Why Do Most Wholesale Deals Exclude Home Inspection & Appraisals?

21 Replies

Seriously!

How much Dough does it really cost to run a Home Inspection Report? $3-$400 bucks?

And...

How about an ‘As-Is’ Appraisal?

and maybe also an ‘ARV' Appraisal?

...another $3..$4...$500 bucks tops???

It seriously blows my mind how I have never seen even One ☝🏼Wholesale Investor ever produce a Home Inspection Report or any type of Appraisal on their deals... yet many wholesalers feel perfectly able to sleep at night with a $2.... $3....$5,000.. capital gains check safely tucked away under their pillow while the risk remains with the poor uneducated soul that just bought that deal...😥...

I’m not here to bash on any wholesalers within Our Come-Unity, but I AM suggesting that maybe it’s possible to create a New Wholesaling Business Philosophy where Wholesalers can partner with what I call “Small Money Investors” who’s small funds are specifically tailored towards funding simple Due Diligence processes with the intent of earning a healthy annual return.

In Theory:

By Producing a Wholesale Deal

‘With’...a Home Inspection Report in hand, and

‘With’...an As-Is Appraisal

and the ‘ARV' Appraisal in hand.

It’ll show an new level of trust & confidence in the buyer that this wholesaler is different than all the rest... You’d create a new wholesaling niche that would separate you from other competitors out there...

And People like ME would become Loyal ongoing customers that would easily buy every single one of your deals as fast as you can get a hold of them...

With all that upfront work...couldn’t you justify a higher commission? say a minimum of $10,000 per deal or more? (That way you make enough profit to pay back the small money lender).

I would Pay it...☺️

After traveling across 50 states and seeing the different REIA clubs and wholesalers nationwide and being a speaker in a few... I've always wondered WHY?

Why has no one done this already?

To those thinking about being future Wholesalers in the industry perhaps think of this as a Potential way of doing future business and Maybe... just maybe... You’ll set a new

Standard and change the entire industry brand

to the next level of Deals...

Sincerely,

Your Friendly Hawaiian in Denver

Afa

P.S. if I were you I would get a home

Inspector that is ridiculously meticulous in their report like 10+ pages and 400 picture type report...

P.p.S.s I would find the President of the Chapter of Appraisals in your Area 😉

Triple P.S. grab their resumes proving over 10 years in the game... and show those credentials to your Future Buyer like ME!

Aloha

@Clayneal Pononuihanohano Afaihere Garrigan ,

Food for thought, indeed.

I wonder, when you're dealing with investors who rely more on their own assessments than the assessments of others, how much that would matter to them.  And, the logistics of potentially dealing with a seller that may want to avoid such a process... might that get in the way?

Still, it's something I may consider testing.  Knowledge is power!

Thanks for posting this.

no no no all wrong.

It is not a wholesalers job to make sure the numbers are correct.

it is YOUR job as the back end buyer. I would NEVER do any effort to even try to convince the back end buyer about the numbers.

You know why?

The second you list a number anywhere they will hold you to it. You are asking for trouble if you make any claims.

So obviously we are not just going to not give any numbers, but we make it ABSOLUTELY clear that the numbers we provide are OUR numbers. Those are the numbers WE would base our offers on and that YOU should do your own numbers.

The wholesalers's job is to provide you with off market properties at discount. That's IT. I am not going to do THEIR homework for them?!

Hell no!

It is not about the cost of the home inspection. It is about what it entails.

The back end  buyer needs to do their own due diligence.

Also keep this in mind. MANY investors claim on their website "no inspections, as is". This makes it more attractive for seller to sell. When I buy a house I AM doing an inspection. And if the sellers has something against it, buh bye.

But that is when I am the buyer. 

I have ZERO responsibility or accountability if you as the back end buyer decides to buy the contract or not. It is all on you. 

I would never accept much less make a purchase with any home inspection report from a seller, I personally know that realtors pick their best deal maker home inspectors, the wording in the home inspection report precludes the possibility of recourse nor would I be involved in a trust basis purchase, there are so many possibilities for a serious issue to come up and the buyer will get stuck with a bad investment, always have your own home inspector do a thorough report on any home you are seriously considering, buyer beware of everything especially seller home inspection reports, facts.  

part of the reason is how wholesalers represent themselves to the sellers..  IE I will buy all cash 
no inspections and close on a day of your choosing.. half the time sellers have no idea they are not dealing with the end buyer..  If a wholesaler makes an offer subject to inspections and appraisals that goes against their marketing message..

