Why am I running into the WORST wholesalers?

Atlanta, GA · Member since 2014 · 240 posts · 130 votes

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!

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Jeff Filali

Rental Property Investor · Broken Arrow, OK · Member since 2016 · 1k+ posts · 1k+ votes

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.

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Sergiu Ionita
Real Estate Agent · Social Circle, GA · Member since 2015 · 116 posts · 53 votes
9y
@Ralph C.@Jay Hinrichs courthouse steps/fix-flips. The duplex I'm selling here in Portland was a house hack that I renovated. It was an awesome experience and I learned a ton! I want to switch to flipping though.
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Ralph C.
Real Estate investor professional · Suwanee, GA · Member since 2016 · 233 posts · 81 votes
9y
Originally posted by @Sergiu Ionita:
@Ralph C.@Jay Hinrichs courthouse steps/fix-flips. The duplex I'm selling here in Portland was a house hack that I renovated. It was an awesome experience and I learned a ton! I want to switch to flipping though.
Ok,u can find deals ga courthouse, just have to monitor the upcoming subjects you have interest in as well attorneys for open bids. Do your title search beforehand, drive by etc.
first Tuesday every month, all cash purchase at the time you win the bid.
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Elbert D.
Real Estate Entrepreneur / Investor · Chicago, IL · Member since 2016 · 688 posts · 367 votes
9y
My biggest problems with wholesalers is when they market deals the ARV is too high and or the Rehab cost is too low. Not too many wholesalers here in Illinois that I ran across numbers are accurate. Another thing here in the chicago area is the amount of deals lately. So it's not uncommon to see 3 wholesalers splitting a fee. Which is ok....I have no problem teaming up with other wholesalers to help move a deal along. It's all about team work! Hopefully things balance out and more deals are abundant.
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Elbert D.
Real Estate Entrepreneur / Investor · Chicago, IL · Member since 2016 · 688 posts · 367 votes
9y
Also I don't know why some wholesalers market properties they don't have under contract as that can get you in a lot of trouble. I haven't ran into those wholesalers but here's hoping I don't lol.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Sergiu Ionita very straight forward simply google the state statues on foreclsoures read them then go at it.
show up at auctions and watch a few times .. too much info to try to impart on a open thread like this.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Sergiu Ionita hopefully you lived in it long enough to get your tax free gain.. the absolute best tax treatment we have today
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Sergiu Ionita
Real Estate Agent · Social Circle, GA · Member since 2015 · 116 posts · 53 votes
9y
@Ralph C. Cool. I have a cousin down there who occoasionally buys at auction. Maybe I'll bother him on a first Tuesday of the month. :)
Thanks @Jay Hinrichs. Foreclosure statutes sounds like a good starting point.
Yeah, it's my first home. We've lived in it for 2 years already. The appreciation we had here is insane!
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Sergiu Ionita yes west coast real estate has been good to many people
however If you bough \ATL in 2010 to 2012 there was a healty run up there as well. it was my favorite market at the time.
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Michaela G.
Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
9y
@Jay Hinrichs , I agree, I bought most of my properties in Atlanta end of 2008 through 2010. I just now got a cute 2/1 under contract for 12K. There are still deals out there, but can't do what everybody else is doing - that's always been the trick for me.
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Gerald Harris
Investor · Atlanta, GA · Member since 2013 · 922 posts · 336 votes
9y
It is actually 1 of the reasons for me pursuing a real estate license. Out of 100 wholesalers maybe 10 know what they are doing. I will work with picking up alot of those wholesale deals cause they are priced as listings anyway. and I will work with the end- investors that the Wholesalers wholesale to. at the same time looking for deals myself
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Michaela G. your also there and willing to invest in neighborhoods I personally would not.. we went for higher end stuff.. a little more out in the burbs.. Henry county that kind of place
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Michaela G.
Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
9y
@Jay Hinrichs , you're right, but I'm also doing some other things than what the norm is. Created a creative community on one block - everything fenced and we have a totally different tenant pool, who came from all over Atlanta, instead of the ones normally in the area.
The one I just got under contract I'll use for airbnb, as it's a great location and it has vacant lots on either side and new houses across the street.
I look for new niches
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Lee S.
Northern, CA · Member since 2014 · 674 posts · 444 votes
9y
I recently dealt with my first wholesaler who is out of my area but locked up a property about a mile from my house. I tried to be friendly with him and explain that I know wholesaling, no worries, I don't mind you making your profit. Even after trying to make him feel comfortable I could sense the dishonesty from his end, telling me he only wholesales homes he "doesn't take down himself". However, when I met him at the house with the home owner, it was clear he could never take down a deal himself. Nice kid, but has no clue what it costs to rehab a house. I'm watching his listing on zillow, I told him what price I would start to be interested at (50k under his asking) and he is halfway there on his price reductions. I'm a licensed Realtor and know the owner has owned the home for 30 years and owns it debt free, I'll wait until he is unable to sell it at his price then send the owner a personal letter and see if I can get it for what it's actually worth, which is still 75k below what he has it listed at. His rehab costs are about 40% of actual, when I asked him if he had ever rehabbed a house I heard nothing but crickets.
I hope the owner hasn't been too inconvenienced by the delay caused by this wholesaler, he does seem like a good kid but still. The problem isn't necessarily wholesalers, it's with dishonest wholesalers. If a wholesaler tells a homeowner what they are doing and it's no gurantee they can find a buyer at the contracted price, the homeowner enters into the agreement with full knowledge. I think that doesn't happen in a lot of cases however.
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Sherman M.
Winter Park, FL · Member since 2017 · 35 posts · 4 votes
9y
So I'm just wondering, is it or is it not okay for a REALTOR to do Wholesaling? I want to get into it and fully let everyone know exactly who I am and what the outcomes can be and such, as well as treat everyone fairly so that everyone is a winner. I'm just new into the industry and wondering if it's legit for an agent to do it?
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David Nguyen
Real Estate Agent · Acworth, GA · Member since 2016 · 111 posts · 14 votes
9y
@Gerald Harris So are you an investor or a wholesaler? Just curious.
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Michaela G.
Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
9y
Originally posted by @Sherman M.:

