Why am I running into the WORST wholesalers?
Atlanta, GA · Member since 2014 · 240 posts · 130 votes
Why am I running into the WORST wholesalers?
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Rental Property Investor · Broken Arrow, OK · Member since 2016 · 1k+ posts · 1k+ votes
9yI 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.
124 Replies
- Rental Property Investor · Killeen, TX · Member since 2014 · 12 posts · 7 votes9yOne way I make sure to get a person is to ask them if they actually have the deal under contract and signed. I remember seeing my own deal marked up so much money and I had to contact the person advertising it and ask them to stop because I was the one with the deal. Another upsetting thing is when I was marketing for buyers and I would have buyers tell me someone else brought them the same deal at a much higher price. My response was I'm the one with the deal and I have it under contract. I so hate it when other people try to add on their fees and be greedy.
- Investor · Tampa, FL · Member since 2016 · 681 posts · 288 votes9y
@Iverem Rose, Hello from Tampa. I noticed what you pointed out with the "Deals" that the few Wholesellers were presenting on BP in our area. All of those Deals were already on Zillow at a 10 to 20% lower cost then what the Whoeseller was Selling them for. So, in my opinion, the Wholesellers presenting on BP for the Tampa, St. Pete, Clearwater areas were worthless. If you did a short Search on one of the sites like Redfin, Trulia, Realtor, Homesnap, Airivify, City-Data, Homes, Loopnet.com etc. you could identify so many properties For Sale, in Foreclosure, or Sold for comparisons and Deals, that there is really no need to do more than run the numbers and drive the neighborhoods. If you look at the map on Zillow for New Port Richie area, it looks like every other house is either For Sale or in Foreclosure. It's like picking a Stock in an Up Market...all you have to do is make a list and throw a dart at it to have some pick to Buy. I saw on the Flipping Vegas show that Scott Yancey said he was Flipping 50 houses a year for the last three years in Vegas. In that case you would want an Agent who was really good at doing all the different Searches online and pay them for some of the good Deals that they find. Scott almost always Buys through the Auctions and on the show he ends up with some really destroyed houses to fix up. A recent example that I saw is a house down the street from my girlfriend's home on W. Osborne, on the corner next to the Broward Elementary School. It's a 2/1 frame in really bad shape that was offered by a Wholeseller a few months ago for $89K and they were saying that you could fix up and sell it for something like $140K. I checked it out on Zillow as I had been watching it as an abandoned property to pick up and it had been advertised for months at $54K. Someone finally bought it and they have a whole crew over there this week, gutting the whole house and even taking off the outside walls to put on a new roof and rehab it from the frames up. Way too much work for me. That house was only worth Buying for Land Value with all the work they are having to do. There is another house that has been in Foreclosure for years, two doors up from my girlfriend's, in this same Seminole Heights neighborhood, that is selling for the original value and the incredible Equity Loan Value that the owner got back before the 2008 Crash. The Bank wants it all with a Sale Price of $135K, when that destroyed, 2/1 block house on a corner is only worth land value at around $50K. The Bank is stuck and the lady still lives there in a huge mess without paying a cent for Rent or the Mortgage, waiting to be Evicted. These REO's are an area that I don't understand. They just boarded up another house across the street from where we are living on the Hillsborough River, across from the Zoo. Nice, possibly, 3/1 or 3/2 block house for a Flip. So, now, there is another possible Foreclosure with a Bank that wants all their Money back, but, won't lower the Sale Price down to what it is really worth for a Flipper or family who wants to live there, to be able to afford to Buy and fix it up to live in. It could go to Auction and still not Sell, like the house on the corner near my girlfriend's and sit there for how much longer? Those are my observations in the short time that I have been a BP member. I did a Search down in the Venice area where my friend has three houses and her friend just bought a small house with two trailers on either side of the house that he can Flip, without lifting a finger, for $30K more than he bought it for. The Deals are all over the place. What does a single Investor need with a Wholeseller?
- Real Estate Consultant · Whitestown, IN · Member since 2014 · 547 posts · 933 votes9y
Wholesaling started as a by-product of an investor who had too many good leads from great marketing. Unfortunately, every program out there is "suckering" newbie investors into their pipe dream of flipping contracts with no money down. These investors do not know how to evaluate a deal or estimate a rehab. They are also quite greedy and have no problem taking advantage of a distressed home owner "AKA motivated seller."
