First meeting with a Wholesaler. Advice?

Question

I am meeting with a wholesaler, which I have never done before, and going to look at properties that I may be interested in purchasing.

It seems that many investors work with wholesalers, is this true?  If you have worked with wholesalers, what have your experiences been like?  Positive or negative?

What advice would you give to someone just starting out?  Questions I should ask?  Things to be aware of?

Thanks so much!

Lynn Dee Murrow · Answer

In my opinion one of the most important things to remember when working with wholesalers is that they do NOT represent you in the transaction. Listen to what they have to say, then verify EVERYTHING yourself. If you do not understand the numbers, or how they got to their numbers don't do the deal. Do not let them rush you into a decision. Right now it can feel like you will never get another deal if you don't take this one. The veterans here on BP will agree that you can find distressed property and distressed sellers in every market cycle. Success comes with consistency. Stay in the game, don't let yourself get frustrated or discouraged, keep making offers that fit YOUR investment model and you will find the great deals you need.

A good wholesaler is a treasure, as are all members of your team. Take the time to really get to know the wholesalers in your area. Ask around at REIA meetings and other gatherings of investors. Every city has 1 or 2 great wholesalers who provide reasonable numbers and are more interested in long term mutually beneficial relationships then they are in making a quick buck.

Finally, ALWAYS do your due diligence and get inspections. If you have more than 4 hours to close you have time for inspections. Don't throw good money after bad. Better to lose your non-refundable earnest money then to buy a deal that drain you dry and derail your investment career.

I hope this helps! Welcome to the BP community!

Shaun Reilly · Answer

@Richard C. thanks for mentioning me.

(A QUUUIIICCCKKK TIIIPPP [said in Josh and Brandon's PodCast voices] setup your name as a keyword that way you know when someone tries to use the @mention but it doesn't work)

Experience with local wholesalers is they have rarely had any deals worth buying.  Most of it is so bad that I don't ever leave the house since I can see the numbers won't work in a 1-2 min review of the given information.

If you are meeting at the guys Realtor's office that means his main way to find properties is to offer on MLS listed stuff.  I will not just hate on that like so many people on here will.  I don't see any reason you can't do that, but you aren't going to find a lot of deals that way since MLS stuff generally sells to close to retail value.

Now say there is a place listed at $250K which is not close to a deal at that price but this guy is offering it to you for $170K then it might well be a deal, he just had the grapes to make an offer probably $150-160K on it.

Problem is that MUCH more common thing is the place is listed at $250K and they are offering it to you at like $240K when it NEEDS to be closer to $170K.  Of course it is even better when they are offering it back at $255K, which isn't all that uncommon either...

Make sure to do your own research.  A good attorney is great but they will just make sure title is good and there is nothing weird in the P&S and assignment contracts.  Having your own contractor look at it to determine the scope and costs of repairs is critical too.  Neither of these people help with value though so you need to have that number pretty secure before anything else.

Account Closed · Answer

I would say a house is a house, a salesman is a salesman and a contract is a contract.

David Begley · Answer

1. Require them to justify the ARV and repair estimates they present.

2. Never, ever agree to a non-refundable deposit.  A normal Earnest Money Deposit requirement and language as found in all real estate contracts is sufficient.

3. Find out if the property will be purchased at a double-closing, and if so, the party responsible for the closing costs of the original seller/wholesaler.  I personally would not agree to pay these costs, but if the deal is sweet enough.....

4. Purchase title insurance.

Account Closed · Answer

@Ann Bellamy Sorry I should've been more specific, my meeting was to look at property, not just a meet and greet.

You make some good points about giving a deal to someone new.  Thanks.

I wound up not being interested in the property.

@Shaun Reilly Thank you, also some really good things to think about.

I'm leaning towards finding a good agent who specializes in investment properties.  I actually got what seems to be a good referral, and will be meeting with him this week.

Thanks for the advice, everyone!

Account Closed · Answer

This wholesaler has been very upfront about the properties, descriptions, owner's asking price, wholesaler fee (which is higher than $3-7, but Boston is a pricey market), etc...

I'm not sure if he just finds sellers, or actually has a contract, because one property he was going to show me, fell through.

He has asked me to meet him at his realtor's office.  How does a realtor fit into the wholesale deal?  My guess is that the realtor represents the seller, and the wholesaler needs to go through the realtor?

I also have a very good attorney, who specializes in real estate, so I'm hoping he can help me identify any red flags or give me a heads up as to anything I need to know.

I figure I may as well look at the property.  If it interests me, I can do my own research on comps, value, etc... He is quoting me a rehab cost, so I will ask where he gets that number from.  I will make sure I have my own contractor give me a quote if I'm interested in the property.

Just want to make sure I'm doing everything the right way.

Richard, I just met Shaun last week.  I'll be sure to talk with him.

Thanks.

Ceasar Blackman · Answer

Meant to add, if you find a quality one hold onto them. Becoming one of their go to clients defiantly has its benefits.

Ceasar Blackman · Answer

I would defiantly try to know where they are getting their properties from, i would mind the price and whatever they are making as long as the numbers work for you. I say ask where and i would google the address yourself just to see whats going on with the property. I have has other wholesaler trying to just mark up other homes there were already for sale on the web.

Just run all your own number and be have handed to account for extra unforeseen problems. A wholesaler is almost always in a rush to make that sale, you are not.

Im not knocking what a wholesaler does, but double check all their information,unfortunately there are several people that call themselves "wholesalers" and give that area of REI a very bad name.

Ann Bellamy · Answer

Once again @Shaun Reilly and I are on pretty much the same page.  One of the most common gripes about wholesalers is that most of the time they

1.  Are offering you the property at a price way higher than you need it to be

2.  Have no idea how to estimate the repair costs

So do your own screening of the property before you leave your house.  You can also ask around about the wholesalers' knowledge and reputation at local events.  I'm not sure I'd "meet with a wholesaler" unless it was at an event that you were going to attend anyway.  What are you getting from this meet 'n greet?  Warm fuzzies?  You need a deal, not to spend gasoline and time.  If he's looking for your buying criteria, you can give him that on the phone.

If he is actually a full time wholesaler, or an investor who sometimes wholesales his deals, he will simply want to put you on his buyer list so that when he has a deal, he can blast it out to his list.  It is unrealistic for him to give it to a newbie first if it's a true deal.

Christian Marin · Answer

I agree with you @Richard C if the buyer is going to make money it shouldn't matter what the wholesaler does. I just sold a property where I had a $17k fee and the buyer didn't care because he was going to make over $60k profit. As for the reason I disclose my fee to my buyer's when they ask is to build trust specially with new investors.

First meeting with a Wholesaler. Advice?

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