Struggles with the Stigma Against Wholesalers

Buying & Selling Real Estate
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Struggles with the Stigma Against Wholesalers

Jimmy O'Connor
Real Estate Agent · Philadelphia, PA · Member since 2018 · 428 posts · 484 votes

Hey BP Community!

I work in Philadelphia and Delaware County as a Licensed agent that specializes in wholesale for REI opportunities. As I have been reaching out to potential investors and doing the cold call grind (like many of you are probably all too familiar with), I keep getting pushback when I say "wholesaler." Over the phone I find it difficult to differentiate me from the people only looking to make a quick buck because some Youtube Personality says they can do it with 5 simple steps. I personally have, and continue to thrive off of repeat investors but I am always looking to grow my network of relationships.

So for all of my wholesalers and investors out there~

Legitimate Wholesalers- have any of you experienced this dilemma and what has your solution been to establish legitimacy in a time where our profession is being too loosely equated to the "get rich quick" mentality rather than

Investors-

What are some of the pain points that you have run into with wholesalers? What can I focus on with my quick pitch to establish value that differentiates me from the wholesalers that have left a bad taste in your mouth?

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James MasottiPro Member
Rental Property Investor · Washington Township, NJ · Member since 2015 · 1k+ posts · 976 votes
7y

@Jimmy O'Connor - Wholesaling is perhaps the hardest job in real estate investing and it's where most newbies think they can get started. Unfortunately the majority of them are completely wrong. It is hard for the following reasons.

  1. You need to know what the ARV is for your target market and how to actually comp properties appropriately
  2. You need to know what rehab costs are in order to estimate the amount of work needed for a property
  3. You need to be good at marketing in order to be able to find the off market deals
  4. You need to be good at negotiating in order to be able to win investors and sellers alike

So...why do most investors get annoyed at wholesalers? Because they bring me a deal and claim it's worth $150,000 when in reality it's only worth $120,000. They tell me it needs light rehab of about $15,000...when in reality in needs $30,000. They do all this and tell me I can "steal" the property from the seller for only $90,000 plus of course their $10,000 fee. 

It's a waste of my time and the sellers. So how do you improve your "quick pitch"...the simple answer is you don't. The deal is what we're interested in. All the newbie wholesalers who are like "I'm trying to build my buyers list give me your email!" That's just spam at that point. Your system isn't any different than anyone else.

 The deal is what sells us on you as a wholesaler. Most of the "good" wholesalers have only a handful of investors they work with because if you bring me a deal that meets my criteria, I'm going to close. You don't need to shop it around...and that's the mutually beneficial relationship everyone is looking for, that very few people are actually able to deliver on.

I will listen to any wholesaler who comes to me on the first deal. When they prove they know their stuff, I'll listen and keep listening...when they are clueless though I know not to bother wasting any more of anyone else's time because they'll eventually run out of marketing dollars and disappear.

::steps down from soap box. ::

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  • Brian Pulaski
    Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes
    7y

    Are talking about finding buyers or are you talking about cold calling possible sellers? If you are an agent, and these are sellers wouldn't you be listing their house verse wholesaling it? If these are buyers, I would just tell them you are finding deals and if they want in, they give you their info to reach out. A solid wholesale deal wouldn't need a list of 100 buyers, just a few wel qualified people actually doing deals.

    3Reply
  • James MasottiPro Member
    Rental Property Investor · Washington Township, NJ · Member since 2015 · 1k+ posts · 976 votes
    7y

    @Jimmy O'Connor - Wholesaling is perhaps the hardest job in real estate investing and it's where most newbies think they can get started. Unfortunately the majority of them are completely wrong. It is hard for the following reasons.

    1. You need to know what the ARV is for your target market and how to actually comp properties appropriately
    2. You need to know what rehab costs are in order to estimate the amount of work needed for a property
    3. You need to be good at marketing in order to be able to find the off market deals
    4. You need to be good at negotiating in order to be able to win investors and sellers alike

    So...why do most investors get annoyed at wholesalers? Because they bring me a deal and claim it's worth $150,000 when in reality it's only worth $120,000. They tell me it needs light rehab of about $15,000...when in reality in needs $30,000. They do all this and tell me I can "steal" the property from the seller for only $90,000 plus of course their $10,000 fee. 

