Tales of Wholesaling Gone Wrong: What NOT to Do as a Newbie

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First, let me say this: I am a wholesaler and I do not plan on changing that anytime soon. However, I do buy rentals and properties to flip. That makes me a buyer as well. At one time I was a newbie who did not what I was doing. Fast forward to now… and I still make mistakes. I try to learn from them and keep on trucking. As you read this, if you’ve made any of these mistakes, let’s change your business model on how you do things. Wholesaling is a business, just like rehabbing and landlording. Keeping that in mind, you should always try to avoid wasting people’s time.

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A Recent Deal Flop

Recently I was contacted on a social media regarding someone who had a few properties in Charlotte. And of course I was very interested. I had to go through a third party. The third party said, “My mentor has these properties in Charlotte, but before she opens up dialogue with you, you have to provide proof of funds.” I replied with, “Ok, no problem.”

The person with the actual deals then verified my proof of fund with the hard money lender. That’s cool; I have no problem with that. Then the wholesaler contacted me, asking a whole bunch of irrelevant questions — for example, “What price point are you seeking,” “New construction or it does not matter,” etc. I’m thinking to myself, “You said you had 3 deals available; just tell me the addresses. I provided proof of funds already.”

Related: The Uneducated Wholesaler’s Deal Gone Wrong: A Cautionary Tale

Then, a day later, I get the “smoking hot deals.” The wholesaler referred to them as “turnkey.” The properties were 2 bed/1 bath houses that the wholesaler was selling for $70k. I looked at the addresses and said, “These houses sell for $15k-20k and are worth $25k, tops.” The wholesaler responded with, “I know.” I’m thinking to myself, if you knew this, why would you waste my time? And to think this person has a coaching program!

If you are going to pay someone for mentoring, I personally think you should ask for recent deals they’ve done, HUDs checks or active projects. I would not have been so bothered if the person would have just given me the addresses up front and not made themselves seem so self-important over a basic, overpriced wholesale deal. Of course, these days people just call overpriced wholesale deals “turnkey” because they have a tenant in them.

Separating Real From Fake

I call all the numbers from the “I buy houses” signs in my city, as well as the numbers from the fixer upper signs. Recently, I saw a fixer upper sign for a property for sale. The price and the ARV made a lot of sense. I called the number. The person I talked to advised me they could not give me the address because of course their properties sell within 24 hours. Don’t they all say that? He then stated that I had to come into his office for 30 minutes. I immediately hung up.

It seems like the people who make you jump through hoops to be on their list never have good, decent deals or you never hear from them again. What could we talk about for 30 minutes that would allow me to get on their list? I later found out that the company who does this are REAL wholesalers. So I did call them back and apologized and explained that I was wary because of all the liars out there who waste people’s time. Now, if you are a new wholesaler, be careful of separating the real from the pretend buyers by simply asking for a non-refundable earnest money deposit from your buyer. It’s really that simple.

The rise of the internet has also created an inundation of messages stating, “I have a bulk package of X amount of houses that I’m selling for $X Millions.” I’ve had to explain to a few people who approached me with these bulk packages that I Nasar do not have access to millions of dollars to take down this package. I am simply looking to buy 1-2 flips per month at this time. I do not want to tell you I have buyers with millions of dollars either. We are all looking for just a few houses a month. I’ve talked to someone who has this kind of money to close these bulk packages. He said that normally the bulk package does not exist; it’s total garbage and of course the person advertising it can’t get in touch directly with the person who has access to the bulk package. So newbies: don’t get caught up in chasing these things. They very rarely close. You are better off regularly closing smaller deals and becoming successful that way.

Conclusion

In conclusion, don’t start off a business relationship on lies. People will respect you if you are willing to be more honest with them. Also, when talking to new potential buyers, don’t sound like you are reading from a script. Just be you and tell them what you are doing or trying to do. You do not have to tell me how you are closing 10 deals a month. When I hear things like that, I know there’s a high probability that I will never hear from this person again.

Related: 3 Tips for Wholesalers From an End Buyer’s Perspective

Also if for instance someone tells you they buy in Charlotte, NC ONLY, don’t send them your emails advertising deals in Tampa, Florida. I recently did a podcast interview for BiggerPockets. That morning I got multiple text messages, emails, etc. about how they loved my honesty and that my failures kept them from giving up. One guy even offered to lend me money. I say that not to brag, but to let you know that people are tired of “fake.” They appreciate realness.

Wholesalers: What stories do you have about deals that have turned out to be no good or “fake?” What bothers you most about the wholesaling world?

Leave your comments below!

About Author

Nasar Elarabi

Nasar is a corporate failure who was saved by Real Estate. Nasar is now a Wholesaler, Rehabber and Landlord in the Charlotte area. Nasar may have just barely graduated college but can flip a house like an acrobat. Nasar's work can also be found at RealEstateDoru.com.

15 Comments

  1. Haim Mamane Palman

    Nice Job Nasar. I’m in a similar position like you, I’m a wholesaler and I also buy rentals. The REAL buyers just need the address, pictures of the property to get an idea of the condition of the property (the more the better), and your asking price. They just need enough information to determine if it worth their time or their employee’s time to go check out the property. I used to provide comparable analysis, rent analysis, repairs estimate etc. Experienced buyers will ignore your numbers anyway and do their own due diligence.

