Wholesaler and LLC blacklist?

Question

I am in the Los Angeles market and buy/rehab/sell many properties on an annual basis. Lately I have been selling some as fixer opportunities without doing any work on them. The problem that I have encountered recently is as follows: wholesaler (who I do not know is a wholesaler) makes offer on one of my properties, and after I vet them out by reviewing corporate LLC docs, proof of funds, making sure they see the property, and then having discussion with the principals directly, they never perform on any of their contractual obligations, and flat out lie on a daily basis that they are moving forward and closing escrow as agreed.

Now I am a seasoned investor and know I have to suck it up from time to time because there are tons of unethical bottom feeding buyers out there like this, but when I hear from my network of agents that they are receiving emails about one of my properties as a wholesale deal, I know that something needs to be adjusted in my process. Besides being clearly unethical, and disrespectful to my vendors (escrow, title, transaction coordinators etc.), it is also an incredible waste of critical market time (and money), so finding a way to prevent/blacklist these individuals and LLC's is a high priority for me since I do expect to sell more properties as fixers over the next year or so.

Does anyone have similar shared experiences, and if so have you done anything different to prevent this moving forward? Different vetting process, contract addendums? What about a shared wholesaler blacklist or LLC blacklist and forum? I have several to add to the list right away. Thanks in advance.

Account Closed · Answer

1. I always ask up front if they are a wholesaler. 2. "Proof of Funds" letters are Unicorns farting rainbows. Instead, I require that they text me a picture of a checking or investment account that has a balance large enough for the transaction (they can block out the account number but I need to see the date of the statement and the bottom line amount) 3. If they are getting bank financing I require they give me the name and number of the person who approved their loan

I give them the address to do their due diligence and if they want to actually see inside I have to have proof of ability to close from a text of their account balance or a phone number of their lender. It sure cuts down on a whole lot of wholesalers. ;-)

Tchaka Owen · Answer

@Paul Skikne - consider giving a very short inspection period after which the deposit goes hard. If your deal is good, a solid wholesaler might be ok with it knowing they will 1) move it, or 2) buy it.

The small timers and/or pretenders won't risk it. Say $5k hard after 3 days; they'll move on to less astute sellers.

I like wholesalers, they're important to our business. What I'm not a fan of are those who tie up with nothing at risk.

Will Barnard · Answer

@Paul Skikne I feel your pain in more ways than you can imagine. I personally would be asking for a proof of funds (only a bank statement with their name or in the name of THEIR business will suffice, no loan approval letters, etc). That weeds out most of the wannabes as they can’t produce it, otherwise, they would be a flipper and not a wholesaler.

As far as black listing them, anytime I receive a deal two or more times (the second, third and so on are not the contract holders) I notify the actual contract holder to see if they know the party illegally marketing their property or contract and if they allowed it or not. Almost always they did not allow it and I leave it up to them as to what they do moving forward but do recommend they remove them from their list. In some cases, the other party is not even on their list so that leaves them scratching their head as to how they came across it.

I mean really? How do these morons think they are going to make a free $10k or $20k by simply forwarding some wholesalers deal to their own buyers? Even if one of their buyers is interested, they need to contact the wholesaler to try and work out the deal and good luck with that if the original wholesaler is for real.

Perhaps we can generate a LA blacklist of wannabie wholesalers purging deals from others and sending them out illegally.

Will Barnard · Answer

I think we can form any blacklist we want and share it here although I personally would not name it a blacklist, rather info and experience about wholesalers (how are not actual wholesalers or buyers).

I’m in for it if you are and we can share this with the local clubs to get the word out.

Michael White · Answer

Hi Paul, I would be interested to hear your experience with Amir and Andrew? They popped onto my radar at a house recently.

Henry Lazerow · Answer

A database of this would be great. Let's do it!

Ask for proof of funds dated and showing their email icon at top of screen. Lots of these wholesalers illegally use someone else's proof of funds or edit in their name. It's harder to Photoshop the colored named email icon then a name which is easy to do on white backdrop.

Paul Skikne · Answer

Thanks for all the feedback. I am doing most everything you guys are doing including super short contingency periods. I also never allow assignments in my contracts. I like the idea of having them text me a picture of one of their accounts.... maybe that should be an actual photo of their account directly from their computer screen....

@Will Barnard how do we start an LA blacklist? Can it be done here in a forum or...? CVI, LLC with principals Amir Suleman and Andrew Riad will be my first addition.

Lee Ripma · Answer

@Paul Skikne

When I buy in LA people are pretty wise to the “wholesaling off the MLS” thing. I get asked if I will be wholesaling by about half the agents. The way I’ve seen this done is that agents say any contract assignment has to be associated with that original person who put it under contract. So if contact is ABC LLC and/or assignee and Adam Smith is signing for ABC LLC then its written into the contract that Adam Smith has to be a member of any LLC that the contact is assigned to. Maybe that will help!

Lynnette E. · Answer

I dealt with one in the LA suburbs, the name started with S__Investments LLC.

I asked all the right questions, no not whole sellers, they fix them and flip themselves, work with a team of folks to rehab---guess this is their twisted lie.  They whole sell to a bunch of anybody's at the other end of an e-mail who actually may rehab.  They had tons of money, but they do not really use it to buy property in the end or they would not.

I had 2 inherited properties under contract with them.  No performance on either contract with them.  After many extensions they took the one at a significant reduction, but I was 2000 miles away and could not take the time to go there again to get it ready to market.  So I took their price.

The other I sold through a realtor and got $75k more than they had in their contract, and $125k more than their 'reduced' price they wanted after they failed to preform.  I had people I knew in this area who could watch the property until I could come 3 months later.  The other property could not wait for me to return, I wanted it gone so took the reduced price.

Total scammers!  And because they are scammers it does not matter what you ask or what proof you want, they lie with their eyes wide open and smiles on their faces.  Whole sellers tend to be lying scammers.

BTW, the house they did sell, seemed to go to something strange as it still is kind of sitting there, used as an office maybe.  The one I sold has a nice family living there,

Bob Prisco · Answer

@Paul Skikne its just part of the biz. I have people call me and tell me they are direct to the owner and try and sell me MY OWN property LOL ,,, Hey doing what we do is better then working a 9- 5 job, right ? :)

Wholesaler and LLC blacklist?

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