The Truth about Wholesaling!

891 Replies

Great questions JM.
I don't make a ton of offers or even 2 in one day on MLS listed properties, but I do things differently than most because I have found what works best for my area and that is forming relationships and having deals brought to me BEFORE the public knows about them.

That said, I do, on occassion, make MLS offers, but on just one here and there, never multiple in one day. I have heard that others will make 10 offers in one day. I disagree with such a strategy, but it is just my opinion.

I submit my offers direct with the list broker nad allow them to dual represent, giving them both sides of the commish. This benefits my offer and my effectiveness.

Any offer I actually write on is ONLY after I have walked the property and inspected it. I have made offers and even purchased without the opportunity to inspect the interior due to occupancy issues, but allowed for worst case in my rehab estimations in those cases. (I have one in escrow right now for such a scenario).

Originally posted by Will Barnard:
Great questions JM.
I don't make a ton of offers or even 2 in one day on MLS listed properties, but I do things differently than most because I have found what works best for my area and that is forming relationships and having deals brought to me BEFORE the public knows about them.

That said, I do, on occassion, make MLS offers, but on just one here and there, never multiple in one day. I have heard that others will make 10 offers in one day. I disagree with such a strategy, but it is just my opinion.

I submit my offers direct with the list broker nad allow them to dual represent, giving them both sides of the commish. This benefits my offer and my effectiveness.

Any offer I actually write on is ONLY after I have walked the property and inspected it. I have made offers and even purchased without the opportunity to inspect the interior due to occupancy issues, but allowed for worst case in my rehab estimations in those cases. (I have one in escrow right now for such a scenario).

thanks for your reply!

I am an agent, so the idea of writing many offers on different properties in one day a bit risky for my wallet and reputation. What do you do if you get it accepted and then have to back off? I don't like burning bridges with the local colleagues you know.

I am planning on buying to flip. So i have talked to a couple REO agents I have bought properties from for clients and they will let me know the deals they have before they list them, which is a good advantage. But, many banks are trying at higher prices and have policies of reducing list price after 30 days, etc.. so even having your friend REO agent might not necessarily mean you get the best deal as they can't control what the bank will accept, which brings me to think that I might as well write my own offers and try to get paid a commission as well. Are you an agent? What do you think of this thought?

How else are you buying your flips if it's not from banks? what is your most typical purchase, if you don't mind sharing, I am stoked about getting started asap.

Thanks for your input!!

I make about 15-30 offers every week. But when I make my offers I have already ran my comps and I know that with my offer price getting accepted that I will have no problem selling the property unless there is something terribly wrong which is the purpose of having an inspection period any how.

I dont make offers on anything that I dont intend on closing on. When I make an offer I know exactly who I would market the property to and at what price I will wholesale it. This way as soon as I get an acceptance its ready to move ASAP. When that happens, I head out to the home and do a walk through with a contractor, then I send it out to my buyers and hit all of my marketing channels.

A word of advice to new wholesalers, don't make offers on something unless you are positive that you have a buyer in mind and that your price leaves you room to move it quickly. Without that you will make a bad name for your self quick when you don't close on deals.

I have been flipping a lot of REO and Short sales lately but I still get a good amount of deals from people I have located thru leads or marketing that just want some quick cash to get out of their homes or investments.

Originally posted by Brad Gertz:

A word of advice to new wholesalers, don't make offers on something unless you are positive that you have a buyer in mind and that your price leaves you room to move it quickly. Without that you will make a bad name for your self quick when you don't close on deals.

Definitely the way to go about this.
So are you letting the REO agent represent you in case of a foreclosure?
Are you buying in your name when buying from banks or LLC?

Originally posted by Brad Gertz:

I have been flipping a lot of REO and Short sales lately but I still get a good amount of deals from people I have located thru leads or marketing that just want some quick cash to get out of their homes or investments.

I find this very interesting. If it is not listed on the MLS how are you finding these deals more specifically? I would really like to start getting leads like that and buying cash from people with equity!!

Originally posted by J M.:
How else are you buying your flips if it's not from banks? what is your most typical purchase, if you don't mind sharing,
Almost all my deals are REO properties and as such, bank owned, so I do get them from banks. A few are shrot sales and those are delivered from asset manager contacts with sellers on board. Any others come from leads from agents and other contacts and relationships, but to be clear, only 1 a year or so. The vast majority of my flips are acquired as REO properties and they are devivered through my direct relationships with asset managers and top REO brokers.

