What is your biggest draw back from working with wholesalers?

Question

Wholesalers can be very beneficial when trying to locate a potential investment property. When given the wanted location, price range, kind of rehab, exit value and strategy most wholesalers are able to find the right property for you. As well as wholesalers often have connections to off-market deals, saving you time and making your dollar go farther. With distressed property being their main focus seasoned wholesalers can make a great addition to your team.

What is your biggest draw back from working with wholesalers? Do you tend to stray away from wholesale deals and why?

Joe S. · Answer

Most wholesalers are very generous and creative when calculating the ARV, and because of this, they are contracting properties for close to full retail and then trying to sell their contract for an additional mark up.

Dan Travieso · Answer

I am a wholesaler and have heard horror stories from some investors. On the surface wholesaling is easy to get into and can come across as a quick way to raise cash. Because of that the market is overflowing with wholesalers, many of which are solely focused on making a quick buck versus establishing relationships with investors and truly helping sellers who are in a tough spot. Unfortunately, many have no ethics, aren't true to their word, and are not willing to do some additional legwork beyond putting properties on contract for whatever price.

Galen Ikonomov · Answer

Katlynn, I think that the biggest lets call it risk working with a wholesaler is the wholesaler to not perform, meaning there is no buyer. Like Dan said, there are a lot of people going into the game without knowing anything and just looking to get a quick assignment.

Also, I want to "demystify" the "Don't work with new wholesalers". I am a new wholesaler and I would not sleep until I find the right buyer for the seller's property.

Gabe Waldrep · Answer

We buy 75% of our deals from wholesalers. They spend more time and effort on marketing than we care to spend. I think good wholesalers provide value, especially if they are presently investing themselves because they have more understanding about the true cost of renovating, etc. Where many fail, is by not properly negotiating with and/or framing expectations with sellers and their distressed properties. Too many are so eager to contract a property that they do not identify all needed updates and repairs. Or they underestimate the repair budget because they try to use a $$ per sqft guideline for repairs. Then they contract the property at too high of a price and fail to sell the deal because the price is wrong. If they would operate with more integrity and do a little more homework, I think it would help everyone involved and make their business more effective. But like in any industry, some excel, some fail, and some just manage to get by.

Corby Goade · Answer

You just have to know what you are getting in to. Most wholesaers have no idea what to do once they get a lead and end up negotiating a crappy "deal" or a crappy contract with crappy terms.

In my opinion- depending upon the condition of the property, the biggest problem with wholesalers is that they always negotiate quick close, cash deals. Sometimes that is necessary, BUT- in many cases it is not and it's usually just lazy and uniformed negotiating.

As a wholesaler, if you negotiate 45 day terms, you'll open your buyer pool up tenfold and create win/wins for everyone.

Katlynn Teague · Answer

@Galen Ikonomov I couldn't agree more. I wish you the best of luck on your new venture!

Katlynn Teague · Answer

@Galen Ikonomov SO TRUE!

Jay Thomas · Answer

Wholesalers are taking advantage of the market, but their approach is not without risk. Many wholesalers have seen their deals fall through because buyers were unwilling to pay the full retail price for a property that was previously discounted. Additionally, if a wholesale deal is not sold quickly enough or if there are unforeseen costs associated with repairs and maintenance on the property, this can cause issues for investors who may not be able to cover all of their expenses. Ultimately, it pays to be aware of the risks associated with these types of transactions and to make sure you do your due diligence before entering into any agreement.

Wholesaling offers a great opportunity to make money in real estate investing by finding motivated sellers and undervalued properties; however, it is important to be aware of all the potential risks that come along with it. By doing your homework and understanding the market, you can make informed decisions that will help ensure your success as an investor.  Good luck!

Katlynn Teague · Answer

@Corby Goade You are absolutely right, vetting people is so important. However, I have a question for you. As an investor, why would you not want a quick close?

What is your biggest draw back from working with wholesalers?

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