Purchasing from a wholesaler

7 Replies

I’ll be purchasing a home through a wholesaler. Is there room to negotiate? Do I need to have an attorney create a contract? Do I need to create a contract of my own? This is my first deal.

Hi @Erica Gregory . There's nothing that says that you can't negotiate with a wholesaler. I'm in the process of closing on a house where I was able to knock a few thousand off the asking price. 

If a wholesaler is experienced, then they'll likely have their own forms and processes. If you haven't reached out to them yet to ask what their requirements are, that would be a good start.

@Mark Durham Thank you for replying. Is there a way to back out of a wholesale deal?

Again, this is my first deal and I’m a little nervous (lol) If at any point I see the inspection costs are too much or it doesn’t appraise for what I need it to, I don’t want to lose my $2500 deposit to the title company and inspection costs.

The wholesaler says “because this is an off market property and are typically rehabbed there are no contingencies”. Is that true? Am I stuck if I get into this deal?

@Kyle Shankin Thank you for replying. Is there a way to back out of a wholesale deal?

Again, this is my first deal and I’m a little nervous (lol) If at any point I see the inspection costs are too much or it doesn’t appraise for what I need it to, I don’t want to lose my $2500 deposit to the title company and inspection costs.

The wholesaler says “because this is an off market property and are typically rehabbed there are no contingencies”. Is that true? Am I stuck if I get into this deal?

@Erica Gregory

Can you back out? Sure why not?  But you will likely lose your deposit.  What do the documents say?  With most wholesalers in my experience, the deposit is non-refundable.  Due diligence should have been done prior to signing a contract and making a deposit.

If this is your first deal and you have these concerns, maybe purchasing from a wholesaler isn't the best option.  It can be a good option if you are confident in your own numbers, not the wholesaler's numbers.  A good wholesaler will provide you with good numbers but that is the exception and not the rule.  

Can't put it any better than what @Colby Hager has said. 

I'll also add that if you're concerned about inspection costs, find out what they are before you move forward. Keep in mind though, the inspection is going to be a constant among all of your deals. It's best if you decide that a deal is worth pursuing before putting any money into it. Also, be aware that there will very likely be a time when you inspect a house and something comes up in the inspection that makes the deal not worth getting. You'll be out the money for the inspection, but will have saved yourself from a greater loss. 

One other thing worth mentioning is that there are no hard and fast rules for wholesaling, it's not regulated. At least, it's not in my area, I get the vibe that's the case in most other places as well. You're free to try and work out whatever terms you want with the wholesaler. There's no harm in asking the wholesaler if you can send an inspector in before you give an offer...they might not go for it, but you never know, it always depends on their situation. If less people are interested in their property, then they'll be more likely to grant you certain requests.

Again, bringing up the example of the house that I'm closing on tomorrow. I had initial contact with them, told them I was interested and asked to see the house. Wholesalers give showing preferences to buyers who offer first, but in this case, they were fine with me walking the property because it's vacant. After walking the house, I gave the wholesaler my offer contingent on the inspection results of one potential problem area. In this case, the wholesaler was fine with that. What's more, they want to close quickly and told me that I could get my inspection done ASAP. I was able to get my inspector in the house before I had even signed to take over the purchase agreement. 

Focus on what you need to make the deal work for you and be sure in your numbers. 

Originally posted by @Erica Gregory :

@Mark Durham Thank you for replying. Is there a way to back out of a wholesale deal?

Again, this is my first deal and I’m a little nervous (lol) If at any point I see the inspection costs are too much or it doesn’t appraise for what I need it to, I don’t want to lose my $2500 deposit to the title company and inspection costs.

The wholesaler says “because this is an off market property and are typically rehabbed there are no contingencies”. Is that true? Am I stuck if I get into this deal?

 Be VERY careful if they are not licensed. Are they skirting and breaking laws to broker without a license. If so, consider that you are dealing with someone with no ethics and disregard for the law. NEVER pay a non-refundable fee. If you were dealing with a legitimate seller through an agent you would never pay a non-refundable fee. What makes these people so special that they are entitled to one? NOTHING.