What has been your experience with wholesalers?

What has been your experience with wholesalers?

Property Manager · Allen, TX · Member since 2015 · 190 posts · 160 votes

I recently got into a lengthy discussion on another thread about wholesalers and whether they bring any value to the real estate industry or not. I am interested to see what everyone's experience has been with wholesalers.

It has been my experience that for the most part, they bring no real value to a real estate transaction. I have come across wholesalers who quote wildly inaccurate numbers on ARV, repair costs, etc. I have come across wholesalers who straight up lie about what price they are under contract for in order to maximize their assignment fee. It seems to me that a large percentage of wholesalers have no ability to actually close on a property. Many seem to be fresh from a local meetup or guru seminar and they are interested in jumping into the real estate industry with no funds of their own to invest. Their actions strike me as not just operating in a gray area, but tending toward outright deception (especially when it comes to getting a property under contract with an uneducated and inexperienced seller).

A note on definitions- it has been my experience that most people who call themselves wholesalers are doing the following;

1) Getting a property under contract for substantially less than it is worth (when I say worth I don't mean ARV, if the property is distressed or in need of repairs then it is worth some lower amount than ARV, when I say worth I mean the amount that the wholesaler knows they can turn around and sell to their buyer list at quickly and easily)

2) The wholesaler does not disclose what they believe a property is worth to the seller, they take the view that they are just making an offer and the seller can take it or leave it. 

3) The wholesaler uses a contract that outlines all the things they may do with a property (fix and flip, buy and hold, assign, etc) once it is under contract, but in reality is fully planning to assign the contract as quickly as possible. 

4) If they are unable to assign the contract, then they walk away and only give up a sometimes ridiculously low earnest amount (I've seen as low as $25!)

It is entirely possible that there is a large group of people who call themselves wholesalers that this doesn't apply to and if that is the case then I am not referencing you and it is just unfortunate that the people who do act this way call themselves the same thing that you do.

One final note - I am honestly looking for everyone's experiences with wholesalers to gauge if maybe I've just been unlucky in the ones I've come across. I know the temptation will be huge for wholesalers to defend themselves on this thread, but please hold off, I'm not interested in having a debate. If wholesalers do tend to conduct themselves ethically then I'm sure a large majority of the responses here from other people in the real estate industry will support them, I just don't want this to become an unwieldy thread where every wholesaler under the sun feels the need to stick up for themselves. By the same token, I'm not interested in "Ya, wholesalers are bad" posts, I'm really looking for concrete examples from your personal experience.

Thank you all!

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Jerry PuckettPro Member
Wholesaler · Fort Worth, TX · Member since 2010 · 1k+ posts · 1k+ votes
8y

All,

Do you think that discussions like these are a pure waste of time and energy? I don't see how this adds any value, and if I am not mistaken, that is the crux of the argument, that wholesalers do not add value. 

Remembering that when one points a finger, there are 3 pointed back at themselves, before I waste another moment, someone please tell me; do all Licensed Agents pass the sniff test, or are there good ones and bad ones as in every other industry? As has been pointed out many, many times, wholesalers exist because there is a space in the industry that needs to be filled. 

Good wholesalers are hard to find. They need more buyers like a hole in the head. People with attitudes go to the end of the line. 

Conversely, bad wholesalers are easy to find. They want every call to be a lead and every lead to be a deal. They are desperate. They do not last long. If a there is a bad wholesaler out there giving you the blues, wait six months....I promise he or she will be gone. 

If a wholesaler does it right, and provides value to the investor in the form of an "off market" property at a great price, then someone is going to cry and say "had to have been predatory". Isn't that a paradox? In this little box, there is no room to win. It's a zero sum game yes? Get a good price, you're a predator; don't get a good price you're worthless.

I can tell bad Agent and broker horror stories all day long, but at the end of the day, my griping is not going to change the industry. Any more than yet another wholesaler rant is going to change a thing on Biggerpockets. 