    It's a waste of my time and the sellers. So how do you improve your "quick pitch"...the simple answer is you don't. The deal is what we're interested in. All the newbie wholesalers who are like "I'm trying to build my buyers list give me your email!" That's just spam at that point. Your system isn't any different than anyone else.

     The deal is what sells us on you as a wholesaler. Most of the "good" wholesalers have only a handful of investors they work with because if you bring me a deal that meets my criteria, I'm going to close. You don't need to shop it around...and that's the mutually beneficial relationship everyone is looking for, that very few people are actually able to deliver on.

    I will listen to any wholesaler who comes to me on the first deal. When they prove they know their stuff, I'll listen and keep listening...when they are clueless though I know not to bother wasting any more of anyone else's time because they'll eventually run out of marketing dollars and disappear.

    ::steps down from soap box. ::

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y

    I think this is super simple as a licensed agent.. your not a wholesaler.. your an agent working in distressed asset field. 

    I have fund hundreds if not thousands of deals that have been brought by OREO brokers  or brokers who choose to work distressed assets..  they NEVER call them selves wholesalers  .. wholesalers are un licensed middle men with varying degrees of knowledge from no knowledge what so ever to large vertically integrated companies with large marketing dollars buyers agents etc. 

    So you should simply say your  a broker working fixers and distressed assets and leave it at that.. I know brokers like this in many other markets and that's what they call themselves NEVER call themselves a wholesaler.. 

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  • Dennis Dahlberg
    Phoenix, AZ · Member since 2017 · 93 posts · 105 votes
    7y

    What left  a bad tase in my mouth?       you asked

    The answer is...  that every wholesaler I meet  .......  is a lying, cheatIng, POS...  scum of the earth....

    Remember you asked the question..

    6Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Dennis Dahlberg:

    What left  a bad tase in my mouth?       you asked

    The answer is...  that every wholesaler I meet  .......  is a lying, cheatIng, POS...  scum of the earth....

    Remember you asked the question..

    One question what do you really Think !!!  :) 

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  • Jimmy O'Connor
    OP
    Real Estate Agent · Philadelphia, PA · Member since 2018 · 428 posts · 484 votes
    7y

    @James Masotti that gave me plenty to digest, appreciate that mentality shift and giving concepts rather than a cliche one-liner.

    1Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    7y

    I think @Jay Hinrichs has a great answer for you - you're a licensed agent. The vast majority of wholesalers are not licensed, and as such the field tends to have a stigma attached to it. Why not utilize the fact that you're licensed to your advantage? From my point of view, I wouldn't care who brought the deal if it's a deal, but someone who's a licensed agent has at a minimum gone through the time, cost and trouble to get licensed and [theoretically] do business in an honest and above-board fashion. If an agent contacted me this way and also dealt with hard properties besides I'd definitely be interested. 

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y

    @JD Martin  JD whats one of the top 5 asked questions on BP.

    well  its those looking for an investment friendly broker.. here you have a guy that is all he does.. put the two together. 

    market your self as a broker who specializes in fixers and distressed and is investor friendly and build a monster business.

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  • Jimmy O'Connor
    OP
    Real Estate Agent · Philadelphia, PA · Member since 2018 · 428 posts · 484 votes
    7y

    @Dennis Dahlberg hahahaha not offended at all, I'm a big boy and can handle a lack of sugarcoat. We have run into issues from buying properties from other wholesalers so I'm not surprised that you feel that way.

    You're actually the reason I made this post and the audience I am trying to break through to since wholesaling can be done honestly and efficiently where I can retain repeat investors like @James Masotti and @Brian Pulaski. 

