Wholesaler and inspection contingency

[Ben M.]

I am working on purchasing my first rental investment property and lost quite a bit of money (deposit money) after terminating my contract with a  wholesaler. They are a major wholesaler with almost perfect review so I thought I could trust their repair estimates but after going back and forth with a contractor the repair was 20k over the wholesaler's estimate. After this experience I am really wanting to have an inspection contingency before putting a property on contract.

Has anyone worked with a wholesaler (especially in Houston) that actually allowed an inspection contingency?

[Brian Alfaro]

@Ben Miculob

Ben - Once you put down your earnest money with a wholesaler, the only way you’re getting it back is if they can’t provide a clear title. No wholesaler is going to want you to potentially back out after you sign a contract because of something that turns up in an inspection. That’s why they all state “Do your own due diligence.”

The best you can do to mitigate this is to walk the property with your contractor BEFORE you put down your EMD and lock up the deal. Obviously you won't be able to find everything, but that's the risk you take when buying a discounted property from a wholesaler. It wouldn't be discounted if there was no risk involved. The other way to prepare for this is always have an inspection contingency (obviously $20k is crazy), and to learn the cost of things yourself by getting multiple bids from contractors. You have to know a rough estimate what things cost when you see them. Otherwise you'll keep finding yourself in this situation.