I was assisting/advising a newbie wholesaler a few months ago. Since then, he hooked up with another wholesaling group. He brought me a deal that they were marketing at $75k (which was a fair price) but they assignment on it was for $40k. I was so turned off, I wouldn't even pass the information on to my clients. They would have been fine to give the owner a little more money and leave a little more "meat on the bone" for the buyers. I am finding deals on the MLS again and hopefully this will reign these crazy wholesalers in. I do know and follow some good wholesalers, they are out there. Wholesaling is a legitimate business, but like any other business, greed and lack of ethics can ruin an industry. We've seen it on Main St, Wall St, big Pharma, Government, etc. Licensed brokers have better technology and have a code of ethics that have to be followed or they can lose their license. Wholesalers have nothing to lose but an already poor reputation.
- Investor · Hoffman Estates, IL · Member since 2014 · 434 posts · 185 votes9y
That's just how it works. There's tons of "wholesalers" out there. Source your own deals, and keep your eye out for any deals that they might accidentally pick up.
- Investor - buy and hold. · Cedar Park, TEXAS (TX) · Member since 2015 · 95 posts · 7 votes9y
worst thing is, they manipulate and present incorrect info mostly COMPS to show the value add and send stacks of pages as a supporting documents to investors. I personally caught local wholeseller multiple times using incorrect info on his deals and worst thing is, person was angry at me because I wasn't buying it from him Lol , some Nerve. From them there are other fish in the sea and as far as there is a demand bad wholeseller keep selling. And yes they target newbies. Sad thing is, investors are keep buying properties from them and I am wondering how they (investors) are doing?
@Ashlee Doerr Property in St. Johns county is very high priced now and like you said many are being sold before they hit the MLS or the day they do. The rehab projects I have seen are in neighborhoods that no one wants to live in and to top it off there are a lot of hurricane damaged homes and it is very difficult to get anyone to work and do the rehab should you find a deal. The so called wholesalers I have run into do not have deals...they are shady and lastly do not know what they are doing from a legal standpoint. Have you checked out the foreclosure sales ? They are online at https://www.saintjohns.realforeclose.com/
However the banks are not coming off their prices and there are lots of other cash investors just waiting to grab a deal from the auction.
- Real Estate Agent · Falls Church · Member since 2012 · 2k+ posts · 1k+ votes9y
@Joshua Feit because they are not professionals attempting to do the job of a professional? Try connecting with licensed agents.
- Real Estate Agent · St Augustine , FL · Member since 2016 · 8 posts · 0 votes9y
Thank you so much for the feedback. I know you feel my pain here in St. Johns county. I was hoping to be the non-sketchy wholesaler in the area...I have heard they aren't very good here. My overall goal is to associate with investors and soak up as much information pertaining to investing as I can. We have a HML who has offered to help get us started but sometimes he goes MIA for a week or so and you and I both know that properties are going FAST here. Do you have a meetup that you attend? I have signed up for one but to my knowledge the group hasn't met yet.
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@John Thedford I think what has caused this so called business of wholesaling in many markets to spiral out of control.. is quite obviously the low bar of entry and the lack of any oversight .
So if you think about it. any one can do this and anyone means
Not only do you have rank beginners learning from a cereal box how to transact business.
But I bet if you ran back grounds on a lot of these folks.. ONE would be shocked to see who these sellers are letting in their homes.. and taking advice from.
- Atlanta, GA · Member since 2014 · 240 posts · 130 votes9y
Thanks for reaching out. Definitely respect what you and others are saying about the importance of working with licensed professionals. However, at least in my limited understanding, agents are mostly dealing with on-market MLS / FMLS properties, right?
In the neighborhoods where I am investing, on-market deals always have a swarm of people like me descending on them. There's too much competition, and the prices are usually inflated. The only way I know to get real deals is to find off-market properties.
I'd rather work with an agent any day, but it just doesn't seem to work out well in this market.
Glad to hear your counterpoints!
- Real Estate Agent · Falls Church · Member since 2012 · 2k+ posts · 1k+ votes9y
@Joshua Feit an agent who is not on top of things only deals with MLS.
