Why am I running into the WORST wholesalers?

123 Replies

Hey BP! 

In 2017, so far I have run into about eight wholesalers who were:

-Marketing properties they did not have under contract
-Daisy-chaining deals 3 and 4 deep
-Marking properties up 200 or more percent
-Dealing with properties that were not theirs to market

Is this normal? Or did I just manage to dive to the bottom of the pool?

More importantly, what are some good ways up front to tell if I am dealing with a reputable wholesaler? Thanks for the advice!

Because there's no license requirement AND they have little to nothing invested in the deal, they can and do as they please.  I doubt ALL perform like this, but there's no restraints whatsoever either - - it a hazard of that endeavor :sigh:

@Joshua Feit - I see a lot of experienced flippers complain about shady wholesalers. Most of them that I have come across, I didn't agree with their ARV valuation and repair estimate. They often inflate ARV and under estimate repair. But some of the things you mention seem to be downright illegal.

You might want to set up a system where you vet some of these wholesalers, and check to see if they got any references. Remember, wholesaling is something that requires very little skin in the game. $10-20 EMD... So a lot of these folks, who are starting out and are pretty much clueless about most of the things real estate related think they can be a successful wholesaler.

I have also heard statistics from successful wholesellers that most of their deals are bought by handful of investors. So it definitely pays to be in backpocket of successful ones and develop those relationships. 

Its game of numbers for sure..

It is very hard to find good wholesalers.

90% of them don't know anything about ARV.

If there are any serious wholesalers please contact me. I'm looking for more deals in IL, GA, NC and TX.

Agreed all the way around. I wish I could meet a wholesaler in Atlanta that:

  • Markets for their own deals (not daisy chains)
  • Doesn't write things like "do your own due diligence" (of course I will, but the wholesaler should do the research too!)
  • Knows their market
  • Is the king or queen of accurate ARV
  • Finds decent deals that really work for their buyers
  • Makes an honest living, and doesn't try to add ridiculous markup

If this is you -- please, please, please, contact me!

I think Atlanta is extreme in that regard. 

In the early 2000's Atlanta was overrun by wholesalers, newbie investors, gurus. Ga REIA had +3000 members and anybody who had a house for sale could find a buyer, regardless of the price and whether this was a deal. Everyone was just so hyped up by all of the seminars, that promised quick and easy riches, that wholesalers had an easy time. Every newbie got into wholesaling.

Atlanta was the first city where the FBI set up an office just for mortgage fraud. 30310 was number one in fraud for the whole U.S. 

Then when the market crashed, those houses of cards came tumbling down. But, those same people are still out there and with the market having picked up, they're poking their heads back out and do whatever they can to get a piece of the pie again. 

I refuse to get onto any wholesaler lists. Just not interested in wading through all of that b.s.

You ask for unscrupulous investors who, when practicing a kind of wash selling, artificially inflate if price of a real property.  Show me your track record, fico score, and licenses and IRS tax filing returns!

Originally posted by @Joshua Feit :

@Michaela G.That's exactly what those email lists are -- total BS! Just a bunch of copied/pasted properties. Terrible.

How are you finding your deals?

 Sounds weird, but whenever I'm ready something finds me. Since I'm not wholesaling or flipping, but buy and hold, I don't need a lot of deals. 

I got tired of dealing with bad wholesalers also, so once I found a really good legitimate one, I partnered up with them to work with me fulltime.  I provide them with leads, they do all the leg work and negotiations and acquisitions of deals for me, then once they have them under contract, I have first right of refusal to purchase the property at the contracted amount, plus I pay them a flat acquisitions fee.  On the ones that I choose not to purchase myself, they get to wholesale them to whomever they choose for whatever markup, and once sold, they pay me a flat fee for the leads I provided. Its a win win.

I do try to educate wholesalers who contact me with bad deals, it happens daily. Usually someone has sold them on the ideal and thrown them to the wolves with no real direction. I typically see the same issues you do, inflated ARV's. misleading Repair Costs, etc. The majority of the wholesalers out there are more like bird dogs working for someone else and trying to learn. Most get burnt on any deals they do generate and only last a few months trying.