I can tell good wholesaler stories until the cows come home, but it won't change the mind of someone who already has it made up.

Wow....there's 20 minutes I'll never get back. What was I thinking? 

See this reply in the discussion

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  • Flipper/Rehabber · Scottsdale, AZ · Member since 2013 · 11 posts · 7 votes
    8y

    Mixed bag for wholesalers. Some pull deals off the MLS and mark them up a little, some get true off market deals directly from homeowners (either thru bird dogging or internet leads) and mark them up huge amounts when possible to get 80%-85% of value minus rehab, its a competitive business and they try and make as much money as they can when they can. Many seminars teach these methods so you have many newbies becoming wholesalers every month.

    I think the issue is the low barrier to entry and non regulation allows wholesalers to make claims about repairs and ARV that are many times flat out false. If you're experienced you can see this by running your own numbers. However, if you are inexperienced (which we all were at one point) it can be very tempting to believe the repair numbers or potential profit is real the wholesaler is offering..this can lead to trouble for the newbie..

  • Brownstown, MI · Member since 2014 · 344 posts · 98 votes
    8y

    We have some great ones in the metro Detroit area.  We have bought 3 off market houses.  I think the key is to understand what you are doing so that it is irrelevant what the wholesaler does.

    Good wholesalers add alot of value. 

  • Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes
    8y
    Originally posted by @David Hines:

    I recently got into a lengthy discussion on another thread about wholesalers and whether they bring any value to the real estate industry or not. I am interested to see what everyone's experience has been with wholesalers.

    It has been my experience that for the most part, they bring no real value to a real estate transaction. I have come across wholesalers who quote wildly inaccurate numbers on ARV, repair costs, etc. I have come across wholesalers who straight up lie about what price they are under contract for in order to maximize their assignment fee. It seems to me that a large percentage of wholesalers have no ability to actually close on a property. Many seem to be fresh from a local meetup or guru seminar and they are interested in jumping into the real estate industry with no funds of their own to invest. Their actions strike me as not just operating in a gray area, but tending toward outright deception (especially when it comes to getting a property under contract with an uneducated and inexperienced seller).

    A note on definitions- it has been my experience that most people who call themselves wholesalers are doing the following;

    1) Getting a property under contract for substantially less than it is worth (when I say worth I don't mean ARV, if the property is distressed or in need of repairs then it is worth some lower amount than ARV, when I say worth I mean the amount that the wholesaler knows they can turn around and sell to their buyer list at quickly and easily)

    2) The wholesaler does not disclose what they believe a property is worth to the seller, they take the view that they are just making an offer and the seller can take it or leave it. 

    3) The wholesaler uses a contract that outlines all the things they may do with a property (fix and flip, buy and hold, assign, etc) once it is under contract, but in reality is fully planning to assign the contract as quickly as possible. 

    4) If they are unable to assign the contract, then they walk away and only give up a sometimes ridiculously low earnest amount (I've seen as low as $25!)

    It is entirely possible that there is a large group of people who call themselves wholesalers that this doesn't apply to and if that is the case then I am not referencing you and it is just unfortunate that the people who do act this way call themselves the same thing that you do.

    One final note - I am honestly looking for everyone's experiences with wholesalers to gauge if maybe I've just been unlucky in the ones I've come across. I know the temptation will be huge for wholesalers to defend themselves on this thread, but please hold off, I'm not interested in having a debate. If wholesalers do tend to conduct themselves ethically then I'm sure a large majority of the responses here from other people in the real estate industry will support them, I just don't want this to become an unwieldy thread where every wholesaler under the sun feels the need to stick up for themselves. By the same token, I'm not interested in "Ya, wholesalers are bad" posts, I'm really looking for concrete examples from your personal experience.

    Thank you all!