  2. Marques Barton

    Great Post Nasar. I kind of feel like this post was talking directly to me, I just recently marketed a property in Baltimore on the BP Market Place and craigslist. The lead was giving to me by a Mentor who does wholesaling in that area and if I was to bring him a buyer we would split the profit. As a newbie I felt this was a way to get my teeth in the Game and get some experience potentially watching a seasoned wholesaler negotiate with a buyer I provided. But it started to dawn on me when people wanted detailed info about the property I couldn’t give them answers and would have to defer in an email to guy who provided the deal, felt like I was wasting their time. As a newbie I want to build a respectful business and reputation but seems like making any mistakes starting out can kill your momentum. Sorry for the long post and Thanks AGAIN!

    • Nasar Elarabi

      Marques,

      Dont worry I made plenty of mistakes for me & you both.. lol Just listen to BP episode 116. Anyway you live & you learn.. Be thankful to live another day and go after what you want.. And find a better mentor or partner who would give you more control in the situation..

  3. Calvin Singleton

    BRAVO! Authenticity and transparency is the bottom line, thats what I learned from your post. I’m a newbie wholesaler and I havent even closed my first deal, but guys like you lay the foundation of what landlords and flippers want I want to thank you for the read & good luck in the future

  4. When I used to wholesale properties a few years back, if I paid (had under contract) $75,000 for a property
    I immediately (same day) sold it for a quick $5,000 or $80,000 and then moved on to the next deal. This left the investor a lot of room (50%) for repairs, carrying costs, real estate commissions etc.

    I now live in Miami where there are a zillion wannabe wholesalers all claiming smoking hot deals. I have
    repeatedly found that the only “smoking hot” deal is for the wholesaler who typically asks 75% – 80% of ARV
    leaving no room for repairs and probable real estate commission of 6% for listing the property once it
    has been renovated. If I add “holding costs” of 90 days there is little to no profits left.

    To add insult to injury I receive weekly many “Wholesale” Lists with “Reduced” pricing. When I wholesaled
    I never had to “reduce” my price.

    Another irritant is that these wannabe Wholesalers demand large non-refundable EM deposits, e.g. $10,000
    or more with no right to bail because of an Inspection Report that evidences a ton of serious repairs and or
    code violations, e.g. converted garage etc.

    I’d rather deal with Banks and REOs and make cash offers and ready to close in 10 days, after an inspection of course where I can bail if there are just too many repairs and problems.

    If anyone knows of a honest “Wholesaler” in Miami, please, let me know.

    • Courtney Merricks

      @Thomas Phelan,

      First & Foremost, I have to thank Nasar for writing such a wonderful article. The mistakes that he and other wholesalers have made in the passed and currently only help me be better as a newbie wholesaler and investor.

      Thomas, I am a newbie wholesaler and investor in the South Florida Market. I have yet to close on my first deal, but I know it is soon to come. One thing about me, I am not about games and I am not in the business to be a wholesaler that look to rip people off. I look to build a network of individuals that I can help make money and vice versa. If you would liked to work with a hard working young man, please let’s connect.

      I look forward to speaking to you soon.

  5. Tarl Yarber

    Great article Nasar. Just send me the address, pictures, price, and if you know any hidden problems. We will take care of the rest. If you send a real buyer a property with this information, and its a real deal, they will jump on it become a potential new friend.

  6. James Hemminger

    I just joined, new in the business. Moved from Philadelphia PA to Mishawaka Indiana, invited by a friend who wants to join me. He said, I will believe in wholesalers when I see your first check. To challenge me, text me address of a duplex in Goshen Indiana, driving by as a trucker, pulled over for photos. I trained the man, a student 5 years ago. 20yr trucker, overnight fatigue forced me to quit. Sunday we visited duplex, owner making repairs, I talked. Any good offers yet? No, he angry last low offer insulted him. He made roof drain repairs, septic tank. Only needs some paint, I said I can do that. He wants $140,000 last month, came down $130,000, low offer $100,000, angered him. I say I came to talk, not insult. Nice job here, $129,500 ok? He happy, shaking my hand, I get assignment contract faxed to you by Friday, give me 30day find a cash buyer to close 7-10 days, you happy, I happy! David surprised on drive home, you did that? I say, I did, you can too. You get finders fee after I get my check in May…God I hope it happens…

  7. Christian Marin

    Great article Nasar. I work for one of those REAL wholesaler companies and nothing bothers me more than liers! There is 2 guys that constantly call me that they want a deal I just sent out and they want wiring instructions or to meet up for a deposit and not once have they come through. Something always comes up and they are like roaches. I’ll take them off my list and they’ll call me asking why I took them off and beg to be put on because they really are buying now lol.

  8. Shaun Reilly

    This was great.
    I found myself nodding and chuckling at so many points you made.

    Without a doubt the more BS someone is going to put you through just to get the basic info on a deal the more likely it sucks, if it even exists.
    If someone asks me to sign a NDNC before getting the address I will bet good money the “deal” is a stale MLS listing they don’t even have under contract yet which is at least 20% over priced and is in a 5th tier area 50+ miles away from where anyone really wants to invest…

    Just had a guy today that sent me some stupid form to fill out to get on his list.
    He sent it to me answering a Craigslist ad that I put up that gave a description of what I wanted to buy and a full list of EVERY town I would buy in for that area.
    I did politely write back and told him I don’t open files sent to me from random people on Craigslist and said for my criteria he could just look at the ad and I did give a few more specifics for clarification.
    He wrote back thanking me and said I could fill out the form on his website instead if I wanted to.

    For sh*ts and giggles I did go to the site.
    One of those slick ones where you have to put in your name, email and phone before getting access to maybe find this form.
    Just closed the window, archived the email and went back to work. Only so many hours in the day and I’d guess it is slightly more likely I wake up tomorrow and poop out a brick of solid gold than this guy would ever bring me a deal that had any profit in it.

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