Buying through a Real Estate Agent vs a Whole Saler

Member since 2019 · 22 posts · 2 votes

Hello brilliant REI's !

I am interested in doing my first fix and flip in the Baltimore area. Could you tell me any pro's and con's of buying from a wholesaler vs a real estate agent?

Bonus Question: How do you go about finding a team of trustworthy contractors when you are new to the process of doing renovations? Also, for a fix and flip, who are some key players, you would want to have on your team (ex. roofer, painter ) I have tried meet-ups, but I haven't encountered many people who are willing to share their connections.

Thank you in advance,

Aiesha Hooper

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Ryan M.

Developer · Panama City Beach, FL · Member since 2013 · 130 posts · 88 votes

@Aiesha Hooper They should really be called "assignors" because wholesaler implies that they buy and sell inventory, which many do not. Many "wholesalers" are newbies and have no funds and no intention of buying the property. They hide/redact the contract they have with the seller as long as they can, even though the contract is what they are really selling 🤔. There are a lot of pitfalls in dealing with these type of deals, especially for a beginner.

Like another poster commented, a realtor that represents you at least has a fiduciary duty to you and is regulated by a state board.

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Joseph CacciapagliaBusiness Member
Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes
6y
The best part about working with wholesalers, is that the price is already negotiated for you. You can analyze your deal without guessing at what the seller will take. The down side is there is usually little to no wiggle room, and you often don't have any real due diligence period. At least in my market, a lot of wholesalers are requiring significant nonrefundable deposits day 1, which is a risk I wouldn't personally take. You often end up working with a seller that has been strung along for a little while, and slightly more difficult to work with. A lot of people believe you get a better deal from wholesalers, but I don't think this is always the case.
On the flip side, working with an agent can be difficult, because you see all these properties listed, and you don't really know where you'll end up on price. It takes making a lot of offers to negotiate a good deal in today's market. However, you have maximum flexibility on the price and terms, because the contract isn't negotiated ahead of time for you. This means you can use a full due diligence period to get quotes on everything, will little to no risk. I believe it's harder to find great deals this way, but are not rolling the dice as much on the front end. You also can't just pick any old agent. You need to find someone that has experience with the types of deals you're doing.
As far as building a team, this is another area where it helps to work with an experienced agent. They should be able to recommend lenders, inspectors, insurance agents, and contractors in your area. It's in their best interest that you become successful, so you will do future deals.
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Elonda Hatch
Member since 2020 · 4 posts · 0 votes
6y
Good morning,
I am a wholesaler in the Baltimore area and I do not have a non-refundable deposit. Can you tell me what type of properties you are interested in?
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Mike B.
Developer · Chicago, IL · Member since 2013 · 433 posts · 356 votes
6y
I charge non-refundable deposits on every property. We typically have one shot with one buyer to close. If you can't perform, I'm not happy but at least I get my EM back. I won't take that loss if you get cold feet, didn't understand your construction numbers or can't secure funding.
With that being said, wholesale properties are for seasoned investors. They know what they're looking for, understand their construction pricing and can assume the risks. New investors may want to work with a realtor on their first deal. The contracts and structure will give you more protection.
As for the construction contacts, if they're unwilling to share contacts at RE meet ups, go to Angie's list and make some calls, walk their projects and check their references. Understand what they're charging per sq ft so you are more precise when running your numbers online. It will certainly help with the speed of your offers. Try and limit your first deal to a cosmetic flip or hold.
4 Reply
Mary M.
Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
6y
I personally only work with real estate agents. If this will be your first time renovating I would really advise caution. It is REALLY easy to under budget and over spend and in this market there is little room for error.
I guess i would want to do a light rehab as opposed to a gut reno my first time out. So therefore I recommend working with an agent who hopefully can recommend a good GC etc.
Lso be sure to budget for a long wait time to get workers on site as the trades are very very busy - for example i bought my home 6 months ago and will finally get to move in in April. Its super hard getting the trades to focus on one small job at this point in the cycle.
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Aiesha Hooper
OP
Member since 2019 · 22 posts · 2 votes
6y
@Joseph Cacciapaglia Thank you so much! That was very helpful information, so once you say you are interested in a property you have only one day to decide with a wholesaler? Should a wholesaler also have recommended lenders and contractors?
Respectfully,
Aiesha Hooper
0 Reply
Mike CumbieBusiness Member
REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
6y
I will agree with @Mike B.
Many people starting out think that Wholesaling or buying from Wholesalers is the way to go. I fully disagree. Wholesaling is an "Advanced Skill Set" and working with Wholesalers is an "Advanced Skill Set". Working with contract assignment is for those who know the numbers and steps and most importantly know the risk. New investors think "Wow I got a great deal" then go "What do you mean there is a title issue that's going to cost 3K". "Nobody told me the septic was draining slow". "Wait the town pulled the CofO on it".
Experienced investors already figured that in.
Good Luck!
4 Reply
Randall Weatherall
Real Estate Agent · Memphis, TN · Member since 2019 · 261 posts · 253 votes
6y
In our market, we don't see many wholesaler deals with enough meat on the bone to really make it worth it after the inflated pricing. Used to be able to get some solid deals but we noticed around 6 months ago or so that a lot of them are almost at retail pricing by the time it hits the end-buyers, maybe with a couple thousand in wiggle room with the actual wholesaler (whether they pass that on to the Seller is up to them). I would be open to working with both, but definitely understand the contract you're inheriting before signing the assignment and if your wholesaler isn't giving you both, then it's a no-no all around.
3 Reply
Aiesha Hooper
OP
Member since 2019 · 22 posts · 2 votes
6y
@Mike B. Thank you for the information! I just have a few questions...what is an EM? Also, why would you only have one shot with the buyer to close.
Respectfully,
Aiesha Hooper
0 Reply
Aiesha Hooper
OP
Member since 2019 · 22 posts · 2 votes
6y
@Mary M. Thank you for the advise. This would be my first flip and I want it to go as seamlessly as possible. I can't believe it takes months to get a job done! That gave me some real perspective!