     I'm curious about your comment: "2) The wholesaler does not disclose what they believe a property is worth to the seller, they take the view that they are just making an offer and the seller can take it or leave it. "

    Isn't that what the free market is all about? A house is worth what a willing  buyer is offering to a willing seller and they come to a meeting of the minds.  

    Who should set the value of a house? HUD? Heaven help us.

    You can't get three real estate agents to agree on the listing price for a house. Three appraisers will come in with three different appraisal amounts. I know, because I've seen it. I was a loan officer and one gets used to the fluidity of pricing a property.

    (I am not a wholesaler and I have never used a wholesaler and I do plenty well, just finding off market properties on my own.)

  • Property Manager · Allen, TX · Member since 2015 · 190 posts · 160 votes
    8y

    @Caleb Heimsoth @Max T. @Jill F. @Jackson Pontsler @Will Gaston @Joe Splitrock @Arun D.

    @Jason D.

    @Kelly Conley @David Roberts @Account Closed

    Thank you all for your responses!

    By my count we have 8 negative impressions of wholesalers, 3 positive impressions, 1 wholesaler out to defend his good name and (most surprising to me) 7 wholesalers who themselves agree that if not the majority, then at least a large number of wholesalers are terrible at what they do. 

    I haven't seen anything that dissuades me from the opinions outlined in my original post.

  • Property Manager · Allen, TX · Member since 2015 · 190 posts · 160 votes
    8y
    Originally posted by @Account Closed:

    Isn't that what the free market is all about? A house is worth what a willing  buyer is offering to a willing seller and they come to a meeting of the minds.  

    Who should set the value of a house? HUD? Heaven help us.

    I'm not talking about some outside party setting the value of a property. When a wholesaler comes to a seller (in particular a distressed or uneducated seller) and makes an offer, it is very possible for the uneducated seller to view that as an outside expert saying their house is worth what is offered. I don't have a problem at all with a flipper doing the same thing and justifying it by saying here is all the work I'm going to do to repair or make improvements and then I'll profit when I resell it.

    I also don't have an issue with a wholesaler (the one's who have the money and plan to double close) coming in and being completely open and honest and saying "here is my offer, I don't plan to do any work and I'm going to sell the property to my buyers list at my offer + $20,000."

    That being said, I don't think that wholesaler scenario happens very often at all. I think it is MUCH more likely for the wholesaler to make an offer, an uneducated seller thinks ok I guess that's what my house is worth, then the contract get's assigned so the wholesaler doesn't have to actually close or they double close and in either case walk away with sometimes surprisingly large paydays. Its only afterwards that the seller feels like they were not told the whole truth and wishes they had put the property on the open market. This seems dishonest and deceptive to me. Someone else above said it nicely when they said that wholesalers do this out of a concern that full disclosure will interfere with the transaction being successful, I couldn't agree with that more.

  • Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes
    8y
    Originally posted by @David Hines:

    @Caleb Heimsoth @Max T. @Jill F. @Jackson Pontsler @Will Gaston @Joe Splitrock @Arun D.

    @Jason D.

    @Kelly Conley @David Roberts @Account Closed

    @Daniel Phillips

    @Jerry Puckett @Jorge De Jesus @Sam Wilson @Van Blackman @Jamal Jenkins @Adam Odom @Russ Scheider

    Thank you all for your responses!

    By my count we have 8 negative impressions of wholesalers, 3 positive impressions, 1 wholesaler out to defend his good name and (most surprising to me) 7 wholesalers who themselves agree that if not the majority, then at least a large number of wholesalers are terrible at what they do. 

    I haven't seen anything that dissuades me from the opinions outlined in my original post.

     Your comment: "When a wholesaler comes to a seller (in particular a distressed or uneducated seller) and makes an offer, it is very possible for the uneducated seller to view that as an outside expert saying their house is worth what is offered."