I can only speak for myself. I am continually driving neighborhoods, I have FSBO sellers automated to be in my inbox every day, and I speak with virtually every FSBO seller that comes in, speaking with reputable wholesalers, just to name a few.
There are many things an agent can do to make sure they know virtually everything that is on the market in their area. Most are activities that can be integrated into the daily flow very easily with a little discipline. It just depends on the agent.
- Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes9y
Originally posted by @Joshua Feit:
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 marketIs 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!
You think you are special or something? You are not running into the worst wholesalers, that award likely goes to me, you are running into the norm. In all seriousness though, the wholesaling idea is full of rookies and desperadoes looking for what they believe is easy money. The truth is, money does not come easy and wholesaling is difficult. If it was easy, everybody COULD do it. While many try, most fail for a number of reasons. Perhaps you should reference the mist popular thread on BP about wholesaling found here: https://www.biggerpockets.com/forums/93/topics/583...
I continue to run into so many bad wholesalers and likely because if my years of experience and track record of flips, they all want to try and sell to me.
I recently had a wholesaler (who likely found me here on BP) who sent me a few deals. I looked the numbers and out were bad but a couple looked like possibilities. Further research showed me the possibility that this wholesaler was not the party with the contract. Red flag #1. I asked for his full name by email and he danced around it and would not provide me his name. What's the big secret? Why would a wholesaler not give me his name?! Red flag #2. Further reaseach showed he did not in fact have the property under contract, someone else did and if course the typical explanation was he was partnering with another wholesaler. Red Flag #3. That should have been the end of it but I guess my desperation to find more deals led me to waste more of my time and I responded to another email with a question on location. I said yes, send it to me. When I got it, it did not gave any address, just the numbers. It took me less than 15 seconds to see that the numbers were so bad it was not even a deal at all. The purchase price plus rehab was only $100k lower than the ARV on a $1M total investment. The costs to resell and to hold would eat all that up and then some for a net loss as a result on this so called deal. I sent him an email back basically asking him what kind of idiot would he expect to find to buy this and to not waste my time with such garbage his response asked me to explain to him what costs would eat up the profit? Now I am all for educating people who ask questions of me but not from a a so called wholesaler trying to sell me who should already know this very simple a basic concept of acquisition plus rehab from the ARV. My final email was to have him remove me from his list.
This is one of many examples of a very poor business model from a very uneducated wannabe investor. This may sound harsh but the truth is better than blowing smoke.
The biggest mistakes wannabe wholesalers make are over estimate ARV, underestimate rehab costs, add little to no value to a deal, do not have systems in place to market to and negotiate with motivated sellers, don't understand all the legal aspects to a wholesale deal, and fail to understand the needs and desires of flippers.
So in closing, Welcome to the Club!
@Ashlee Doerr There are plenty of investors who would love to work with a quality wholesaler...that said where will you get your inventory...bandit signs and yellow letters and driving for dollars don't really work here because there are not all these "tired landlords" or folks willing to let their property go for cheap...because they don't have to so they won't :)
- Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes9y
Read 475.43
What do you mean by "quality". If they are not licensed, and not closing and then reselling, they are violating state law. What happened to dealing with professionals?
- Flipper/Rehabber · Littleton, CO · Member since 2014 · 75 posts · 75 votes9y
I think Jay Hinrichs is correct. You just want an address and asking price and the rest is up to you. I have found most of my deals through wholesalers and have made good profits. But even with the good ones, I would say 70% of their deals are not deals at their asking price (unless you have the inside track and first dibs I suppose, which I don't). Also, sometimes they don't even know what they have and you can score that way. I bought one a few years back from a wholesaler and 2 days later the neighbor knocked on the door and offered me 30k more than what I paid so I wholesaled it to him. On another one I bought from a wholesaler I made 45k in two weeks on a 117k investment. Not all my deals work out that well but legitimate wholesalers are an invaluable resource for me.
- Atlanta, GA · Member since 2014 · 240 posts · 130 votes9y
26 pages of posts in that thread! You, sir, are the king of working with bad wholesalers. Award granted. Wishing you (and me) much better experiences in the future.
