Unscrupulous Wholesalers

[Jared DeValk]

I have some investors that I'm good friends with that asked me to find deals for their rehabbing. I know them well and they have just been approved for an unlimited total line of credit for rehabs, but a per deal purchase limit of $150,000.

Regardless, I had a wholesaler send me a deal that I had never worked with before. They said that the property is available (including their fee) for $66K and it needs $20K of rehab (HA!). ARV is going to be $119,000 minimum so it looked pretty attractive for my investors. Carpet has been ripped out and the place was cleaned out from a hoarder that rented there previously.

We take a look at the property and the first thing we see is a condemned sign on the front. Cracks in Stucco all over the house. It's a 3/2 1250sqft that still has the carpet in it. All that being said, it needs close to $50K-$60K for the rehab which puts us in the neighborhood of $30,000. We call the city inspector up for the condemnation (truly a nice guy) and we mention the property to him. He said that he talked to a man not that long ago claiming to have a contract and earnest money for the property. He was very rude to the inspector and he told the guy that the owner would need to show up to the property with ID in hand in order for him to lift the condemnation.

I contacted the wholesaler and relayed my findings and he began to get snappy with me. He tried to tell me that homes were going for $139K-$149K, to which I said, "I'm a Realtor as well, and I obviously was not looking at the same comps that you are," (I looked at all the comps for the neighborhood, that price wasn't there). He then began to tell me that we were just a backup anyways and that they were already working a contract for the property (Ok, now I'm pissed). I gave him the offer and said that's where we're at, call me if you want to do a deal.

We understand that wholesalers need to make money, but I have a feeling that he is trying to rip the homeowner off. What are your thoughts on bypassing the wholesaler and going straight to the owner? BTW, he's not on BP, so he must be unscrupulous!