When working with wholesalers, should I expect that their asking price is negotiable or not? If so, how much wiggle room do they build in when they try to sell an assignment? Can & should I know what the seller is getting paid? Thanks and Happy New Year folks!
A wholesaler's margin and their wiggle room is completely dependent on the wholesaler. On my wholesale deals, my standard is that the price you see is the price I am selling it for. If you buy more than one at a time then I will knock off $500 a piece. I sell deals cheaper than you can find them anywhere else. My philosophy is pay the price or go somewhere else and negotiate them down to a higher price than you would have paid for mine.
When I am buying from a wholesaler, I used to care more about what they bought it for and the like, but now I just don't care. As long as it hits my numbers, I don't care. This business is about making money, and I understand that they are going to make money on the deal. Plus if you get too nosy, you might burn a bridge. I've had a couple new investors think they were doing something creative and contact the seller directly and find out what they sold it to me for. The investor would smile at me and tell me they knew what I bought it for so why don't I cut them a better deal. Not only did I not cut them a deal, but they've never got another phone call from me since.
Don't get caught up in what someone else is making. Focus on your numbers, and what you need to make the deal work for you. That's all that really matters in this game.
well, correct me if i'm wrong, but you have to get a copy of the original contract between seller and assignor...
so you'll find out that info anyway.
and besides, a wholesaler should just tell you the fee he/she is charging to assign the contract to you.
it's not some big secret.
On an assignment, yes, you will see exactly what the wholesaler bought it for or rather what you bought it for and what the assignment fee is. Now on a double closing, you will not know anything about the original transaction between the seller and the wholesaler.
Some investors are really weird about a wholesaler making money on a deal that they are buying. They have this mentality that if an investor is selling it then it must not be a good price. Most of the time its new investors that haven't interacted much with the wholesaling crowd or its the old timers that have never really interacted with us. I'm trying to break in an old timer right now. He's bought one from me that was 10% cheaper than any he had bought in the area he likes, but he's still kind of fidgeting with this next one. Again, it's 10% under what he normally buys them for over there, but because I'm an investor he's just not sure. It's actually a better house than the one I sold him before for the same price. We'll see what happens, I'm going to follow up with him tomorrow.
i'm not all that familiar with double closings, i know multiple deals close in a day :D
before we bought our first property (from a wholesaler), the reaction i got from my partner and family members was, "well if it's below market value, why are they selling it? why don't they sell it for market value or fix it up and make the money?"
i think this is where wholesaling gets a bad reputation - because there are alot of "wholesalers" out there pushing JUNK.
Good info guys. I appreciate the comments.
Don't get me wrong I push a lot of JUNK, but it's junk that is priced right for an investor to make money on it. Now I think I know what you mean that a lot of wholesalers push bad deals, and that is absolutely true. I would have to say that MOST wholesalers try to push deals that a rehabber couldn't make money on. An investor has to learn to crunch their own numbers and not rely on a wholesaler's opinion. Just think of the wholesaler as a normal homeowner, would you buy that house for that much with that much in repairs from a normal homeowner. If the answer is yes then buy it. If the answer is no then don't buy it.