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Aiesha Hooper
OP
Member since 2019 · 22 posts · 2 votes
6y
@Mike Cumbie I am glad that you both said that. I did, indeed, hear that wholesaling was the way to go for the first try. Thanks for the perspective!
0 Reply
Mike B.
Developer · Chicago, IL · Member since 2013 · 433 posts · 356 votes
6y
@Aiesha Hooper No problem. EM is short for earnest money.
In my experience, most wholesale deals come from a seller with a need to sell as opposed to an owner that wants to sell. Those sellers have issues that are typically time sensitive...which means were under a time crunch to get it closed. If we waste 1-2 weeks with a buyer that backs out, there's a good shot we end up losing the deal.
2 Reply
Joseph CacciapagliaBusiness Member
Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes
6y
Originally posted by @Aiesha Hooper:
@Joseph Cacciapaglia Thank you so much! That was very helpful information, so once you say you are interested in a property you have only one day to decide with a wholesaler? Should a wholesaler also have recommended lenders and contractors?
Respectfully,
Aiesha Hooper

The situation can change from one wholesaler to another, because it isn't a regulated profession, but in most cases in my area, you don't have any reasonable "outs" once contract with a wholesaler. In my market, with a on MLS deal, you'll typically have 10 days or more to do your inspections, and can back out for any reason if you don't like what you find.
Some wholesalers may provide recommendations, but remember, you are not their client, they are selling a contract to you. An agent will usually have a fiduciary duty to you, and therefore shouldn't just provide any old recommendation. They are usually required to have your best interest in mind, where wholesalers have no such duty.

[email protected]979-218-2286
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Aiesha Hooper
OP
Member since 2019 · 22 posts · 2 votes
6y
@Randall Weatherall Solid info, Thank you!