Sorry but you have a very skewed perception of this. 

It's YOUR job to do property due diligence on the deal before buying it. You need to verify all the numbers and run comps to determine ARV yourself.

Serious flippers don't usually get a formal appraisal or home inspection, so I'm not sure why you'd expect a wholesaler to deliver those to you. Even in a traditional retail sale, you're not going to be provided an appraisal or inspection report. 




Originally posted by @Pratik P. :

Sorry but you have a very skewed perception of this. 

It's YOUR job to do property due diligence on the deal before buying it. You need to verify all the numbers and run comps to determine ARV yourself.

Serious flippers don't usually get a formal appraisal or home inspection, so I'm not sure why you'd expect a wholesaler to deliver those to you. Even in a traditional retail sale, you're not going to be provided an appraisal or inspection report. 


Agreed and to add to this, I would never trust any appraisal or inspection report completed by a seller or a wholesaler. An appraisal is just ONE person's OPINION of value and that opinion can easily be influenced by the seller or wholesaler. For the inspection, if the numbers are close enough for me to take a closer look, I will put my own eyes on it and see what it needs or what is wrong, I don't need an inspection as an experienced rehabber. If I was new, yes, I would want one but one in which I hired the inspector, not the wholesaler or seller.

 

It is not a wholesalers job to make sure the numbers are correct.

This is not good advice in my opinion and goes directly against what I have been preaching about for years. A good wholesaler knows how to properly evaluate rehab numbers and most importantly, exit values. Otherwise, how the hell do you come up with your own offer if you can't do that. I realize some markets and some strategies by specific wholesalers around the country can get away with this, but as a whole, it is extremely important that wholesalers know their numbers and deliver said numbers to their potential buyers. Their buyers will certainly do their own DD and check said numbers but I will say for a fact that a wholesaler sending me deals with numbers far off do not ever get taken seriously in the future and often get blocked from my email. Knowing your numbers and providing those numbers is essential to building report with your buyers.

Eben the good ones are not right all the time, hell, neither am I for that matter, but on average, if you are, then you have a much better chance of success.

Originally posted by @Will Barnard :

It is not a wholesalers job to make sure the numbers are correct.

This is not good advice in my opinion and goes directly against what I have been preaching about for years. A good wholesaler knows how to properly evaluate rehab numbers and most importantly, exit values. Otherwise, how the hell do you come up with your own offer if you can't do that. I realize some markets and some strategies by specific wholesalers around the country can get away with this, but as a whole, it is extremely important that wholesalers know their numbers and deliver said numbers to their potential buyers. Their buyers will certainly do their own DD and check said numbers but I will say for a fact that a wholesaler sending me deals with numbers far off do not ever get taken seriously in the future and often get blocked from my email. Knowing your numbers and providing those numbers is essential to building report with your buyers.

Eben the good ones are not right all the time, hell, neither am I for that matter, but on average, if you are, then you have a much better chance of success.

Bro, you really need to read what I am saying. You keep assuming the wrong things my man.

We ABSOLUTELY do an amazing job figuring out the numbers. Like I said before, we approach this as if WE yourself are going to buy the house... because that IS an option... we just DON'T SHARE  our numbers with the back-end buyer. 

The point I am making is that it is NOT my job to figure out what THEIR profit is, and what THEIR cost of repairs are. And think about it .. how could it be my job?

Me as a flipper would redo the kitchen. Many flippers do lipstick fixes, we don't so our numbers ARE WAY different than theirs. To avoid confusion and misunderstandings, it really is best they do it all themselves.

THAT is what I am saying. That it is not my job. I am not saying we do not figure out the numbers.

We give them the comps we used to comp the house, and we give them our ARV. We tell them what we think is wrong and needs fixed, and that's all!

Originally posted by @Jerryll Noorden :
Originally posted by @Will Barnard:

It is not a wholesalers job to make sure the numbers are correct.