    Thanks for making me chuckle with your response though 

    3Reply
  • Jimmy O'Connor
    OP
    Real Estate Agent · Philadelphia, PA · Member since 2018 · 428 posts · 484 votes
    7y

    @Jay Hinrichs That right there is a solid tip since I am in fact licensed and work for a nationally accredited business. I carry myself as a professional and just need the first meet after the phone call so that can be readily apparent to my potential investor. That will be a big help in getting my foot in the door and start to develop my list of SOLID investors who are ready for large inventory that my team has to offer.

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y

    JImmy I could write your script I would elevate myself so far above the rabble that is most wholesalers.. it would be quite easy as well. especially to larger buyers who are looking for some level of sophistication.

    Most of the larger OREO distress brokers that would have been considered in the wholesale realm are licensed they need to be they don't want to get sued for brokering without a license. 

    but there are some substantial companies that are not licensed.  this should be quite easy for you.

    I deal In philly you would be my go to type of guy.. when I get a letter or call from a philly non licensed wholesaler I don't give it the time of day.. but that's.. me I tried over the years.. but the industry is plagued by beginners who are trying to do as @James Masotti described the very hardest thing to do in real estate.. and like anything sales related.. there are a certain amount that will make it work.. but those folks would make any business work.. the rest they just do what others mention they get whopped up on Hey I am going to wholesale so I can buy and hold.. blow what marketing money they have then just fade away.. seen it for decades.. especially in the foreclosure realm. 

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  • Jimmy O'Connor
    OP
    Real Estate Agent · Philadelphia, PA · Member since 2018 · 428 posts · 484 votes
    7y

    @JD Martin I appreciate the comment. I'll start using that more than I have before and focus the quality of the deal. Thanks man!

    1Reply
  • James MasottiPro Member
    Rental Property Investor · Washington Township, NJ · Member since 2015 · 1k+ posts · 976 votes
    7y
    Originally posted by @Jimmy O'Connor:

    @Dennis Dahlberg hahahaha not offended at all, I'm a big boy and can handle a lack of sugarcoat. my licensed team is known for being conservative with ARV's and generous with Rehabs since we go more for quantity rather than trying to inflate our fee lie and scum our way to doing one wholesale that year to pay the salary but we have run into issues from buying properties from other wholesalers so I'm not surprised that you feel that way.

    You're actually the reason I made this post and the audience I am trying to break through to since wholesaling can be done honestly and efficiently where I can retain repeat investors like @James Masotti and @Brian Pulaski. 

    Thanks for making me chuckle with your response though 

     I would take the advice of @Jay Hinrichs and @JD Martin. What your talking about isn't wholesaling. What you're talking about is having pocket listings as a licensed agent. These are 2 MASSIVELY different concepts. The majority of the deals I have purchased are through pocket listings from my agent. Where his connections in the market have other agents bring him deals where for some reason their clients don't want to list on the MLS. Some of these deals make sense...others have sellers with terrible expectations on what they can sell their properties for.

    The biggest difference though is the messaging.

    You're not a wholesaler. You're an agent. If you cold call me I strongly suggest that you

    1. Already have a deal that you're shopping. This means you're legit and not a newbie agent just trying to build a list
    2. If I'm interested in the deal I'll give my parameters, if it works great. If not you now know my sort of investing criteria
    3. Don't waste my time on future deals that don't at least come close to my criteria. 

    So again...many of the same concepts apply, but you need different messaging. As a licensed agent you have at least a little more starting credibility with me, but plenty of agents have also very quickly lost that credibility by being clueless about what I, and many other investors, are looking for. 

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  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    7y

    @Jimmy O'Connor something doesn't add up. Either the prospect isn't qualified or the deals are not good. Any real investor is concerned with the quality of the deal, not your title. 

    The fact that you do 30 deals a month and you are licensed should lend you enough credibility to open a discussion. That should give you an opportunity to present deals. There are so many people looking for deals in today's market, that it makes no sense you would be striking out. 

    I don't think the word "wholesaler" is your problem. What specifically are the people saying to you when they reject you? 

