How much should a wholesaler's margin be?

Question

Hello all-

I am new to investing, so just wanted to see what you guys thought of this. I looked at this property couple of weeks ago. It's FSBO and the asking price was $18,500. I offered $15,000, the seller countered back with the asking price. I countered back with $16,000 and explained why my $16,000 was a reasonable offer.

I spoke with the seller yesterday and she said she is still considering my offer, but now she's using an agent to sell the property. And the agent told her to not consider my offer, because he will try to get her an offer for more than the asking price. This was all yesterday around 1.30.

So I meet this wholesaler, and he takes me to the exact same property and he's asking $24k for the house. I didn't tell him that I had looked at this house couple of weeks ago and was still negotiating. I wasn't very sure how to deal with this issue, so I stayed quiet. I asked him if he owned the property, and he said yes, the seller just accepted his offer, which I know is a lie. He's trying to do a double close and make quick $5-6k on the property, but that just seems too much.

So I wanted to ask you guys:

1) If you had ever dealt with the similar situation?
2) Should I talk to the wholesaler about it?
3) And is the margin of $5-6k on a $18k property reasonable? Seems too high to me.

Thanks!

Michael Quarles · Answer

Good to meet you Hate saying this however your mistake was not having a presentation to make to the seller... If you don't teach the seller to value your offer then you're offer will be perceived as useless. The fact that they now have an agent tells me you didn't accomplish that basic task... As for the wholesaler and wasting your time... Stop... Learn and move on... Its just spilled milk now... I know it seems harsh to say this but learn and burn Happy hunting Michael

Anson Young · Answer

I have seen anything from $1k to $80k made on wholesale deals. Like someone else said, if the deal still makes sense, focus less on what the wholesaler is making and more on your bottom line. If the seller takes your offer, you can cut out the wholesaler completely.

Brian Levredge · Answer

It's probably best to let it go. Like any other profession, RE has its share of crooks and dishonest people as well. Best to remember who that person is and tell everyone you know not to deal with them either.

Michael Quarles · Answer

Hey What is a seasoned investor anyway? Is that salt and pepper or some mix of herbs and spices kept secret and passed down from generation to generation? As for presenation... Or lack of one thats just crap... we all use one... I bet every time the phone rings most say "Hello" but heck thats just guru talk... Please... Grow a set and grow up... Maybe your model works or maybe you're lucky either way its stupid to think we don't use them... Unless you're still a virgin.. Life is all about presentation... Happy non hunting.. Michael "still practicing" Quarles

Brian Haskins · Answer

It's always a good idea to negoatiate. You might get anywhere but you always have to try. Donâ€™t think of them as stubborn because not all of us are. Some deals just donâ€™t have room for it. Brian Haskins

Brian Haskins · Answer

You will find this situation everyday, as a wholesaler its very common some people just donâ€™t handle business properly. But there is nothing you can do about it. As far as 5-6k on a 15k house why would you say it's too much? Something you will need to learn if you plan to wholesale is the market decides what the house will sell for not you. If the market says it's worth it then why wouldn't you. If we all set prices for our houses depending on what the price range was we would all be making small money. I have made 40k on a house that retailed for 100k it was a wholesale deal i did no work to and i didn't even own it. Brian Haskins

Jeffrey K. · Answer

Most of them really dont know what they want. I dont know too many pros who buy from wholesalers on a regular basis. Once you become a seasoned investor you will have access to all the properties these guys do and more. Most of them are just guys who got a guru class from a late night tv show and will never do anything more than add you to their "buyer's list." I have a guy who keeps calling me and is not shy about wanting to make 100k on each deal.

Sharad M. · Answer

When you guys buy properties from a wholesaler, is there a lot of room for negotiation? Or are wholesalers pretty stubborn about their price for the most part? Thanks!

Sharad M. · Answer

Hi Jeffrey- Thanks for the quick reply.By no stretch of imagination, I consider myself a seasoned investor, but I completely see your point about not buying many properties from wholesaler on a regular basis. I am getting to a point where I am getting my name out there to homeowners and getting calls straight from them. As a matter of fact, an agent called me this evening before listing a house on MLS. Though it didn't fit my criteria, but it still good to know that you have access to some properties before they are listed. All thanks to BP!

Sharad M. · Answer

Thanks for all the replies. Being a new investor, I am learning a lot everyday. I understand that I shouldn't focus on the profit margin of wholesaler, but this seemed a little outrageous to me. I have an offer on the same property for $16k, and I called the seller to up my offer to full asking price of $18.5k, but this wholesaler, who doesn't even own the property is offering the exact same house to me for $24k. Jeffrey, yes I did make a cash offer and will close in two weeks time. Do you guys think I should talk about this with the wholesaler or let it go?