    I look at it this way, with over 78,194 agents in Texas (Source HAR.com), if one of those agents can't find that seller, the agents aren't doing their job. Shame on you. Quit shifting the blame to the wholesaler and the open market. ;-)

    If the agent won't knock on the potential seller's door, what choice does the seller have? Couldn't they pick up the phone and call all that wonderful advertising that real estate agents pay for? Of course they could. They choose not to. It is their right not to. Again, I am not a wholesaler, I've never bought wholesale and I don't endorse wholesaling. But I strongly believe in the free market. 

    Some people just don't want to use a real estate agent for whatever reason and are willing to take less for their property. If they wanted an agent's opinion, they'd ask for it. 

  • Property Manager · Allen, TX · Member since 2015 · 190 posts · 160 votes
    8y
    Originally posted by @Account Closed:

    If the agent won't knock on the potential seller's door, what choice does the seller have? Couldn't they pick up the phone and call all that wonderful advertising that real estate agents pay for? Of course they could. They choose not to. It is their right not to. Again, I am not a wholesaler, I've never bought wholesale and I don't endorse wholesaling. But I strongly believe in the free market. 

    Some people just don't want to use a real estate agent for whatever reason and are willing to take less for their property. If they wanted an agent's opinion, they'd ask for it. 

    I'm not shifting the blame, you are shifting the blame for the wholesaler's actions (the one actually contacting the seller and being deceptive) to other parties. The fact that they haven't been contacted by an agent or inspired to follow through on advertising does not excuse the misbehavior on the part of the wholesaler! 

    Being deceptive in order to make money ISN'T a free market, very far from it. You seem to have the opinion that a free market means that everyone is on their own and what ever happens happens. If that is the case then I couldn't disagree with you more. What about a market free from deception? What about a market where everyone is free to expect open and honest and complete disclosure from the parties you are dealing with?

  • Jerry PuckettPro Member
    Wholesaler · Fort Worth, TX · Member since 2010 · 1k+ posts · 1k+ votes
    8y
    Originally posted by @David Hines

    @Caleb Heimsoth 

    I haven't seen anything that dissuades me from the opinions outlined in my original post.

     Of course you don't. There wasn't a chance that you were going to change your mind about anything. That's what makes this and all posts like it such a colossal waste of time. 

    This is just the latest flash of wholesale hate. It's nothing new, certainly not original. But the wholesalers are still there, good and bad..... Right along with good and bad flippers, landlords, and *GASP* good and bad Agents and Brokers. 

    If your opinion helps you to sleep better at night, more power to you....at least that isn't a waste.

  • Flipper/Rehabber · Scottsdale, AZ · Member since 2013 · 11 posts · 7 votes
    8y

    If someone tells me theyll buy my car thats worth 30K for 20K and they assign the car to a dealer for 25K  (making 5K) good for them. Whether they disclose it to me or not I dont care I got my 20K. Chances are I needed the cash urgently so the wholesaler or middleman is providing me a service and liquidity in the marketplace. Middleman have and always will be apart of every industry whether its wall street commodities cars housing  market etc..

    My issue w wholesalers is many arent getting true off market deals. Many just bid (or overbid) on the MLS get the 10 day inspection period put out an email blast that way over inflates the ARV and is basically a guess at the repair costs.

    They also want a non refundable EMD and some (Networth Realty comes to mind) will stick w you all there closing costs. Its a lot to take in for a newbie investor and you can lose a lot of money. The whole deal appears legitimate but really the person doing the repair estimate is not a true professional in estimating costs and ARV's are cherry picked comps. You must be able to do your own dilligence and make quick decisions as theres usually another fool waiting in the wings to snatch the deal from you.

    With no regulation many wholesalers "deals" come across as if theyre liscenced agents/professionals when theyre just making much of it up. Not saying all are but thats my take..

  • Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes
    8y
    Originally posted by @David Hines:
    Originally posted by @Account Closed:

    If the agent won't knock on the potential seller's door, what choice does the seller have? Couldn't they pick up the phone and call all that wonderful advertising that real estate agents pay for? Of course they could. They choose not to. It is their right not to. Again, I am not a wholesaler, I've never bought wholesale and I don't endorse wholesaling. But I strongly believe in the free market. 

