What Are the MAIN PROBLEMS with Wholesalers?

[Andre Vaughn]

I recently got my first property under contract in the St. Louis, MO. market (Florissant, MO. to be exact).  I do not have a buyers list but yet I have managed to make some great connections regarding my area where i intend to market.  Though i know and understand that we all make mistakes especially as newbies, I am one that strives to do things the proper way to avoid the common mistakes.  My question to the experience wholesalers and cash buyers is What are some problems and pitfalls that you have experienced dealing with wholesalers and how did you avoid or correct those issues?  Thanks!

[Andy Collins]

My biggest problem with many or most wholesalers is they don't know the ARV (but state one way too high), don't know the true cost of repairs (but state one way too low), and think they have a deal when they don't.

I had a recent wholesaler state the ARV on a property was $155k,,,,I have a house down the street that I just got an appraisal for $115k, and I was surprised it was that high.....if I see a wholesaler stating an ARV way off in an area I know, I don't trust any of the information on other listings they send me

[Curt Davis]

@Andre Vaughn

Great question.  Here are some issues we have run into:

1. Though I have the home under contract with you to buy, the actual owner sells to someone else who gave them a little more or you sell to the other wholesaler who offered you $1,000 more after we have already agreed to buy. 

2. You tell me the home dosnt have title issues when it does. 

3. You tell me the home only needs $2,000 in rehab and then when I get there its more like $15,000. This is a very common issue. 

Thanks!!

[Arktavious Sally]

@Andre Vaughn 

Most newbie wholesalers numbers are usually way off and don't know what's a great deal.

[Andre Vaughn]

Those are valid issues @Curt Davis and thanks a lot for the response.  It sounds like those 3 are more integrity issues more than anything.  I look at this as my "investing career" and though wholesalers have buyer lists, it doesn't make since to squash or walk over a possible LONG lasting relationship over $1,000 or any dollar amount.  There will always be great deals if you market consistently so I never understood why someone would risk a seemingly great relationship over a few bucks OR not do there due diligence before presenting a deal to a buyer(s).  The rehabbing issue can go either way BUT the wide margin in rehab costs could very well be intentional.  I definitely understand how that can be frustrating because of the wide spread and if the same wholesaler is consistently doing that.

[Andre Vaughn]

That's a great point @Arktavious Sally ...I can see where a bit of lack of experience or knowledge can make two sides see differently in terms of those numbers.  That why the resources on BP and across the web are so important for newbies such as myself to utilize and to always keep learning your craft.  Thanks!

[Pete T.]

I dont know if it is lack of integrity or knowledge, but either way those issues will kill your rep and the buyers you have contacted you will likely not pay attention when you actually do have a deal.

[Andre Vaughn]

I can see how the ARV being stated too high can make you turn the other way fast ESPECIALLY after a verified appraisal @Andy Collins But look at it this way:  You Just Saved Yourself A Lot of Time and Can Move On to The Next Deal!  Great Point!

[Andre Vaughn]

You're Absolutely correct @Pete T. That makes a whole lot of sense!  Thanks!

[Eddie T.]

Inflating the pro forma numbers.

Emailing me deals in bad neighborhoods

Telling me rents are going up when i know they are not.

Showing we deals that are not at wholesale prices i can get 80% ARV on my own off the mls show me 60% and now were talking.

[Andre Vaughn]

Great points @Eddie T. Are these from wholesalers that you consistently buy from?

[Eddie T.]

Have not bought any yet we keep in touch weekly he had a good deal this week but the layout did not work for me. And i picked up something else on my own at 70% FMV.

[Andre Vaughn]

Ok @Eddie T.  Great....keep chugging away and thanks for adding to this post.

[Jessica H.]

I would second what others have said about ARV being off and rehab costs way too low.

[Andre Vaughn]

Thanks for adding to the post @Jessica H. it sounds like the ARV is a real issue. Easton, PA home of "The Easton Assassin" former Heavyweight Champ Larry Holmes! Nice!!

[Ryan Dossey]

I had a wholesaler bring me a property that was listed with an agent and he simple gave the owners of the property a letter of intent. He had no real way of "selling" me the property. He did the "negotiating" behind the realtors back and was acting super weird. He set up times to show the property and then backed out multiple times the day of. He eventually admitted that he couldn't show the property and I'd have to speak with the realtor. Wasted my time for a week and I won't use him. The realtor also didn't seem interested in showing the property once he found out who sent me his way. 

[Andre Vaughn]

WOW!!!!  You talk about integrity or lack of integrity!  Sounds like he was playing a heavy game of "Real Estate Three Card Monte." @Ryan Dossey You are very fortunate that you didn't get involve in his game.  The time wasted is upsetting too.  Thanks!

[Dean Letfus]

You have to define wholesaler. Most people who call themselves wholesalers are newbies trying to learn who set up a website, start going to meetings, join BP and start trying to sell anything they get offered to make some money.

None of these are wholesalers.