This is not good advice in my opinion and goes directly against what I have been preaching about for years. A good wholesaler knows how to properly evaluate rehab numbers and most importantly, exit values. Otherwise, how the hell do you come up with your own offer if you can't do that. I realize some markets and some strategies by specific wholesalers around the country can get away with this, but as a whole, it is extremely important that wholesalers know their numbers and deliver said numbers to their potential buyers. Their buyers will certainly do their own DD and check said numbers but I will say for a fact that a wholesaler sending me deals with numbers far off do not ever get taken seriously in the future and often get blocked from my email. Knowing your numbers and providing those numbers is essential to building report with your buyers.

Eben the good ones are not right all the time, hell, neither am I for that matter, but on average, if you are, then you have a much better chance of success.

Bro, you really need to read what I am saying. You keep assuming the wrong things my man.

We ABSOLUTELY do an amazing job figuring out the numbers. Like I said before, we approach this as if WE yourself are going to buy the house... because that IS an option... we just DON'T SHARE  our numbers with the back-end buyer. 

The point I am making is that it is NOT my job to figure out what THEIR profit is, and what THEIR cost of repairs are. And think about it .. how could it be my job?

Me as a flipper would redo the kitchen. Many flippers do lipstick fixes, we don't so our numbers ARE WAY different than theirs. To avoid confusion and misunderstandings, it really is best they do it all themselves.

THAT is what I am saying. That it is not my job. I am not saying we do not figure out the numbers.

We give them the comps we used to comp the house, and we give them our ARV. We tell them what we think is wrong and needs fixed, and that's all!

I don’t have any doubt you know how to do your numbers which is a major factor in why you are successful at not just wholesaling but rehabbing as well. I did read your post, it made no mention of “profit”, it was “numbers” and it is my desire to help guide these newer investors to learn how to analyze the “numbers” properly and accurately so they can be successful. These numbers include the exit value and rehab estimate based on a specific or multiple option strategy. If your buyer is a buy and holder, than certainly you are looking at the deal from a buy and hold perspective providing said numbers that would yield the best results for you and your potential buyer which they can either agree with that or not but at least you provided some accurate info for them to make a decision to look more into it or pass.

My advice comes from the fact that too many send out deals where they have no clue or are way off on rehab numbers and exit values. One would argue that many inflate exit values or underestimate construction intentionally to make their deal look better. These are the things that drive us real cash buyers insane and make us ignore these wholesalers in the future. 

It is true that one rehabber may do a nicer rehab job than another, that is not the point here. The point is that the wholesaler needs to understand how to arrive at a proper exit number for their intended or suggested scope of rehab work. The buyer can then decide if they want to go with a higher end rehab, lower end rehab, or perhaps something different all together. Actual profits and their calculations are certainly up to the buyer to figure out.

Originally posted by @Barry Pekin :

@Clayneal Pononuihanohano Afaihere Garrigan,

Food for thought, indeed.

I wonder, when you're dealing with investors who rely more on their own assessments than the assessments of others, how much that would matter to them.  And, the logistics of potentially dealing with a seller that may want to avoid such a process... might that get in the way?

Still, it's something I may consider testing.  Knowledge is power!

Thanks for posting this.

 

Originally posted by @Barry Pekin :

@Clayneal Pononuihanohano Afaihere Garrigan,

Food for thought, indeed.

I wonder, when you're dealing with investors who rely more on their own assessments than the assessments of others, how much that would matter to them.  And, the logistics of potentially dealing with a seller that may want to avoid such a process... might that get in the way?

Still, it's something I may consider testing.  Knowledge is power!

Thanks for posting this.


Aloha Berry, thanks for your gentle input...

Just to be clear, I absolutely do perform my Own Due Diligence on every property every time. I guess this topic matters to me only Because "I have Never seen any wholesaler ever present a deal, including a paid home inspection report". To me, this shows effort, this shows someone willing to spend money on a 3rd party opinion when most wholesalers won't. It matters to me mainly Because I haven't met one single wholesaler who has... To me it shows a difference in character...someone unique and different... So maybe for others, it doesn't matter much... But for me, it separates the cream from the crop... Blessing Berry...Applied Knowledge is Power.

Originally posted by @Jerryll Noorden :

no no no all wrong.

It is not a wholesalers job to make sure the numbers are correct.

it is YOUR job as the back end buyer. I would NEVER do any effort to even try to convince the back end buyer about the numbers.

