholesalers in DFW who I buy from and consider worthwhile. I'm always happy to look at a deal they send me. Their ARV and reno costs are in line. Their deals are solid. There are a couple others who are "pretty good" and sometimes I see a deal I think is really worthwhile.

B. Then there are all the newbies who may have a good heart, but got told they could make money in real estate with no money down, and just don't have the experience or resources to really do it right. 

C. Then there are a couple of huge companies that I (and several other BP members - I know I've seen @Hattie Dizmond talk about this a lot) consider simply fraudulent - they're always flacking inflated ARVs and underestimated reno costs. They're big churn & burn operations. In my GC capacity, I've worked with their victims - the newbie investor who trusted them, and now has a house he can't make money on. Those guys are no better than Bernie Madoff - they're selling the same false promises and telling themselves it's OK.

Category A - I love working with them.

Category B - I feel sympathy for them, but they're really not doing the world any good.

Category C - I hope they get syphilis.

 I agree with you - I learned wholesaling AFTER I become a landlord and AFTER I've rehabbed houses. By doing so, I know my property values, repairs and how to present the deal to a landlord or rehabber. I also learned how to talk with motivated sellers and learned negotiation skills prior to me wholesaling.

Wholesalers who are experienced real estate investors tend to be good wholesalers because they know their numbers, their market, they know marketing and negotiations. Just listing these skills...make me realize why a lot of newbie wholesalers FAIL in this business.

Maybe that's a good article to write: "Wanna Be a Wholesaler - Read this Furst: Why 90% of Newbie Wholesalers FAIL"

I have mixed emotions about wholesalers in my market. As has been said above, there are a few that offer great deals with the potential to make money off of it from a flip aspect. Unfortunately the large percentage are either newbies who aren't able to accurately assess repair costs, and who believe zillow is the all knowing for arv, or sharks who feel they should make at least 10k profit off of every deal they sell. Either the price is way too high, or they didn't get a good deal in the first place. I just saw one the other day that was being wholesaled for 43k. needed 15k in repairs and retail was 62k best case. Absolutely no meat left on the bone. Wholesaling is a great part of being an REI, especially when you are too tied up in several rehabs at once to move on another property but a great deal comes along. Just my .02