Genuine wholesalers buy assets at below value and market them to retailers or end users with reliable rehab costs and provable equity information.

There are very few wholesalers in the USA.

[Curt Davis]

I prefer wholesalers to just call me with the deal, tell me how much they want for it and get me inside and I can figure out the rest to determine if its a deal for me or not. 

@Ryan Dossey Nothing is better then when a person brings me a deal that is listed on the MLS and then they try to sell it to me for a few grand more!! I tell them I could get it for less and make a commission buying it as I am a Realtor myself !!!

[Sondra Mckibben]

For me the problem is when a wholesaler calls me with a property they are offering (that they have under contract) they have never seen it, been in it, have no clue what repairs are needed, what the costs of the repairs are, or even know the correct ARV (zillow, is NOT an accurate site to get ARV's). I will set up a time to go meet the property owner to do my own evaluation of the property, write up what the actual repairs will be for a rental or resale, have my realtor pull the true comps for that area! Then I call the Wholesaler with the true facts, lol 9 times out of 10 I have to tell them that they are wholesaling it too high, the property is so bad that it will be very difficult to find a buyer, their ARV is way off, or the property has been vandalized and stripped.

I wholesale deals myself, but I take the time to meet with the property owner, make sure my repairs are accurate, my ARV is definitely correct, know the rental income that it will cash flow at, all background info as possible on it before I look for pass it onto any other investor. I want repeat business with who I work with, I was raised hearing in this world you have one thing going for you "Your Good Name, your Integrity and your Honesty". I try very hard to live by those words my father used to tell me!

[Jay Hinrichs]

@Curt Davis 

 in part thank BP for all these folks running around thinking they can be in the bizz and wholesale properties when they have not a clue.

A true wholesaler has CASH buys the asset then resells it.. any one flipping contract is just a bird dog and lowest rung on the totem pole in the investing world.

But hey got to start somewhere.  I think a lot of these wholesaler wantabees would just get a RE license and act as RE agent to get started would get a better feel for the bizz and wasting peoples time.

[Jeremy T.]

Whew, I was getting worried.  A variant of this thread hasn't popped up for almost a week.

@Ryan Dossey good stuff in the second paragraph.

[Andre Vaughn]

The useful information that I have received throughout this post will be VERY, VERY helpful to myself and other newbies that actually have a real estate investment plan that involves wholesaling.  @Dean Letfus it sounds like your definition of wholesaling is spot on and I will definitely learn from it. @Curt Davis I read another post on BP about a property attempting to be wholesaled from the MLS. Tactics like that would absolutely ruin your reputation quickly. @Sondra Mckibben your Dad taught you well because I live by those same values and teach my children that way also!

[Maurice Miller]

@Eddie T. and @Curt Davis 

 Yes the waters seem to be getting murkier and murkier when it comes to wholesalers.

I think you have a combination of unscrupulous people as well as just plain no

knowlege of the business. They listened to a few REI podcasts and webinars now

they want to do the BUSINESS. But have no real integrity or solid foundation.

If you have a good wholesaler, you better treat them like gold, because unfortunately I think things will only get worse.

[Angelo Mart]

Dear forum

I found a property located in a very wealthy area (Red Bank) that is an estate sale with highly motivated sellers that is being sold in "AS IS" condition. The sellers (of estate) need to push this property fast and just reduced the price from $520,000 down to $405,000 and wont really budge as they have to pay a REVERSE mortgage off. I have reviewed and verified three recently closed homes on the same street that were completely renovated but were similar in terms of size (within 200 Sq.Ft.) room count and lot size (as per city assessor) to this property. One sale was at $590,000, $625,000, $700,000 and the house next door sold at $665,000. My estimated cost to cure/repairs is estimated at $60,000. I am going to utilize transactional funding for this deal as it seems the best solution for wholesaling. I offered $360,000 and they laughed at me!!! What is the most I Should pay for this property as I want to make a minimum of $12,000 on the deal??? If I estimated the house at $665,000 (most similar comp) and use the formula of 65% of that would be $432,250 - $60,000 - $12,000 = $360,250. However, an investor (rehabber) friend of mine in the area says that his company does not do a deal unless they make a minimum of $90,000. In this case they could make ALMOST $150,000-$200,000 even it if pay full price of $405,000 as the formula does not appear to be consistent in this high end market. Somebody PLEASE help me to structure this deal, I don't want lose it. If I use the 70% ARV I could pay $390,000 . What would you do ? Thank you

[Tim G.]

I don't hang in the forums dedicated to agents (do we have those)? 

But, I don't see terrible wholesalers doing much different than listing agents do. Same overvalued exit prices, overpriced deals with unrealistic repair values etc... 

I just hope people are as vocally harsh on those folks as they are on wholesalers, I've yet to see it though.... A lot of it stems from the buyer themselves not understanding how wholesaling works. Wholesalers should close a deal with their money then sell? What? Why? That eliminates the entire purpose of wholesaling!

Some sales people suck, who likes a car salesman? Wholesalers are no different, some of them aren't any good.