I agree that making a ton of offers can diminish your credability which is one of many reasons I don't play that way. Also, as Brad stated, any offer you write, make sure you have crunched the numbers ahead of time and Always perform.

Your friend who gets REO listings - the key to this relationship is getting the BPO low enough and supported by real comps and condition reports, so that if the bank approves the BPO price, you already know that this price is acceptable to you. Of course many banks are listing at full retail value, even on some that need quite a bit of work (they are dreaming,but hey, what can we do).you just have to find the ones that get BPO prices approved at reasonable price points (reasonable to a flipper).
Don't give up.

Will this was a fantastic post and very informative.I wish this post had been around 2yrs ago when I was doing my research on wholesaling,I probably could've gotten started sooner.lol I purchased a course and it stated that within X amount of days I should have my first deal done,I didn't.I beat myself up and was discouraged.However as I began to realize that this is a business and is not built overnight it really helped.I also have a background in home remodeling through my father's company.Also I have a background in finance.I should have known better but I became intoxicated by the potential and figured since the guru was local to me that he'd actually give more information.I'm not saying his information is bad but what worked for him &others does not work in my situation.I am very cautious on what I submit to my buyers list.Like anyone learning something i've had plenty of duds.Also I have made emotional decisions to take on a deal b/c I missed out on a great one.I said all that to say thanks for the post and I will continue to operate my business in a manor that attracts new relationships &buyers!

HDJ - Keep on keepin on my man! Its only through the bad deals that we learn what good deals look feel and taste like. Mistakes are inevitable in this business and the GURU's? Oh, please dont get me started on them. I see you are from MD. Were you studying under Lloyd and Vicki Irving?

The question is what would be examples of singles, doubles, and triples in wholesaling? I think this would help out on the tips already provided.

Originally posted by cashboy2010:
HDJ - Keep on keepin on my man! Its only through the bad deals that we learn what good deals look feel and taste like. Mistakes are inevitable in this business and the GURU's? Oh, please dont get me started on them. I see you are from MD. Were you studying under Lloyd and Vicki Irving?


LOL, i used to train at one of his mma schools. Seems they are branching out into everything now.

This is a great thread. Its good to hear views of and for wholesalers. I personally think its alot harder starting out in real estate investing then most people think. ALOT of things to know, people to know. You really do need to have a good team together to get started out right.

So from all the guys with alot of experience in the field, what do you look for in a wholesaler? Right from the start do you have a way to weed out the bad ones?

Originally posted by Aaron V.b:
The question is what would be examples of singles, doubles, and triples in wholesaling? I think this would help out on the tips already provided.
Singles, doubles and triples in wholesaling would be the same as a non-wholesaled deal. Basically, if you get a deal locked up which would be considered a double ($50k net profit in my neck of the woods), then you know also have a wholeslae deal which I would consider a double. You most likely can make a higher fee on a double than a single and so does your buyer.

Since everyone does not operate in the same areas as I do, my double could be drastically different than yours so this analogy is not equal Nationwide.

The important factors are: know what you are doing, get the rehab estimate very close to accurate, get the exit price very, very close to accurate, and know what your buyers are looking for and find it at good discounts.

Originally posted by Thorney Gibson:
So from all the guys with alot of experience in the field, what do you look for in a wholesaler? Right from the start do you have a way to weed out the bad ones?
Great question. I weed them out after a brief conversation with them, if I am not sure, I am then sure once I look at one of their deals. When they send me something advertised at a great bargain and produce an exit price of X and rehab of Y and neither hit anywhere close to those marks, I know they have no clue! Simple as that.

Its been a while since we had some activity on this thread and thought it was worth while to bump it here.

I continue to hear about how newbies want to start out by wholesaling so they can raise enough capital for other investment strategies and I wanted to remind everyone that wholesaling is ONLY an exit strategy, not an investment strategy. Also, wholesaling requires the investor to have the ability to lock great spreads on deals, enough to attract a buyer and still have enough room for the wholesale fee. many times, these newbies fail and get discouraged because this exit strategy is really for the expereinced investors and not the beginners.

My intent here is not to discourage, but to open the eyes of the new members who think that wholesaling is their best starting point. I personally disagree. The best starting point is to pick a strategy they would like to do (buy and hold, flipper, etc.) and then find a partner who is already doing it and partner with such an investor.

My biggest pet peeves when dealing with some wholesalers are the following: 1) they often will blast every "deal" to everyone on their list (even if that deal doesn't fit my already discussed buying criteria), and 2) they don't seem to know the difference between a margin and a profit.