You know why?

The second you list a number anywhere they will hold you to it. You are asking for trouble if you make any claims.

So obviously we are not just going to not give any numbers, but we make it ABSOLUTELY clear that the numbers we provide are OUR numbers. Those are the numbers WE would base our offers on and that YOU should do your own numbers.

The wholesalers's job is to provide you with off market properties at discount. That's IT. I am not going to do THEIR homework for them?!

Hell no!

It is not about the cost of the home inspection. It is about what it entails.

The back end  buyer needs to do their own due diligence.

Also keep this in mind. MANY investors claim on their website "no inspections, as is". This makes it more attractive for seller to sell. When I buy a house I AM doing an inspection. And if the sellers has something against it, buh bye.

But that is when I am the buyer. 

I have ZERO responsibility or accountability if you as the back end buyer decides to buy the contract or not. It is all on you. 

 Aloha Jerryll,

You have a passionate heart and I admire that in you. I'd like to thank you for your thoughtful opinion. You are a man great experience and I can only wish to be seen in your rear view mirror one day. I've learned a lot from your perspective. So Thank you... Blessings Jerryll... King of the #1 SEO Rankings system on Google ever. lol

Originally posted by @Robert Goldman :

I would never accept much less make a purchase with any home inspection report from a seller, I personally know that realtors pick their best deal maker home inspectors, the wording in the home inspection report precludes the possibility of recourse nor would I be involved in a trust basis purchase, there are so many possibilities for a serious issue to come up and the buyer will get stuck with a bad investment, always have your own home inspector do a thorough report on any home you are seriously considering, buyer beware of everything especially seller home inspection reports, facts.  


Aloha Robert,

I totally understand your perspective. I get that some "Realtors" will tend to hire their best friend or family members to do their inventory home inspections for them. To tip the scales in their favor. I agree there are so many things to consider when purchasing a property from "Any" seller (Including Wholesalers) and that it is always the best idea to do your own personal due diligence before blindly trusting the reports of any seller. 

But more Precisely, this topic was specifically talking about "Wholesalers" and not so much about "Realtor Experiences"... I have also experienced Realtors that have provided a cheap, broad, general home inspection reports for potential properties to buy, and I've seen basic rehab budgets provided by realtors for me to look at. And Realtors have been known to provide some form of Appraisals and passed it on to buyers... 

My point is that, I've seen this behavior from Realtor but I've Never seen this type of behavior from Wholesalers... 

and so I questioned, WHY? 

To be clear Robert, I do perform my own due diligence on every property. Including my own Home Inspection Reports, 3 General Contractors Bids and an "AS-IS and an "ARV" Appraisal usually from the President of the Chapter of Appraisals... True these are all glorified "Opinions". But there is something that we both agree upon, to encourage 'Buyers' to please do your own personal due diligence process even if one magical day.... you did find the rare once in a lifetime wholesaler that DID give you all their research reports and honest findings...

Blessings Robert and Thank you.      

 

Originally posted by @Jay Hinrichs :
part of the reason is how wholesalers represent themselves to the sellers..  IE I will buy all cash 
no inspections and close on a day of your choosing.. half the time sellers have no idea they are not dealing with the end buyer..  If a wholesaler makes an offer subject to inspections and appraisals that goes against their marketing message..

Aloha Jay,

Thanks for taking the time to bring insights here... I like this opinion, I never considered that it could be totally 'against' a wholesalers philosophy and DNA. To spend money on these Reports for future buyers when they are making promises to distressed home owners that they would NOT be doing any of these Inspections and Appraisals... That makes sense to me...

Thanks again for your view.

Afa

 

Originally posted by @Will Barnard :
Originally posted by @Jerryll Noorden:
Originally posted by @Will Barnard:

It is not a wholesalers job to make sure the numbers are correct.

This is not good advice in my opinion and goes directly against what I have been preaching about for years. A good wholesaler knows how to properly evaluate rehab numbers and most importantly, exit values. Otherwise, how the hell do you come up with your own offer if you can't do that. I realize some markets and some strategies by specific wholesalers around the country can get away with this, but as a whole, it is extremely important that wholesalers know their numbers and deliver said numbers to their potential buyers. Their buyers will certainly do their own DD and check said numbers but I will say for a fact that a wholesaler sending me deals with numbers far off do not ever get taken seriously in the future and often get blocked from my email. Knowing your numbers and providing those numbers is essential to building report with your buyers.