My biggest pet peeve are the ones who call me representing themselves as an investor wanting to buy one of my homes, when they know they don't have any money and have never purchased a property in their lives. If they said they're a wholesaler or even working with investors looking, that's one thing.  But, I've even asked, so are you the investor or are you wholesaling?  And they start scrambling for words and usually lie.  When they do lie, I get their contact info and tell them Ill send them a purchase agreement and wiring info. I usually never hear from them again.  Be YOU, be Honest, be Successful!!  There's nothing wrong with wholesaling, if done right. 

@Michaela G. Can you send me the ones you don't have bandwidth for?  Wholesalers have made a lot of promises that I found to be untrue prior to purchase (lucky me).  I have been looking in the Atlanta area for a while now.  Looking for multis mainly, but not against single fams.

@Joshua Feit I wholesale properties in Atlanta and all the properties I market, I have under contract. I agree that some wholesalers in Atlanta do everything you mentioned in your post, there are also good wholesalers. Most of the good ones have a handful of investors that buy from them and the property is under contract within hours, therefore you would not see those deals. 

- To answer some of your questions - most wholesalers say do your own due diligence because many investor will put an offer in without seeing the property and ask for due diligence. At that point the investor has "reserved the property" and may or may not buy the property, but has tied the property up and the wholesaler is out time and potential buyers. 

 - Value is subjective and each investor has different criteria - Some flippers want same street comps, others are OK with comps within a mile as long as same school district. Some Buy/Hold investors want 20%, others are fine with 10%. I attend a weekly meeting full of investors, when wholesalers present deals, 70% turn their nose up and the other 30% are interested. It is very interesting watching the different dynamics of investors - OTP vs. ITP, flippers vs. Buy/hold and so on.

Feel free to contact me if you would like more insight.

Hey, what advice would you have for a wholesaler when approching a buyer with a deal? I understand that im not actually investing in a property, im finding  great deals and assigning the contract. So what presentation advice would you have from a buyers perspective? 

Alot of garbage wholesalers here as well. I will not bust them out but I've seen plenty of them just send emails tacking on a hefty fee when the actual person who has it under contract I already deal with haha

you have to manage your expectations.

wholesalers by and large are brand new.. for some strange reasons they have had it pumped into their noggin that the way to get into real estate with little to no money is to wholesale or co wholesale. I E daisy chains..

as a true investor buyer you just want an address and a asking price.. you do NOT want to rely on anyone else for ARV or rehab amounts.. you either know this yourself or YOUR the one not ready for prime time..

To think that wholesalers should just tee up deals for you is flawed thinking.

your living and working in one of the best places to do it yourself.

forget all the wholesalers they just waste your time..

start following the foreclosures.. GA is one of the best states to do this.. sales are only once a month so very easy to follow... hedge fund competition has died way down and unless your looking to buy 10 to 20 props a month..it should be a piece of cake for the average investor to pick up one or two a month with a little bit of study and work ethic.

I rolled into ATL. in 2012 and bought 54 homes in one year at courthouse steps.. I brought an associate from ORegon and he bought 60... easiest place on the planet to do this.

Serious buyers that are looking for wholesale deals that are from real ARV's determined from MLS comps at 70% of ARV in Texas contact me. If you have interests in other states contact me as well because I can start marketing in your areas of interest for your buying criteria.

Here is why: they are NOT professionals. Most are NOT licensed. Many are just outright scammers and frauds willing to say or do anything to make a buck. WHY would you consider dealing with these fringe operators in the first place? Simply because the word "wholesale" implies some sort of better value? Remember, they are skirting licensing laws and have no accountability. Why not deal with a professional? You can at least file complaints against them with the state boards if they misbehave. If you get lied to and conned who are you going to report them to? This is why I provide the following suggestions when anyone talks about working with one of these guys:

BEFORE you deal with any unlicensed broker consider these ideas:

