Are there any GENUINE wholesalers in the Cincinnati Area?

Question

I am becoming increasingly frustrated by so-called wholesalers who contact me with a "deal," which, when I go to Redfin or Realtor.com, I find it is listed on the MLS for less than the "wholesaler" is presenting to me. Maybe I have misunderstood the meaning of wholesaling. I thought a wholesaler will go out, beat the bushes, send out mailers, etc. to find unlisted properties at below MLS prices, and then flip them to a flip, fix and sell person like me.

This isn't something random. So far I have been contacted by three "wholesalers" with deals like this. If I want something from the MLS, I'll get it. I have a realtor. I'm looking for the unlisted deals!

Am I way off base?

This isn't something random. So far I have been contacted by three "wholesalers" with deals like this. If I want something from the MLS, I'll get it. I have a realtor. I'm looking for the unlisted deals!

Am I way off base?

Brian Cooke · Answer

@Sean Cole If someone is a wholesaler I've worked with before and can trust their due diligence then I can see your point, in the value in them presenting a deal off the MLS so i don't have to dig through all the listings myself. The problem is there are many new wholesalers out there that think they know what to look for and the cost of rehab, but don't really. So even if they say they've done the due diligence, I have to do it again myself. Many times I find that they are underestimating the rehab cost, or overmarketing the ARV, and what they say is a good deal really isn't.

Ian Walsh · Answer

I am not in that market but I can say that there is a 100% chance that there are good wholesalers there.  Every single market has them.  Like any business, there are good and bad ones.  Get to know your market and you will find them.

Sean Cole · Answer

@Jim Wiley and @Dave Richards there's been a few conversations about this here on BP.  In the last 60 days or so, I've not done a single deal sourced from the MLS because everyone else is there.  We've been getting off-market deals, but they're hard to come by.  We find that many investors who only want wholesale deals off-market also get upset at the markups on those off-market deals.  We spend many thousands of dollars and many hours to find those deals.Can I ask why it's so important to you that you only see deals from wholesalers that aren't listed on the market?  I get that you have a REALTOR, I'm a REALTOR too.  I've not yet met a REALTOR that moves as quickly as we do, knows how to put together an accurate rehab budget and scope, has the relationships with the bank listing agents, and/or has the track record of successful outcomes that I/we have.  I assume that you work a full-time job, so you're at a time disadvantage compared to me who spends all day every day looking for houses.

If a seller mis-prices a house too low, does that make it worth less than if they priced it too high?  I'm presently negotiating 13 MLS deals in Cincinnati that I believe are priced below where they should trade to me, not including any fee I'd add on top.  I'm tracking or negotiating on another 144 that are either priced right where I'd want to be or are overpriced to some degree.If someone is concerned about the source of the deal, or wants to decide what a "fair" profit is for finding the deal, I find that working with wholesalers isn't generally the right move for either party.  I'd suggest/ask/beg investors to evaluate the deal that's presented based on the work necessary in dollars and time terms, the return on invested time and capital and the likelihood of success rather than focusing on where the deal came from, how much the other guy is making, or any other metric.

I don't know which wholesalers you get properties from locally, so I can't speak about them.  I'll assert that we provide more value than just the house.  You're buying at a known and fixed price with due diligence already completed.  You're getting access to design ideas sourced from the hundreds of other investors we work with.  You've got the ability to call me for a contractor referral that I've either used myself or know someone who has.  I'll resell your property for $1000 when you're finished instead of charging 3%.  We're also good guys here that aren't terrible to have a drink or 2 with.  If you're not familiar with us, ask around with your other investor buddies - I'd bet they have nothing but great things to say about my company and the people that work here.  I know for a fact that the same can't be said for many of our competitors locally.

/end of rant

Adam Curry · Answer

Yeah, I've started to see some 1.25% commissions from banks??? But, they still sell so it is what it is.

Jim Wiley · Answer

No. There was no realtor involved. As I walked through the properties, I could see things like termite damage, floors that needed new subfloor, obvious need of a new roof, very old furnace or a/c unit I would never sell to someone in good conscience, foundation issues (like cracks going from basement floor clear to the ceiling, and other such things. Also, as part of my due diligence, I will check recently sold houses in the area on Redfin to see if the ARV estimate is in the right ballpark.

As an example, I looked at a house Tuesday evening. Talked with a neighbor who had a nicer house, double lot, and his house appraised less than a year ago for $164K. The wholesaler projected the ARV on the house I was looking at for $175K. And this house had a much smaller yard, less curb appeal, AND a shared driveway! I would say a more reasonable ARV would have been $150-$155K.

Sean Cole · Answer

@Brian Cooke I do need to get better at estimating ARV accurately.  Since I started buying as a wholesaler in 2012, the median resale price of the houses I've sold is 105.6% of the ARV I pushed out.  I'm clearly too conservative!BTW, it's not a small sample size - I'm at 48 deals this year and average 75-85 a year.

Sean Cole · Answer

@Adam Curry my pricing/tracking model contains a fee that we'd consider our minimum to chase the deal.  We've gone less when we needed to, but I don't price differently for MLS or off-market deals because of the volume of houses that we're tracking at any given time.  I've systematized as much as possible to be more efficient.  My model assumes a fee of $4900 for all deals but that's in place to show the most I'd be willing to pay.  We almost always are able to negotiate a better price than that.  If I have to pay close to MLS list price or over MLS list price, we generally get a smaller fee than we should because of feedback from investors saying that they could have bought it themselves.  If we get a big discount off list price, we make what we can while leaving the deal with meat on the bone for the investor.  Depending on neighborhood and other deal specific items, we're pricing deals for investors to make 20% to 35%.

What's happened lately is that we're not able to make anything on MLS deals.  Coupled with banks depressing commissions down to 1% of many deals, it's not worth the effort this summer to chase many of them.  As I look back at our last year, our average fee for an MLS deal is pretty close to our average fee for an off-market deal.

Adam Curry · Answer

I admit that I sometimes get irritated when when I receive a lead and then find out it's on the MLS (4-5 properties/leads last week). But as Sean said, if he's able to take advantage of being so in tune with the market and beat everyone to the deal, there really is no difference between that deal and an off market one, most likely just annoying that you had the same access to it that everyone else and missed the opportunity. I feel like it happens to me or my clients at least once every 2-3 weeks. Question for @Sean Cole, do you have a standard rate you charge for MLS/on market deals or is it case by case? Thanks for any info.

Dave Richards · Answer

Do you have an email list or just put them on your website?

Sean Cole · Answer

@Dave Richards I didn't take offense to anything that anyone posted here.  It's the internet, after all!  I'm glad to hear that you buy any good deal from a wholesaler (or any source).Today marks 1 year since I stopped working for another company in this space and went out on my own.  It's been a great year for us professionally and personally.  Next on our list is to actually do some deals with folks on BP!

Are there any GENUINE wholesalers in the Cincinnati Area?

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