Why am I running into the WORST wholesalers?

123 Replies

Promotion
REI Nation
Premier Property Management Group
Premier by REI Nation is the #1 PM Choice for Passive Investors
Looking for worry-free property management? Check out our Ultimate Guide to Property Management.
Download Now

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?

Originally posted by @Sergiu Ionita :

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?

 Depends what you want to do?

Buy-fix-flip, House hack, court house steps?

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.

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.

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.

@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! 

@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.

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

@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

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.

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?

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.

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.

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.

@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! 

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.  

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.