So I'm just wondering, is it or is it not okay for a REALTOR to do Wholesaling? I want to get into it and fully let everyone know exactly who I am and what the outcomes can be and such, as well as treat everyone fairly so that everyone is a winner. I'm just new into the industry and wondering if it's legit for an agent to do it?
As long as you're a principal in the transaction, you should be fine. But I know there are some states where that differs.
That means that you're an actual buyer and/or seller in the contract and not just a middle man. Maybe use bridge funding to buy the property and then sell directly to an end buyer.
Realtors are fighting hard against investors doing that, because it takes business away from them. And then there are the bad wholesalers, mentioned in here, that give those realtor ammunition and that'll make it more difficult for anyone doing it legitly.
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Kim Ford
Wholesaler · Columbia, SC · Member since 2016 · 75 posts · 15 votes
9y
That's not normal. I'm a wholesaler and I do none of those things. I carefully do my comps and tend to underestimate them ( just closed a deal where I estimated ARV $80k and buyer sold for over $130k), I do try to overestimate repairs because you never know what you'll find once reno begins, and I don't try to get astronomical assignment fees because I want buyers to come back to me.
1 Reply
Nick C.
Investor · Tampa, FL · Member since 2011 · 2k+ posts · 3k+ votes
9y
To answer the OP, yes this is very normal. You are not at the bottom of the pool, you're right in the middle.
If I had to take a wild guess, I'd say 5% of wholesalers are really good, 80% are really bad, and 15% are criminals. Just play the odds, if you've come across 8 bad ones already, keep meeting them and eventually you'll find a good one.
It'd be tough to tell upfront if they're good or not, if they bring you good deals then they're good wholesalers. What they say upfront is irrelevant. More than likely you're just going to get more daisy chains and junk email, but you never know. The good ones are out there.

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John Thedford
Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
9y
@Sherman M.
Yes an agent can operate that way BUT who is he representing? Himself. So, you get a call and a guy wants to list. You claim you want to purchase it, sign a contract, and check the box stating the contract is assignable. They you find someone to assume the contract and pocket whatever. Was this truly a service to the owner? Probably not. Many agents try put the properties under contract far enough under FMV to resell the contract and the owner loses out on a lot of their equity. I am going to be one of those pushing hard for accountability in this industry from agents. Does this stop an agent from buying under market? Absolutely not. IF they give the seller honest figures, offer to list it at FMV or purchase for quick cash at whatever discount they want to pay, the owner can either list it or take the fast cash offer but the are doing so as an INFORMED seller.
BTW--check out 475.43. This closes the door on the scammer unlicensed brokers. I see NO WAY to operate as an unlicensed broker without violating the law. Many have tended to operate "underground" and out of sight. I would suspect they would need to operate even more carefully considering the wording of 475.43.
Ignore the people that say agents are "jealous" and "protecting their turf". These people probably have not seen the victims of these scammers. I talked to DBPR several times within the last two weeks. According to the DBPR agent I spoke with, it is most often the elderly and people with a poor grasp of the English language that are the victims of the cons. Those were her words....not mine!
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JD MartinBusiness Member
Moderator
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
9y
Originally posted by @Jay Hinrichs:

