How aggressively do you negotiate price with wholesalers?

Question

I am trying to find deals and there are some wholesalers with pretty many to offer. I know that the wholesalers need to make their profit, but can usually accept less that their listed price. Any tips on this negotiation?

Also, I know that when buying from MLS, you typically use an agent to submit offers to the seller. How do you make an offer to a wholesaler? Just email them? Call them? Is there a formal process?

Thank you,

Dean

Jay Hinrichs · Answer

@Andrew Johnson one thing I think those that want to use the wholesaler route should realize or be cognizant of is: Just look on BP about how many beginners that have never done a deal have very limited knowledge of real estate let alone rehabbing.. get on here and say hey I am now going to be a wholesaler LOL So that part of the world is dominated by beginners.. The guys that do this a lot and have success at it pretty much feed their inventory to the known players.. they don't need one offs or beginner investors.unless its a smaller market were there are no real players.I was in Philly this week with one of my clients and I would say in the under 100k SFR range he is one of the biggest buyers.. and his e mail is going constantly with wholesaler deals.. we drove to BALT together and I did the driving so he could work and he was negotiating.. it was not a take it or leave it.I did ask him I said since WE have all the money why do you need these guys.. why not just bring in your own ACK team and do it yourself.. His response was in these neighborhoods a lot of people want to work with someone they know or think they know so even if he did it he thinks he would be missing deals. Along with one of the big Guru's I know personally who teach's flipping his moto is to use wholesalers and to spend your time flipping not trying to find the deals personally.. Now for me personally I don't have the time to wade through it all.. and my vendor in Philly he knows deals by just reading him an address then he sends his construction manager over for a quick look see and then can pull the trigger and then of course he has me ( the money) and boom its done. Plus he has his own money I don't do all his deals but you know what I mean.So for me when you have a field and I use that loosely dominated by beginners finding a wholesaler who has experience and knows his or her market. that will deal with a one off.. that's a challenge.. Lastly I just don't like the Hey let me put you on the list and when I send the deal out its first come first serve.. I don't want to be in a bidding war.. and I pretty much know my clients that are big buyers wont go for that either.. So if some wholesaler gets through my fire wall and gives me this is going out to my list first EM takes it.. well that goes right in the trash..

Jay Hinrichs · Answer

@Curtis York Jr so if your teeing up sub too deals I suspect those are buy and holds ??how do you protect the seller If your doing sub too as a middle man.. how do you know the buyer of the property is not going to just rip rent and leave the poor seller in the learch with a foreclosure looming?

Ralph C. · Answer

Just email them your offer.You dont need an agent for that.Also make sure you know your numbers.Wholesalers or contract assignors can and will accept less cause they are on the clock to also unload the deal since majority of times all they are doing is assigning the contract. They have a very short window to close deal with the actual owner of the property which time is of essence.As long as you can close quick and obviously have the cash to move fast.Keep your dd timeframe short unless you inspect before offer.

Kuba F. · Answer

I’m a big proponent of using wholesalers and I’m happy to pay the fee as that’s the cost of me not having to chase down deals. But they can be definitely a mixed bag and as it always is, it depends on relationships. I have no problem helping new wholesalers as to what I would like to see in a deal, as I really want them to succeed knowing full well that 90% will not. Must be the idealist in me. With that being the case, if you want a good filter for a wholesaler who will have decent deals, ask them how long they’ve been at it. As to the answer to your original question, what Ralph said.

Curtis York Jr · Answer

First, let me just say it’s cool to write someone that you’ve listened to before lol. Now, that we’ve gotten that out there I prefer to work with buyers that understand the benefits of working with someone that understand the value of someone that knows rehab costs, and is knowledgeable of the respective market based on accurate MLS data and what has sold recently. That in itself rules out newbies, simply because unless they’re done some extensive research on their own there’s always a chance of buyers remorse because they didn’t do their own due diligence or did not know what to look for. I prefer buyers that know their numbers and who have skin in the game, but also aren’t afraid of deals. I find a lot of buyers that pass up on GREAT deals because they are unfamiliar with Subject To deals, or the “70% Rule” doesn’t apply. I have no problems with the negotiation process as long as the buyer understand that the business has costs and we need to make money as well, so that we can continue to provide the superior services that we do. As far as answering the phones we have a policy in place that we answer within 48 hours. I hope that I sufficiently answered your questions lol

Jay Hinrichs · Answer

@Curtis York Jr So Curtis as a wholesaler whats your favorite buyer to work with .. or what is your method. do you like to hook up with the Players in your area that are for real but drive a hard bargin or do you like to target the newbie who is getting into the business for the first time and might be easier to motivate to move forward.. ???? be interested to hear your thoughts on this.Also do you answer your phone live.. that is a major one for me.. I just don't understand how folks can spend thousands on direct mail and then not answer the phone.. its not like people e mail you on these letters.. maybe people text.. but I won't respond to a text that I don't know who it is.. I just erase them.. for that matter I don't even look at my text very often.. hate those things.

Jay Hinrichs · Answer

@Andrew Johnson as long as you have Gurus constantly sending this message out" you can make big money with NONE of your own money , no experience etc etc etc" Folks will pay to go to these many times a lot of money 20 to 30k for the super secret sauce which really is not all that super or secret. Point in fact we get about 5 to 10 yellow letters a week. and once in a blue moon I will call one.1. whats normal is no answer and no return call.2. if I do get a return call ( no one answer which is a huge mistake in my mind in the sales business) then its pretty much reading from a script and pretty easy to detect.Just so many wildcatters out there pretty hard to cut through the white noise that we just give up on it.So I see this as the buyers that really have no other means to find something will put in the time to wade through it and the wholesalers many times are working with someone ALSO who is new to the game and can get away with the gross misrepresentation .. talk to 10 buyers one will not be swift enough to figure they are getting duped..

Casity Kao · Answer

@Dean Wissing I would ignore their price and offer what makes sense for you. I have offer 20k below asking on a 80k offering and they came back to me 4 months later and said they would take it. When you make an offer to a wholesaler they generally will want to be paid the EMD directly. Normally it is only $1000 and we deal with wholesalers that others can vouch for so we don't have a problem giving it to them, otherwise I would ask who is being used for title and give the EMD to the title company.

John Thedford · Answer

watch out for the ones that pitch you MLS listed properties. NEVER pay a non-refundable fee. That is not the norm in the RE business. Also lots of daisy-chain operators offering properties they don't have a contract on, but simply trying to be ANOTHER middleman.

Andrew Johnson · Answer

Dean Wissing I’m with Brian Pulaski I’m that you have to let the deal dictate your offer. When I did look at deals from wholesalers I found that the ones I was looking at had bad ARVs, low rehab cost estimates, and dicey projected rents. So I’m either getting “bottom of the barrel” deals that 98% of people have passed on OR I’m just getting these potential properties from bad wholesalers. Either way, the deal should dictate the numbers. And you’ll probably need to build in some cushion, etc. So, in your shoes, I would just start making offers. You have only as much to lose as the wholesaler who emailed you in the first place (read: diddly squat).