    Some people just don't want to use a real estate agent for whatever reason and are willing to take less for their property. If they wanted an agent's opinion, they'd ask for it. 

    I'm not shifting the blame, you are shifting the blame for the wholesaler's actions (the one actually contacting the seller and being deceptive) to other parties. The fact that they haven't been contacted by an agent or inspired to follow through on advertising does not excuse the misbehavior on the part of the wholesaler! 

    Being deceptive in order to make money ISN'T a free market, very far from it. You seem to have the opinion that a free market means that everyone is on their own and what ever happens happens. If that is the case then I couldn't disagree with you more. What about a market free from deception? What about a market where everyone is free to expect open and honest and complete disclosure from the parties you are dealing with?

     They say "You get the most flack when you're over the target". Guess I hit the target on this one, eh. ;-)

    By the way, you say "Being deceptive in order to make money ISN'T a free market, very far from it." 

    What is "deceptive" about making an offer on a property? If a wholesaler represents that they are a real estate agent, and they aren't or they represent that they are an appraiser and they aren't, then they clearly have broken the law. But, I don't think that is what was referenced in the discussion.

    Did you know that a real agent estate agent's listing price is "an opinion"? Did you know that an appraiser's appraisal is "an opinion"? Same with the wholesaler. The wholesaler is simply saying, the propererty is worth "this much to me". Plus the seller doesn't have to pay the 6% commission fee to a real estate agent. Oh, I GET IT! You are sore about the commission. ;-) Just follow the money . . .

  • Katy, TX · Member since 2017 · 372 posts · 140 votes
    8y
    Originally posted by @Jerry Puckett:
    Originally posted by @David Hines

    @Caleb Heimsoth 

    I haven't seen anything that dissuades me from the opinions outlined in my original post.

     Of course you don't. There wasn't a chance that you were going to change your mind about anything. That's what makes this and all posts like it such a colossal waste of time. 

    This is just the latest flash of wholesale hate. It's nothing new, certainly not original. But the wholesalers are still there, good and bad..... Right along with good and bad flippers, landlords, and *GASP* good and bad Agents and Brokers. 

    If your opinion helps you to sleep better at night, more power to you....at least that isn't a waste.

     Exactly, your mind is made up. And a poll? It’s an option,  sorry somebody burned you.  Hope to see you tomorrow morning 

  • Property Manager · Allen, TX · Member since 2015 · 190 posts · 160 votes
    8y
    Originally posted by @Account Closed:

    What is "deceptive" about making an offer on a property? If a wholesaler represents that they are a real estate agent, and they aren't or they represent that they are an appraiser and they aren't, then they clearly have broken the law. But, I don't think that is what was referenced in the discussion.

    Did you know that a real agent estate agent's listing price is "an opinion"? Did you know that an appraiser's appraisal is "an opinion"? Same with the wholesaler. The wholesaler is simply saying, the propererty is worth "this much to me". Plus the seller doesn't have to pay the 6% commission fee to a real estate agent. Oh, I GET IT! You are sore about the commission. ;-) Just follow the money . . .

    Classic straw man argument, misrepresent what I said and then attack the misrepresentation (I get it, its easier). I never said making an offer was deceptive. Making an offer at X while knowing that you can immediately sell the property or assign the contract for X + $20,000 without ever doing anything of value to the property is deceptive if you haven't disclosed to the seller that that is the plan. I have seen this exact situation, and not on 400-500k properties either, I've seen a property with an ARV of 100k that a wholesaler gets under contract for 50k and markets to their buyers list at 70k. So I would say that at the time of the deal, the property is worth 70k and if the wholesaler isn't disclosing to the seller that they are going to sell or assign the contract for a 20k profit, then that is deceptive.