    1Reply
  • Jason Ericksen
    Rental Property Investor · Portage, WI · Member since 2018 · 33 posts · 11 votes
    7y
    @James Masotti thank you. As a new investor, this is the exact information on wholesaling, I needed to hear. I am interested in getting into wholesale properties, and your response, and many of the others, have answered a lot of my concerns.
    1Reply
  • Jimmy O'Connor
    OP
    Real Estate Agent · Philadelphia, PA · Member since 2018 · 428 posts · 484 votes
    7y

    @James Masotti I'll start taking that approach because that actually more accurately aligns to my objectives and abilities.

    Yeah sure, simple concepts, but the mentality shift is what leads me to be able to phrase what I actually do vs what I've been inaccurately saying what I do (if that wordy sentence makes sense)

    0Reply
  • Kate J.
    Rental Property Investor · Austin, TX · Member since 2016 · 294 posts · 104 votes
    7y
    @Jimmy O'Connor I am not sure why you are calling yourself a wholeseller. You are supposed to be a fiduciary for you client otherwise expect to be sued. You can not be both licensed agent and wholeseller. If you are aiming for profits over you agent's standard fee, then that's what will leave a bad taste. Once again, you are playing with fire, as it is a very easy thing for the seller to go for you in court.
    1Reply
  • Shawn Ward
    Real Estate Investor & Consultant · Los Angeles, CA · Member since 2016 · 620 posts · 386 votes
    7y

    From an investor standpoint, I love wholesalers. 

    They send me deals they find, which allows me to not do so much research and digging myself. 

    If their numbers do not fit for me, I pass. If they are close, I let the wholesaler know at what price I CAN buy it. 

    I like the wholesalers that:

    1. have realistic rehab estimates

    2. Have great comps that justify ARV

    3. That give good analysis on ARV

    4. Have high ethics

    Onward!

    sjw

    5Reply
  • Jimmy O'Connor
    OP
    Real Estate Agent · Philadelphia, PA · Member since 2018 · 428 posts · 484 votes
    7y

    @Kate J. Let me correct that one really quick before it spirals. I am a licensed agent under a certified brokerage and we buy the home and then sell the homes to the flippers/renters and take care of the transaction,  clear and marketable title transfer. When we sell them, I get a small percentage of the fee from our service. THIS IS NOT a way for me to skimp more money or violet my fiduciary responsibilities.. 

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  • James MasottiPro Member
    Rental Property Investor · Washington Township, NJ · Member since 2015 · 1k+ posts · 976 votes
    7y
    Originally posted by @Jimmy O'Connor:

    @Kate J. Let me correct that one really quick before it spirals. I am a licensed agent under a certified brokerage and we buy the home and then sell the homes to the flippers/renters and take care of the transaction,  clear and marketable title transfer. When we sell them, I get a small percentage of the fee from our service. THIS IS NOT a way for me to skimp more money or violet my fiduciary responsibilities.. 

     Your broker is actually purchasing the property and reselling it for a profit to another investor? 

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  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    7y

    @Jimmy O'Connor if you are getting push back on the word "wholesaler" then simply don't use that word. If you have a genuinely good deal it doesn't matter how or where you found it to a real buyer.

    1Reply
  • Jack Clough
    Flipper/Rehabber · Wilmington, DE · Member since 2016 · 80 posts · 75 votes
    7y

    call yourself anything you want, if you bring a good deal then I'm buying.

    And if you (anyone) bring something that's clearly not a good deal and it's obvious that you're greedy, clueless, or both then you (anyone) won't be taken seriously again. In which case your "list" of buyers will evaporate. Sure, one might find a few clueless buyers to take their deals, but then they will get zero repeat business. Done. Dried up.

    Much more to say on that subject and great thread, but I'll leave it at that for now. And if you have a deal then let me know! 

    3Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Jimmy O'Connor:

    @Kate J. Let me correct that one really quick before it spirals. I am a licensed agent under a certified brokerage and we buy the home and then sell the homes to the flippers/renters and take care of the transaction,  clear and marketable title transfer. When we sell them, I get a small percentage of the fee from our service. THIS IS NOT a way for me to skimp more money or violet my fiduciary responsibilities.. 