0 Reply
Ryan M.
Developer · Panama City Beach, FL · Member since 2013 · 130 posts · 88 votes
6y
@Aiesha Hooper They should really be called "assignors" because wholesaler implies that they buy and sell inventory, which many do not. Many "wholesalers" are newbies and have no funds and no intention of buying the property. They hide/redact the contract they have with the seller as long as they can, even though the contract is what they are really selling 🤔. There are a lot of pitfalls in dealing with these type of deals, especially for a beginner.
Like another poster commented, a realtor that represents you at least has a fiduciary duty to you and is regulated by a state board.
5 Reply
Zaire Willis
Wholesaler · Harrisburg, PA · Member since 2020 · 3 posts · 2 votes
6y
@Aiesha Hooper I am a wholesaler in PA. In my purchase and sale agreements I asked for a “Due Diligence Period” of 14-21 days from sellers. This gives me time to locate a buyer and allow them to inspect the house, or inspect it and get detailed numbers myself to present to buyers. Every wholesaler is different.
2 Reply
Mary M.
Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
6y
Originally posted by @Aiesha Hooper:
@Mary M. Thank you for the advise. This would be my first flip and I want it to go as seamlessly as possible. I can't believe it takes months to get a job done! That gave me some real perspective!

Going into spring/summer the trades will be slammed with little to no time for a small job with a newbie. I mean absolutely no disrespect, but IMO if this were me, I would find a house that needs easy stuff - floors, paint, some light landscaping maybe a light kitchen and bath redo - no structural changes, no gut rehab, not septic etc etc.

Also, budget twice as much as you think it should be both monetarily and time wise. My house is a reno for me, and I have run into a couple issues that put the brakes on things while I figured out a path forward (mastic covering 90% of the floors for example)

anyway, its a fun way to make money but it is NOT as easy as tv shows show or gurus say.....

what i would do is get an agent that has done renos themselves - they will have an idea and more importantly contacts. Then talk to the contractors and see what they say time wise. Then go from there. I always ask a zillion questions which people dont seem to mind, thankfully. One being : what should my expectation be time wise. When can you fit me in and how long will it take? (Then double it lol) Good luck!
1 Reply
Aiesha Hooper
OP
Member since 2019 · 22 posts · 2 votes
6y
@Mary M. Wow. So, I basically would have to find a home that is in need of purely cosmetic renovations at a really low price to actually make a profit. Thank you for sharing your experience.
0 Reply
Joe Norman
Property Manager · Baltimore, MD · Member since 2014 · 1k+ posts · 1k+ votes
6y
Originally posted by @Joseph Cacciapaglia:
You also can't just pick any old agent. You need to find someone that has experience with the types of deals you're doing.
^ This. Every agent has access to the MLS, not every agent has experience working with investment properties, wholesalers, REO agents, etc.

1 Reply
Mary M.
Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
6y
Well, you could think of your first one as part of your education. Dont expect to make a lot but learn a ton.
Just remember that most of the folks on this board are selling you something. Figure what that thing is and take what they say with that in mind.
We are at the top of the cycle so while you can make money it isnt going to be as easy as it sounds. Connect with a good agent and go from there. Good luck Real estate is a great way to build wealth. Just be careful
1 Reply
Virginia MarphisPro Member
Real Estate Agent · Reno / Sparks, NV · Member since 2013 · 174 posts · 59 votes
6y
Alesha,
I'm going to say it depends. I need more information from you to help you answer your first question.
No matter what, you want to let everyone you know what you are looking for: Wholesalers, Real Estate Agents, Other Investors, Friends, Family, UPS Drivers, Mail Carriers, and anyone who drives and knows the area. Don't get stuck thinking only one person or strategy to finding an investment property is the way to go. Anyone can help you find motivated Sellers. If you are not a licensed Realtor, you can also pay an incentive for others to help you find properties (Birddog fee).
Not all Realtors are created alike. Some of us are also investors and understand the investors mindset. (I'm a realtor.) 80% of the realtors out there are not even investing in Real Estate themselves. Its that 20% who are. A realtor who invests in real estate and thinks outside the box is one of your team members.
Most investors do not like to provide you members of their team who are involved in the trades because they are soooooo busy and new investors tend to swallow a lot of time of the tradesmen who are already super busy.
Go to lots of investors meetups or groups or REIA'S and meet lots of people. The more people you interact with and immerse yourself into the real estate world, the more you will embody the knowledge.
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