How wholesaler ruins reputation when end buyer falls through?

Question

How does a wholesaler ruin their reputation when the end buyer falls through?

There are only a few end buyers but there are tons of sellers in my area.

Patricia Steiner · Answer

Ruin their reputation?  Are you kidding me!  The seller is under contract with the wholesaler - who he most likely doesn't know if someone who has no intention of buying the property himself or even capable of it - to then have the deal fall through because the wholesaler can't perform. Any time a property comes BOM, it taints it.  Potential Buyers and Realtors opine that it didn't pass inspections or appraisal and the value is perceived as less.  What is more important to understand is that wholesaling in real estate is illegal in most states; it is the unlawful practice of real estate. It's punishable with some big fines and even imprisonment.  Before accepting a contract, I encourage all sellers to ensure it is clearly noted that the transaction is not transferrable. I've seen a lot of sellers and buyers get burned (many BPers) by wholesale deals.  It's not okay.

Bob Reinhard · Answer

@Angie Castro

I won't lend to a wholesaler because what is my lending asset/insurable interest? A soon to be flipped contract?

If it is a real double-close, it's something else ... maybe; but as @Greg Scott said "a good wholesaler should be prepared to buy the property at their wholesale price."

Patricia Steiner · Answer

@Mike Schorah

Mike, first things first:  check your state law to see if wholesaling is legal.

Secondly, your questions are telling...you're looking for way to get in the game but you don't have the knowledge (yet).  And, what you don't know will hurt you.  As far as who has been fined/imprisoned, really?  There are Real Estate Commission minutes published in every state with the names of people who violated real estate law.

Again, you don't know what you don't know and that makes you a danger to yourself and others.  Check your state law first.  I am not an advocate of wholesaling.  I have had at least 10 BPers contact me for help with deals that went wrong and financially were devastating.  And, with that, I leave you to pursue the answers you need.

Angie Castro · Answer

As an investor focused agent that works with tons of wholesalers I would not advise retaliation. A wholesale deal usually gets funded through hard money lending. Due to the volatility in the market hard money lenders are changing their lending criteria. Closing time has jumped up from 5-15 days to 30+ days. Interest rates are spiking. Hard money lending is drying up. A lot of end buyers have been backing up out of deals. Next time ask for a non refundable deposit to protect yourself.

Maybe they backed out because of hard money lending or they backed out because the deal wasn't doable anymore.

When it comes to ruining their reputation. You have to ask yourself, do you want to be known as the wholesaler bashing on the end buyer? The investor community tends to be small and everyone knows each other. End buyers talk between them. Trying to ruin their reputation will most likely only ruin yours.

Greg Scott · Answer

IMO a good wholesaler should be prepared to buy the property at their wholesale price.  If the deal is good enough that they would buy it, they should have little risk of not selling the deal and no risk of hurting their reputation.

Paul Merriwether · Answer

I listed a home ( fixer) I own in MO FSBO on Zillow. I was contacted by a buyer ... eager to buy the home ASAP. He just had to have it. I gave code to home, his team members visited home and them he made an offer I accepted verbally. He sends over the contract and now wants 15 day inspection. Also wants ability to market property & earn a profit while I grant him the opportunity to ASSIGN the PSA to a third party. I also need to remove my Zillow listing to make this a binding contract. So in essence ... turn over complete control so he can potentially benefit while I play with myself. :) I call him out as a wholesaler and said I'm not interested in those terms. Also refundable EMD. Then questions what gave me the idea he was a wholesaler? :) He then comes back with $5,000 more offer. I told him original offer was still in play but scratch out all that wholesale stuff. What I got out of it was an education and a nice PSA if I ever decided to wholesale. :)

Angie Castro · Answer

There is transactional funding. It's quite common here in NC. I meant hard money lending from the buyer side not the wholesaler. The buyer could have backed out because the deal didn't make sense with the hard money lending criteria changing so quickly.

Mike Schorah · Answer

Wholesaling is legal in the state that I'm in and the 3 surrounding states. I've only heard of wholesaling being illegal in Illinois and Oklahoma.

How many wholesalers have violated real estate law? Where can I find the list of people who have violated the law and their infractions?

How are wholesalers financially devastated by a deal that fell through?

How wholesaler ruins reputation when end buyer falls through?

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