Eben the good ones are not right all the time, hell, neither am I for that matter, but on average, if you are, then you have a much better chance of success.

Bro, you really need to read what I am saying. You keep assuming the wrong things my man.

We ABSOLUTELY do an amazing job figuring out the numbers. Like I said before, we approach this as if WE yourself are going to buy the house... because that IS an option... we just DON'T SHARE  our numbers with the back-end buyer. 

The point I am making is that it is NOT my job to figure out what THEIR profit is, and what THEIR cost of repairs are. And think about it .. how could it be my job?

Me as a flipper would redo the kitchen. Many flippers do lipstick fixes, we don't so our numbers ARE WAY different than theirs. To avoid confusion and misunderstandings, it really is best they do it all themselves.

THAT is what I am saying. That it is not my job. I am not saying we do not figure out the numbers.

We give them the comps we used to comp the house, and we give them our ARV. We tell them what we think is wrong and needs fixed, and that's all!

I don’t have any doubt you know how to do your numbers which is a major factor in why you are successful at not just wholesaling but rehabbing as well. I did read your post, it made no mention of “profit”, it was “numbers” and it is my desire to help guide these newer investors to learn how to analyze the “numbers” properly and accurately so they can be successful. These numbers include the exit value and rehab estimate based on a specific or multiple option strategy. If your buyer is a buy and holder, than certainly you are looking at the deal from a buy and hold perspective providing said numbers that would yield the best results for you and your potential buyer which they can either agree with or not but at least you provided some accurate info for them to make a decision to look more into it or pass.

My advice comes from the fact that too many send out deals where they have no clue or are way off on rehab numbers and exit values. One would argue that many inflate exit values or underestimate construction intentionally to make their deal look better. These are the things that drive us real cash buyers insane and make us ignore these wholesalers in the future. 

It is true that one rehabber may do a nicer rehab job than another, that is not the point here. The point is that the wholesaler needs to understand how to arrive at a proper exit number for their intended or suggested scope of rehab work. The buyer can then decide if they want to go with a higher end rehab, lower end rehab, or perhaps something different all together. Actual profits and their calculations are certainly up to the buyer to figure out.

Aloha Will,

Hey Man thanks for your Insights. I appreciate that you've taken the time to bring clarity to this topic and assisting new investors, (myself including) to learn something new about the wholesaling industry. I do agree that in general a majority of wholesalers that I have met tend to (NOT ALWAYS) but tend to inflate the ARV and suggest a Lower Rehab Budget in order to catch the eyes of a quick Cash Sell. I admit, Not all Wholesalers do this, but I've spoken to more than I'd like too in the past... Again thank you for the Value you've brought here and in BP.

 

@Clayneal Pononuihanohano Afaihere Garrigan ,

You certainly got a lively discussion going here.  To your defense, I see a home inspection just giving the buyer more information to work with, and I saw that as a benefit.  I don't see this report as being or including an estimate for the repairs, but just to uncover what's there.  Home inspections can be pretty detailed and uncover issues that might be a little harder to discover.  However, as we all agree, the buyer has to do their own DD and shouldn't (and wouldn't if they know what they're doing) rely on that.  As such, does it really have any value?  I'm not so sure now, especially considering how everyone here reacted.

Then there's the seller.  As I mentioned, that could be an issue with the seller who's been told they will sell their house as-is.  First, I'm 100% for transparency and honesty, and they will know what I am or am not doing.  But, I wouldn't want them to see a more formal inspection as something that's going to make it harder for them to sell their house since our message as investors is that we're going to make this as easy as possible

I still see this as an interesting experiment to maybe do one day, but after all of the responses here, I'm certainly less likely to do it.  It seems like extra work that may only have a down side.  My father always taught me never to pursue a lose-lose proposition.  I would have to see a pretty strong up side to doing this.

Thanks @Jerryll Noorden and @Will Barnard !  Always good info.

Originally posted by @Clayneal Pononuihanohano Afaihere Garrigan :
Originally posted by @Jerryll Noorden:

no no no all wrong.

It is not a wholesalers job to make sure the numbers are correct.

it is YOUR job as the back end buyer. I would NEVER do any effort to even try to convince the back end buyer about the numbers.