    Also, that $20,000 is FAR in excess of the 6% charged by an agent. By my calculation, that's a 40% markup. If that seller were treated honestly by the wholesaler, then I think most sellers would end up using an agent and keeping much more of their equity. Wholesalers know this and it is EXACTLY why they aren't fully honest in the first place. Oh, I GET IT! You are sore about the outrageous 40% profit for doing nothing of value. Just follow the money...

  • Property Manager · Allen, TX · Member since 2015 · 190 posts · 160 votes
    8y
    Originally posted by @Jerry Puckett:
    Originally posted by @David Hines

    @Caleb Heimsoth 

    I haven't seen anything that dissuades me from the opinions outlined in my original post.

     Of course you don't. There wasn't a chance that you were going to change your mind about anything. That's what makes this and all posts like it such a colossal waste of time. 

    You can believe what you want, but I assure you if I had made my original post and 75-85+% of the responses had solid reasons why wholesalers are generally well behaved and that I was mistaken to write off the profession, then I would have reconsidered my position. However, that isn't what happened is it? If you want me to change my mind, then make a stronger argument...

  • Contractor · Jacksonville, FL · Member since 2017 · 1k+ posts · 2k+ votes
    8y
    @David Hines wholesalers=useless... I see absolutely no value that they bring to the industry.
  • Contractor · Jacksonville, FL · Member since 2017 · 1k+ posts · 2k+ votes
    8y
    perfect example of wholesalers... Just this morning I had a bigger pockets wholesaler sends me a message about a great deal in Jacksonville Florida for 43k... "it's a great deal"....whatever.... It's been on craigslist for 2 months for 41k and this wholesaler just regurgitates something that is already existing and marks it up 2k and tries to make it off like it's a good deal... This sums up 98% of my experiences with these wanna be wholesalers...
  • Altadena, CA · Member since 2015 · 66 posts · 58 votes
    8y

    Im loving this thread post, because myself being a wholesaler am really looking for the key distinguishing facts that differentiate a amateur from a professional. 

    My idea of a professional wholesaler is being able to contract a deal at a deep discount that serves a benefit to the seller (depending on their situation) and at the same time also keeping their end investor in mind. At the same time the deal has to be one that is not made available to the general public (makes no sense), and has to be an off market deal that the end buyer couldn't have found. The transaction has to be done with integrity meaning the seller has to be informed of exactly whats going on. I really try and focus on the problem and what I can do to help the seller, whether its relocate, clean the house out, or deal with other issues that are causing the distress. 

    one thing that i see is common here in my local market are wholesalers that contract MLS deals and than add their assignment fee and try to push it to an end buyer. Makes no sense to me whatsoever. I also other wholesalers contracting other wholesalers deals making a huge endless cycle of A-B-C-D transaction which is also ridiculous because by the time it ends up at the end buyer its not a deal anymore. I know everyone has a different opinion of wholesalers, and i can understand why. Im not saying i'm perfect in anyway, but from my personal experience and from what i have learned from these forums, there is definitely a right way of wholesaling and a wrong way of doing it.

  • Rental Property Investor · Austin, TX · Member since 2016 · 294 posts · 104 votes
    8y

    it's an old topic, but let me still comment. I think the wholesalers arr generally commiting a fraud. They hit the seller hard. The idea is to get below the market value house under the contract by making the seller think they have a good deal. Hiw is this not a fraud? As an investor I trully like good deals. But when it come to wholesalers, they put the price that I can get from MLS. The next level of fraud is when a wholeseller befriends with a selling real estate agent to bring the price down for the property at MLS. That should be regulated by the goverment, as it can hit the seller hard. All in all, I dont have mich respect to wholesalers and dont consider this as a profession. People with low income and no savings are trying to shave some money from a transaction. What surprises me more that they call themselves RE investors. Right. Get some money first to spend and then do a real investment and not a fraud.

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