Cheers,
Josh - Atlanta, GA · Member since 2014 · 240 posts · 130 votes9y
@Scott Lepore So the million dollar question is:
How did you find the good wholesalers? Trial and error? Or something a little more focused?
- Wholesaler · Philadelphia, PA · Member since 2016 · 35 posts · 20 votes9y
I got my start in the real estate business as a wholesaler before I started buying for myself. Personally I always went above an beyond putting together elaborate packages with pictures, getting at lest 2 contractors estimates, I would break down the numbers for flips and for rentals with refi numbers even, I had a realtor running good comps for me and tried to put the deal on a platter. Have never received one complaint and have a lot of repeat buyers.
Unfortunetly good Wholesalers are much like good contractors, or investor friendly realtors, or good tenants. They all have their bad apples! And all must be veted with the appropriate questions. But just like all of the other "professionals" once you find a good couple hang on to them and take care of them and they will keep feeding you.
Vetting questions from my insider perspective? hmmm I would ask 1. Are you direct to seller (no middle men)? I personally dont like more than 2 in the middle. 2. Always ask for original contract as well as the assignment, if they are squirmy with not wanting to let you know what they got the contract for that is a red flag, 3. They should know ARV, BUT if they don't they should tell you up front. There have been times where I came across a property that was out of my area and I had a ball park ARV but did not know the area like the back of my hand. OR maybe I had not even been to the house because it was 2-3 hours away. 4. a detailed interview of them ahead of time testing their knowledge on real estate terms and thought processes, asking what kind of margins they look for etc. a good wholesaler speaks and thinks just like an investor. 5. ask them what kind of marketing they do and how they get their deals. Just off the top of my head those are some of the things I would have asked myself as a current investor and previous wholesaler looking back.
- Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes9y
Here is where people can check to see if unlicensed brokers have had complaints filed with the State of Florida:
https://www.myfloridalicense.com/sto/unlicensedact...
I have checked up on several people when I see what appears to be unlicensed brokers. I have found some BP members with cease and desist issued by the state and more. I helped a seller fill in a complaint today against a fraud that was playing games with the seller. This fraud has already had one complaint filed and here comes another one:) Sadly, I believe this is an integrity issue. They are a BP member. This site was being horribly overrun with these get rich overnight no license needed types. Thank goodness Florida is dealing with them and other states may soon follow. If it WAS a service, they would be licensed by the states!
- Charlotte, NC · Member since 2017 · 13 posts · 3 votes9yI'm glad this post came up, I am a wholesaler in CLT, NC area and I know exactly what your talking about. I see people claim to be a wholesalers but have no knowledge Real Estate terminology, ARV, Comps, etc. I think people have the wrong idea when it comes to wholesaling as though it's just quick cash and you can jump in and out (it's marketed like that). Basically they don't look at it as a business model, like you would Rehabbing or Renting properties. I see this as an opportunity for wholesalers to see that there are many buyers that just want a good deal with a good wholesaler.
- Realtor · Atlanta, GA · Member since 2016 · 40 posts · 15 votes9yThe reason I have started taking classes to get my RE License is to be a reputable wholesaler and investor.
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Will Barnard the wholesalers are watching the flipping shows.
PP 400k
rehab 100k
sold for 575k with a whopping 75k profit... end of discussion. its amazing how weak math skills are in our country...
and its one of the things I have always had to help many of my borrowers with as they get started.. they simply don't account for all the costs.. 1 mil property needs 200k minimum on top of all in to make a decent profit.. and so on
- Rental Property Investor · Paramus NJ · Member since 2016 · 76 posts · 27 votes9yJoshua Feit From my experience, after speaking to 10 you get 1 with decent deals. "Wholesalers" sometimes are big well operated firms that bring good deals to the table. Then you have bird dogs or someone that has seen a webinar or two and now thinks this is the way out. Too many Gurus telling people you can be in real estate without your own money. It can be done but for that you will need to become resourceful. There is plenty of good wholesalers who are honest and take their business serious and do it full time making a decent income. Speak to enough people, go to enough meet ups and you will eventually partner up with a few decent one
- Winter Park, FL · Member since 2017 · 35 posts · 4 votes9y
Originally posted by @Michaela G.:
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.
How do you do bridge funding? Are you saying to buy the properties outright and then resell them instead of assigning them?
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