     I did this business for years I bought at court house steps.. or agents would bring me deals.. but I owned the real estate company was a broker and I CLOSED on everything before i put it back on the market..  thats the major difference.  the wholesale crowd wants to make broker fee's called assessment fees  and or double close.. so its a no money make fee's business. as opposed to a broker or company that actually closes and resells..  of course we know why wholeslaers do what they do.. no cost of capital other than marketing which frankly to do volume requires lots of capital

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  • Lynnette E.
    Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
    7y

    I agree with @Kate J.  

    If you are marketing yourself as a broker, then you should get the amount that you are taking from the deal in writing with the seller as a commission then market the deal with your clients --the seller's--best interest.  Get as much as you can from the buyer to benefit the seller, not yourself.

    But if you are another scammer wholesaler and trying to get the property for as low of an amount as you can from the seller and take as much profit that you can scam out of the deal, then you are the typical wholesaler and should not call yourself a broker.  And if the seller does not know how much you are taking from the deal, then you really should not use the word broker in your title.  How can you have the seller's best interest in mind if you are too ashamed to tell him/her how much you are taking?  Likely more than the normal 6 percent if the seller used a normal broker for a developed property.

    I think that you are now trying to use the broker title to legitimize what you are doing, but benefitting yourself and having only your best interest first and foremost.

    Can you as a broker with a straight face tell your seller "I am getting you  buyer. I am telling you I am buying the house for $50,000.  Now I am taking $10,000 for myself on top of that $50,000.  I will resell your house for $60,000.  Yes, I am making a 20% commission give or take.  You will pay closing costs of XXX...and the person I am selling the house to will spend $20,000 fixing it up to sell it for $120,000, making a profit of $30,000 give or take depending on their financing and speed of the rehab.  But if you put $20,000 to $30,000 into a remodel you could sell the house for $120,000, with a 6% commission and closing costs net about $108,000.  Then again, this way I only get $7,200.  My normal commission for a $50,000 sell is $3,000."

    So wrong!

    0Reply
  • Matthew Perry
    Developer · Boston, MA · Member since 2017 · 125 posts · 137 votes
    7y

    We are in culture now that insists on right now mixed with just come along and follow my lead. One of my favorite entertaining aspects to do when I can is to find a real estate seminar in my area and find out how many of those people are there because they see it on TV and think to myself I can do that- how wrong is that mentality. Now it seems those people are moving into wholesaling because they have been told they do not need the capital to do it, or they see as you said on YouTube, or read about it the newest real estate investing book. Without question it is a struggle, and it is making the market far more compressed now than it should be because you people coming trying to scoop up stuff just because it meets some criteria they are seeing on the page in front of them. You do this long enough however you do not need some checklist in front of you, and it becomes more about intuition and experience that you are pulling from to know what a good deal is and what is a deal to let the hotshot fly by night person try and make the buck with. For me when dealing with investors it is staying true to my buyers list, and not deviating from that list. They are people first and foremost I know and know me, who know what I stand for, know my message, my purpose, and my reason. It is a list that I have taken time to cultivate and craft, because when I have a deal to take to someone they know that what cards I am holding and that I am not looking to get on over on anybody. I know when I call someone on that list in their specific area, first I know they will be interested because of our history and more importantly I know they will close. I look at that relationship as a see-saw we both need each other and if only person is doing anything they other is going to be stuck. This stigma is going to be the biggest problem for investing in the next decade as more and more younger folks get into the game, and I truthfully I am all for that because I want them to learn and see that this is not as easy as they see on YouTube. One of my mottos is I am my brand, and my brand is me and when I am looking at a deal to buy (to either flip myself or to turn and around and wholesale) I make sure to talk about why I am doing this, that I have every intention of being here tomorrow, the next, and the day after that. Money is not the driving force here, but it is rather the chase for me that I enjoy so much. Money is merely the byproduct result that comes. I find it best to make my story personal as to show I am not just chasing another deal, or dollar, or transaction. I found the more I talk about who I am, what and why I believe in a particular project my closing rate is much higher, but you better believe I will have data to back up what I am saying. 

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