Ignoring my buying criteria is the quickest way a wholesaler to get blacklisted. I've warned some, countered others with terms that matched my deal criteria, and blocked repeat offenders.

Additionally, repairs aren't the only costs that a rehabber will incur, and many wholesalers fail to include any slack within their repairs figure.

I agreee Dory, of course there are some exceptions to the first item you mentioned.
I have people sign up on my wholesale buyers list via my website, and often, they do not include their criteria, plus, I try and keep from just adding anybody and everybody, as i believe a quality list is better than a quantity list. As such, my email of a deal will often go out to all on my list. It would be difficult to manage all criteria and differentiate inside email folders which buyers should and which buyers should not get the email of the deal, hence it goes to all.

That said, I believe it is so very important to present deals with accurate numbers, both on the exit values and on the rehab costs. Doing anything less is a great way to lose credability.

I thought it may be handy to post this form here in this thread for easy access for all now that Josh has added the new Fileplace to the website.

This form is how to properly estimate rehab costs on your own which is crucial for wholesalers and rehabbers. This form can also be downloaded by going to your resources tab and selceting fileplace.

Will, this is a great thread and I hope it helps to steer newbie wholesalers in the right direction.

I'm subscribed to many wholesaler list in my area and I have not found a good deal out of the 100's I've looked at.

I too am a wholesaler but I try to present my buyers with real value (deep buys) before even attempting to offer them a deal. I know that investors in my area will buy at 70% - 72% of the ARV - Repairs... therefore, I must buy at 65% or less to make money and keep my buyers list interested in my deals.

I’ve had some good luck negotiating deep deals but I’m lacking in the lead department. I’m a HomeVestor franchise owner and I was solely depending on HV to provide me with leads… Those days are over, I recently had a homerun wholesale deal and I’m now planning an aggressive marketing plan to get me in front of more motivated sellers. I’ll be posting my marketing plan soon and hope to get it critiqued by the pro’s on BP.

Happy Investing!

Stinson, thanks for the props and I look forward to reading your post about your new marketing plan for motivated home sellers. I would be happy to offer my opinion when you post it. Please send me an email or PM to the link of your thread to make sure I don't miss it.

I just wanted to say Thank You for putting this topic out there.

It is very reassuring to see so many responses, so I know I am not the only one dealing with the "wholesale" jackals.

Another point to the issue. I have been buing and rehabbing REO's since the very very begining. I was into new development construction, and saw the fall coming a mile away. For the last years there has been month-month development as to buying, but I will tell ya what, it has NEVER been HALF as impossible as it has been the last 6 months. Reason being, a FLOOD of super novice "wholesalers" grabbing up properties on contract, and of course they can, there throwing offers out there that have no margin.
I forsee another collapse, the novice investor defaults, of unknowing people who read a book, saw a video, and wanted to get into R..I. (good 4 them) BUT were told it was easy, duped by these HACK "wholesalers", and are into a loosing investment.

I feel for those people. There is a moral obligation to R.E.I., we are the informed experts in a conveyance of what for most people is the #1 most important purchase and belonging of there entire life. It sickens me to see people knowingly, wantingly, taking advantage of the ignorant and trusting, using the fine print excuse of do your due dilligence". It's like opening a stand selling an "elixer cure for cancer", charging top dollar, and when they die and relatives come back pointing out the fine print of "do your due dilligence".

Yes, DO do your due dilligence, but a scam is a scam, period. Saying they didn't find out it was a scam until after, does NOT place burden on the buyer.

I wish there were a way we could root that ugly element out. They ruin the name of us all, make all good R.E.I. harder, will cause more stringent regulation to pass, AND make it far harder for a newbie to start and rise.

Good to hear all comments and serious interest on this. It is easily one of our top issues at hand effecting us all, especially if the "predatory" side of it grows, causing MORE regulations on us.

James, thanks for your response, I could not agree more and that is one of many reasons why I created this thread. Not only to teach people who to wholesale right and spread the trusth about the fact that it is not as simple as the gurus would make you believe, but to also help preach that doing it right on both a legal AND an ethical manner will help preserve our business.

These crooked so-called wholesalers who lock deals with little spread and lie about exit values and rehab costs in hopes to sucker a newbie buyer into buying their deal will likely cause that new buyer to lose their shirt and most likely never re-enter the market. Such occurances can be negative ligfe changing events for an investor and if we can help prevent just one occurance such as that, I feel I have done my part.