1. Always require WRITTEN comps that can be substantiated

2. Always require WRITTEN bids from LICENSED contractors

3, Always require WRITTEN comps to substantiate ARV

4. NEVER pay a non-refundable fee

5. Always correspond via email so there is written record to bring suit in the event of misrepresentation.

6. Always demand to see a copy of their contract.

Remember, these are middlemen trying to play RE agent without a license. Make sure they provide GOOD comps. Make sure if they are representing an ARV value make them provide ARV comps. If they make claims about rehab costs, make them provide WRITTEN bids from contractors. They are brokering real estate so make them PROVIDE good quality information like you could get from a licensed broker. Many of these unlicensed brokers simply make up figures that sound good but cannot back them up.

Unlicensed brokers generally have no insurance. From personal experience most just pull their ARV out of thin air. Lets see: claim it costs x and it will sell for y. If someone uses an agent, an agent won't provide or should NOT provide the BS an unlicensed broker does. They should not or do not provide rehab figures (to protect themselves). They should tell a prospective buyer to get their own bids. They can provide comps in some situations on an updated unit vs an original unit. Agents have something to lose, can be fined, and have their license suspended or revoked. Unlicensed brokers, acting as fringe operators skirting the laws have nothing to lose. They are acting as an agent without the laws, ethics requirements, education, and insurance that are vital IMO.

Because too many people on BP are telling newbie investors that wholesaling is the best place to start "and generate quick cash so then you can flip with the money then save that and then buy large apts and then retire in a couple years"
LOL

@Tim Ryan

If I didn't know better I would try that too! It sure sounds good. At least with the forums, there are plenty of people that know what they are talking about. I have been dubbed the "wholesale hater" LOL but the fact is I have seen and met several of their victims that were promised their house was sold when in fact they were simply SCAMMED! Thank goodness Florida has taken the lead and written statutes to put an end to these frauds. They won't all disappear but the word will travel fast when a few get placed under state investigations for brokering without a license. Some may think that is a joke but a $5000 civil find AND the possibility of getting charged with a 3rd degree felony will take that smirk off their face pretty fast! I just turned in one fraud. If you saw his FB page you could simply insert the word "broker" in place of "wholesaler". He is pretty sly and obviously a great talker putting some properties under contract with NO EMD. Florida statutes prohibit ADVERTISING properties you do not own and the guys using contracts to subvert licensing just got the door closed on them. To be clear I don't even agree with licensed agents working in this manner. A seller should be told the truth about FMV for their property...but that won't ever happen. @Jay Hinrichs stated the Oregon just adopted new statutes to deal with them as well. 

@John Thedford   what Oregon did was to include  "equitable interest" in the definitions.

IE the trading in equitable interest for expectation of profit is now considered selling real estate and a license is required.. there was a module on it in my CE

Also if you go to the state of CA BRE website BIG tab right up front..  " if you suspect someone of selling RE without a license file complaint here "

Then there was a post on BP were a wholesaler In MI  shows up to a WET closing ( still cant believe people actually do that can't think of a worse thing than putting buyer and seller in the same room LOL).. and seller looks at wholesaler and tells her to go pound sand your not licensed and I am filing a complaint.. she got a cease and desist from the state and of course the buyer and seller just did the deal without her.. 

that's what I know... about it... I simply don't deal with wholesalers my self  some of my teams do.. but I won't.. I get 10 yellow letters a week .. occasionally I call one if I am board and listen to the poor person try to spit out how they are going to pay cash for my asset  LOL.... pathetic really.

what ever happened to learning a craft and an industry...

I had a wholesaler , stopped by a property when I was working on it , and offered an all " CASH" deal . I told him I have a standard contract of sale  right here in my truck , .  I will take $ 10 grand as a deposit  in CASH when you stroke the pen  close in 7 days and bring CASH no checks .  The back peddling and excuses were funny .

@Jay Hinrichs I'm selling my Duplex in Portland and moving to Atlanta at the end end of March. I hear the real estate market there has died down. If foreclosures are still hot, it's something I might look into, but I've never bought a property for cash, so I have no idea what to do when I get there. Any advice for a noobie with about 100k to work with?

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