Is it possible to buy from wholesalers with cash or financing?

Question

I've been having trouble finding deals lately.  I've put in lots of offers (even offering to pay over the asking price and in cash), but there's just so much competition lately and I haven't had much luck.

So, I've decided to start trying to work with wholesalers instead of just competing with everyone else for what's listed on MLS.

My question is this....is there any problem with buying from a wholesaler using financing?  I can pay with cash if I have to (which I'm sure is preferred); however, I think my money would go a lot further if I finance some of the properties.  I'm just not sure if that would cause any problems (or maybe isn't even the accepted way of doing things) when buying from a wholesaler?

Anyone with experience that can offer any insight?

Larry Flanagan · Answer

The only reason I will sell to an investor with financing is because he will pay more than a cash buyer.  It typically has to be at least $5,000 more or its not worth the hassle.  I make the financed buyer put down at least $5,000 non-refundable earnest money so if they cant close I keep the $5k and then sell it to the cash buyer.

Account Closed · Answer

Kyle J.  I think you might not be familiar with how most wholesalers work.  They usually don't close and don't bring cash to closing.  They want you to close and they want to get paid.  They need to live up to the terms of their deal with their seller or they'll be out of contract and lose their deal.  They can't risk waiting out a loan with your lender.  You say your lender can close, but I'm guessing you don't really know how your lenders deal with assignments or contracts when you are buying from someone or paying a fee to someone who isn't the owner.  I can't tell you the number of times rehabbers have told me their lender has no issues with assignments or title seasoning or whatever.  They are usually wrong.  Nothing personal, but a lot of investors on the buy and hold and rehabbing end do not know anything about lending.

I close on everything I buy so I can re-sell with more time and control.  But I don't need another rehab buyer with a lender that needs this that and the other thing.  There are 10 cash buyers for every one of those in this market. :)

A few here are suggesting you do your own marketing to work directly with sellers.  There's value in that but it's not for everyone.  Make sure before you spend money on marketing that you know if talking to strangers on the phone sounds like fun and is what you want to do with part of your day.  The reason I have rehab buyers is because marketing and research is not what they do with their time.

Samantha M. · Answer

Are wholesalers generally ok with working with HELOCS?

Sharon Vornholt · Answer

Jerry Puckett. You've got that right. If you don't do marketing, you will find yourself in the position Kyle J.did.  No deals.

Kyle J. · Answer

Looks like the consensus is cash all the time, every time. Guess that's what I'll have to do.

I know I can always refi after buying cash and pull the money back out, but I was hoping to avoid the 6-12 month wait (seasoning) that usually requires. Oh well.

Thanks for all the responses.

Jerry Puckett · Answer

Um, Kyle J.? The DEALS are what is in short supply...NOT Cash Buyers...

Not trying to bust your bubble here, but it is what it is, and for me to take on a financing Buyer is not a win. I literally have my deals sold within hours with 2 or 3 phone calls, max. There is no shortage of cash right now.

But Sharon Vornholt gave you the best idea...buy the BEST deals with cash...because cash is king...then Refi your money back out. That's what my private money guy does.

(Actually, I still think the best idea is to spend your money on marketing!)

Sharon Vornholt · Answer

Wholesalers will choose the cash buyer every time. Now I have some folks that have private money etc. that can close quickly. They buy from me multiple times each year. These guys are just like cash buyers, and that is perfectly fine with me. But I know, they will close; I am secure in the fact that they won't back out of the deal.

If you have cash, close the deal with your cash and then get financing to cash yourself out.

Kyle J. · Answer

Well, hypothetically, if a wholesaler's fee was $5k and I bought a house from him with all cash, he'd make $5k. However, if that same wholesaler sold me 3 houses with me using financing, he'd make $15k and I'd have 3 houses. You wouldn't consider that a win-win?

Jerry Puckett · Answer

The deals are what is in short supply....not Cash Buyers. So, undoubtedly a win for you. But the wholesaler? What benefit to him to go to a financed buyer? A big headache where one isn't necessary? And you not willing to pay more to compensate for the headache?

Jerry Puckett · Answer

You've hit the nail on the head. Financing often falls apart because of the condition of the house not falling in line with lender standards. It's one thing to wait, it's another waiting with a certain dread that it goes kerblewey....

I have one investor who uses private money that does just this....makes his offer NOT contingent on financing. Yes, he uses other people's money, but it's a sure thing, so the deal is not contingent.

Most wholesales are got under contract with the understanding that it's a cash sale....a financing addenda would usually blow the deal. If you're having the contract assigned, an addenda would have to be drawn up and signed. That would give the seller cause to back out.

Some Title companies will tell you that if you have any sort of financing at all, that the financing addenda is required.  However, we have it understood now that since the deal itself is not contingent upon financing, there needs to be no language reflecting such in the contract.

If you have that sort of understanding with both the wholesaler and the title company, I don't see a problem. But you will likely need to establish a good strong relationship with the wholesaler first.

Is it possible to buy from wholesalers with cash or financing?

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