you have to manage your expectations.
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..
Quoted for truth! I am fairly down on wholesalers, but I would never depend on anyone else's numbers to do a deal. Since I only do deals in my backyard, I know the neighborhoods like the back of my hand. If I get a contact with an asking price, I can just about guess in 30 seconds if it's even worth pursuing. This is obviously a little harder in a huge metro area like Atlanta, but Atlanta can be subdivided into sections that one can learn very easily. As for rehab, I walk my own property deals because my idea of rehab might not be your idea of rehab.
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Tim G.
Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
9y
Sometimes these posts complaining about crappy wholesalers makes me wonder.
Is the OP mad about that, or mad they aren't getting deals in their market and letting their frustration out on an easy target.
The magic land where agents hand out deals on a silver platter to me for simply adding onto their email list, where is this place? It takes time to develop relationships AND show a decent wholesaler why its worth their time to call you.
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Ritch Bonisa
Specialist · Indianapolis, IN · Member since 2016 · 841 posts · 480 votes
9y
I work with wholesalers in Charlotte, Cincinnati, & Indianapolis - I have 3-5 in each market that I work in, probably 11 or 12 in all. I think it's all about references. There are many out there who will do a deal with you and then you never see them again. I prefer to work with wholesalers that others have done repeat business with. If you can find one that has worked with clients over and over again, that can help prove they are legitimate. It's about making money on volume, not on one deal. The one shot dealers are dangerous.
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Scott Steffek
Flipper/Rehabber · Crown Point, IN · Member since 2009 · 482 posts · 216 votes
9y
I agree with Nick and I'm sort of....a wholesaler. I try to develop personal relationships with my investors and there's a reason for that. 1. It's just good business and it makes then feel a little bit more comfortable 2. If you offer them a fair deal, they'll come back. I work in the Chicago and Northwest Indiana markets. I know the vast majority of wholesalers that have been around a while. I know of maybe 25 of them or so. I trust 2 of them. In my opinion, the rest are out to make a buck and could care less about the investor. ARV's are always inflated, rehab costs are usually double what they tell me and some of these guys are 4 or 5 people away from the person holding the contract! If I don't have a contract on a property and offer it to my investors, I let them know I don't have the contract. However, I don't offer it unless I know the person well. I just met a new wholesaler last week and he told me he's huge in the Chicago market. He was shocked I didn't know about him. Well, now I know why. I just came home from looking at one of his properties. He said the rehab costs were $30k. What a joke. It was more like an easy $70k. The ARV was $40k lower than what he put out. I always tell my investors to do their own due diligence on properties we give them. One of the problems is all of these guru's are telling people how they can make big bucks wholesaling. I don't know if people quit their jobs or what. But they get stuck, have no buyers and are desperate for money. So what do desperate people do? Lie through their teeth until they get a sale. It's a shame, but that's the way it is.
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John C.
Investor · Suwanee, GA · Member since 2010 · 104 posts · 22 votes
9y
Sorry I must have missed something. To me a wholesaler was someone who had the wherewithal to close with their own funds or credit and often did so then resold with a reasonable amount of earnest money at risk (can be held in escrow with their attorney of course). Worst case any good wholesaler will have no problem teaming up with a hard asset-based lender to finance the transaction (could be a double close to save money of course). But only if the deal really made sense. If it didn't then they should walk away or look at other more creative approaches.
The folks you guys are speaking of as "wholesalers" I would call "bird dogs" or "transaction engineers". Putting houses under contract with "weasel" clauses and "and/or assigns". The problem to me is what happens if they are not able to perform after promising the moon and the stars to their seller who may be counting on them for one of their biggest life situations.
So the litmus test to me would be if a hard asset lender would be willing to lend on it. Nothing wrong with marketing a property that you have under contract (in my mind the Real Estate Board may disagree) as long as you have the ability to close if not able to find a buyer in time (which I'm pretty sure a judge would agree with).
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Majic Jones
Investor · Atlanta, GA · Member since 2010 · 10 posts · 4 votes
9y
As a full time investor & wholesaler, I can understand almost everyone's point of view. Buying from a wholesaler is more of a strategic preference for some investors in which case your relationship with the wholesaler(s) brings real value to each other. Some rehab investors are short on time and are aggressively sourcing new properties to keep their capital in rotation as opposed to having it sitting stagnant. The more capital they secure, the more they need new renovation projects.
Now some wholesalers do fall into the rut of making the same mistakes listed above, I did. Once I became more knowledgeable and experienced (wholesaling & completing rehabs), the more I understood the strategy of wholesaling is ALL about value and creating a mutually beneficial relationship. Everyone's definition of value may differ but that's part of developing a relationship with each other to understand needs, wants and expectations. There are plenty of Atlanta area wholesalers, landlord investors and rehabers who work well together, while there are just as many who don't.
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