You know why?

The second you list a number anywhere they will hold you to it. You are asking for trouble if you make any claims.

So obviously we are not just going to not give any numbers, but we make it ABSOLUTELY clear that the numbers we provide are OUR numbers. Those are the numbers WE would base our offers on and that YOU should do your own numbers.

The wholesalers's job is to provide you with off market properties at discount. That's IT. I am not going to do THEIR homework for them?!

Hell no!

It is not about the cost of the home inspection. It is about what it entails.

The back end  buyer needs to do their own due diligence.

Also keep this in mind. MANY investors claim on their website "no inspections, as is". This makes it more attractive for seller to sell. When I buy a house I AM doing an inspection. And if the sellers has something against it, buh bye.

But that is when I am the buyer. 

I have ZERO responsibility or accountability if you as the back end buyer decides to buy the contract or not. It is all on you. 

 Aloha Jerryll,

You have a passionate heart and I admire that in you. I'd like to thank you for your thoughtful opinion. You are a man great experience and I can only wish to be seen in your rear view mirror one day. I've learned a lot from your perspective. So Thank you... Blessings Jerryll... King of the #1 SEO Rankings system on Google ever. lol

 ha ha ha,

thank you brother.

To be very honest. I REALLY do feel your pain. I can not STAND it and Im ean I HATE it hen these unsolicited wholesalers spam my inbox, especially because I never signed up to any list, and they send me deals when they OBVIOUSLY have not done any homework.

Dude I hate it. It gets me so angry. When I started wholesaling... I had developed a sweet little package, graphics all numbers. And the more information I gave them, the more difficult the buyer becomes, and they they want me to add this, explain that and a lot of times they are complete time wasters. Then I noticed the second we only gave them the minimum, they do their own due diligence and the conversations become a lot more efficient.

SI I totally know where you are coming from. But when you switch sides... you see first hand the effects of it :) 

@Jerryll Noorden I can see where too much info can be given and then create issues with buyers to a point. I would add to that dilemma the following: The importance of screening your buyers Before adding them to your official buyers list. Getting their criteria, their proof of funds, and their comfort level with different flip/development/buy and hold options will give the wholesaler a good idea as to what to provide them right from the start and hopefully kill the time wasters and such. This is yet another reason why I preach finding the buyer from the start gives you so many more options and control as the wholesaler, not to mention a better negotiating position knowing you already have 1, 2, or more buyers ready and able to purchase.

Not only is it the end buyers duty and responsibility to do their own due diligence.. but you're expecting the wholesaler to put up $700-$1000 per deal... hoping they can find an end buyer. Thats a big risk most wholesalers wont take and simply cant afford - especially if you are a good wholesaler moving multiple deals a month. 

Also, you have to realize these sellers are looking for a quick close and we are competing against a dozen or more other offers from investors/wholesalers - so it becomes a game of terms. A lot of times we dont have time to schedule an appraiser and an inspector. 

We contract, wholesale, and close most of our deals here in Austin, Tx all with in 10-14 days. Appraisers alone take one to two weeks to get out to a house here and 3-5 days to get you the damn report back! Unfortunately time is not on our side in this game!

@Austin Pitts

Aloha Austin thanks for your insights... I understand that Volume seems to be the intent... Instead of Quality it seems like a philosophy of quantity... Yes I am suggesting that a wholesaler should pay for inspections and appraisals which is about $700-$1000 and which do much “Volume” I’m sure a Wholesaler CAN afford it, but they just choose not too... I do understand your situation in Austin where it may be difficult to have inspectors and appraisers move at the pace that you need them to move do to market

Demand... But what I can assure you is that it is absolutely possible to get a home inspector to show up the day after a property under contract and to produce a report by midnight that night, to also have 3 general contractors show up the following day to write bids on the home inspection, and to have an appraiser walk the property on the 3rd day and send me their "As-Is and ARV" appraisal by Midnight that night... I know it can be done because I've done it... Now granted I believe in Quality over Quantity and I believe in Spending $1,000 in every house weather I'm going to buy it or not in due diligence and I might be a little old fashioned but I can safely fund a deal in 5 business days with a profession team in place... So I know it's totally possible if your flipping it in 14...

Thanks

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