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!

[Andre Vaughn]

I'm blown away by the ENORMOUS response from this post.  There have been some truly amazing people with various perspectives on Wholesaling.  I have connected with some great people with some very good advice too.  I will be a better investor from it though I am in my early stages but I am committed as well.  The experiences that you all have been through will help me and MANY others with similar questions to be better at their craft.  Though we agree to disagree in some cases, the knowledge that was shared is PRICELESS.  Thank You All!!!

[Thomas Weir]

I remember when I first got in the business and got on craigslist to see what properties were available. The first thing I noticed was seeing the same property with a different person representing themselves as having control of the property. Of course they all had a different price to account for their assignment fee

[Jay Hinrichs]

@Thomas Weir 

  just check craigs list for note buyers... You call one and then its a shock to their system that they actually got a call.. then they hesitate for a few minutes why they scurry around trying to find there script.. then they read the script like a bad actor.... LOL

[Account Closed]

I thought Craigslist was a scammers watering hole.

Joe Gore

[Shaun Reilly]

Originally posted by @Account Closed:

Originally posted by @Shaun Reilly:

I agree with the people saying that they don't give ARVs or repair estimates since the investor is going to confirm the numbers anyway, and for repairs that number can be all over the board (And if you do vastly different levels of work that can effect the ARV as well).

However I do like to get those estimates from a wholesaler.  Not because I trust them, I would not trust them fully no matter no much I respected the intelligence and integrity of the person giving me the deal.  It is mostly because I have never found one of these good wholesalers that I KNOW finds good deals that are worth looking into.

So when the new inexperienced wholesaler finds a deal I'd like to know the number they had in their head when evaluating it. More than half the time I can look at those given numbers and tell it won't work for me. So I don't want to spend any real time figuring out an ARV and going to see it to figure out repairs. If their numbers at least pass that sniff test I will then do the ARV at my desk and will eliminate at least half of the rest when it is clear they are way high on that.

If I find a @Account Closed or @Tim G. /really good wholesaler/ Sasquatch riding a flying unicorn in my market I would be more than happy to just get an address and the asking price.

What about listed properties? Do you put those through the same sniff test? I'm guessing you do your ARV and have no real idea about repairs until you've seen it. Why would an FSBO or wholesaler's asking price be any different than a listed prop? You'd probably go see a listed prop where the asking was out of whack and still make an offer.

BTW, you'd likely be very disappointed by my offerings and my asking prices.  I sell them for what the market can bear.  I have a couple of regular buyers and I list everything else.  On top of that, I don't consider very many offers with hard money, and I require full proof of funds from cash buyers.  You'd have all kinds of names for me if you were in my market. :)

This is just one part of a cycle. Some day the cash buyers will dry up and there'll be a backlog of inventory. Then I'll have to provide ARV comps, repair quotes, discounted listing services and throw in some gift cards to get it sold.

Not sure what you are saying about listed properties. If I am mining the MLS (I'm an agent so I do this a lot) yes I have to figure out ARV to see if it is worth a 2nd look when I see something that looks interesting at first glance.

If another agent sends me a possible deal I do have to do the same thing, and yes they will not make repair estimates.  I can usually spend 2-3 minutes just pulling up the first page of local comps to see if it is worth clicking on any individual place to really compare them.  I'm willing to do this since I have gotten much better leads from agents than I ever have from a wholesaler.  The other thing is they are just looking for their commission so if I say that it is still probably only worth me offering 2/3 list price they will say sure and write it up for me.  That would usually be a non-starter for a wholesaler who probably has it under contract for tens of thousands more than I said I could pay.

Oh and I would NOT go see a listed place that seemed to have a low price. I would run a repair estimate based on the size and features of the house assuming I needed to do everything to it and then put in an offer at 90% of my MAO and if they respond I will go look at it.

There are few things in this world I hate more than looking at a house that I don't buy so I try to only look at houses that there is a decent chance that I will buy.

Oh and I would not hold any grudge against you if you could sell your deals for way more than I said I could pay. Pretty sure most of these deals I see end up getting canceled. Big thing is I don't think there is pretty much any overlap in what landlords and what rehabbers want. Pretty much just the full gut 2-3 family places and only for rehabbers that want to flip to landlords (not a high percentage) and the landlords that are willing to put up a mammoth amount of capital to do the rehabs themselves (Even smaller percentage). I also don't see a big owner occupant cash buyer willing to do a fixer market here either, so not a lot of buyers to market to. My point was actually exactly what you said about sending stuff to a couple buyers and then listing things retail otherwise to make more money. If I had a "you" here I know you would only send me the ones that might work for me. You won't send me your 85% ARV minor repairs to get rent ready deals if you know I am looking for a deeply discounted rehab to retail deal.

[Account Closed]

Originally posted by @Thomas Weir:

I remember when I first got in the business and got on craigslist to see what properties were available. The first thing I noticed was seeing the same property with a different person representing themselves as having control of the property. Of course they all had a different price to account for their assignment fee

This happened to me a few months ago. Two different sellers called me about the same out-of-town property, and one person emailed me. I have an I Buy Houses ad in the paper and on craigslist so they were looking for a cash buyer. At first I thought maybe the sellers were all related somehow. When I looked up the property it was an REO on the MLS. Which of the seller had a contract, if any of them did, I"ll never know.

[Account Closed]

I think wholesalers get a bad Rap from investors who want to offer the wholesaler a low-ball offer and leave no meat on the bone for the wholesaler, and they call greed.

Joe Gore

[Jeremy T.]

@Shaun Reilly Don't all unicorns fly?  Or am I thinking of a Pegasus?

Is "REO Speedwagon" the first thing that pops into anyone else's mind when they read "REO"?

@Richard C. point taken...though your contract law comparison using Aunt June's musty house and narcotics is a bit of a reach, IMO.

I have worked with 4 agents: 1) a woman who persuaded me and my wife to overpay for a house (we were impatient and naive). grade: D- 2) a kind old woman who took a huge hit in commission to help us pay closing costs on the same house when we sold it 4 years later. Grade: C+ (a good human) 3) a woman who was fired for egregiously hideous customer service in all respects. Grade: F- 4) woman who got the job done and whom I would work with again, but not someone I would rely on, especially from an investment perspective. Grade: B-

Though these threads become redundant, I enjoy the back and forth...any time people sit down and bang out a 500+ word replies, there are going to be some gems to uncover. Bravo @Andre Vaughn et al.

[Jay Hinrichs]

@Jeremy T. 

Riding the storm out on a winters night in the rockies.. or something like that. I was going to school in Leadville when that REO speedwagon hit the charts. thanks for bringing back the memories.

[Jeremy T.]

@Jay Hinrichs If one does not bob their head in rhythm with "Roll with the Changes" I submit they do not have a soul.

[Shaun Reilly]

Originally posted by @Jeremy T.:

@Shaun Reilly Don't all unicorns fly?  Or am I thinking of a Pegasus?

As the father of 2 young girls with a recent obsession with My Little Pony I can assure you that Unicorns and Pegasi are not the same.  They can live in peace and harmony but they are unique.  

[Tim G.]

To look at the amount of effort the bright minds here contributed to a thread essentially whining about wholesalers makes me a little sad. 

There is an obvious bias towards wholesalers from many investors. A lot of it I think comes from the hard work they put into getting where they are now, and believing these wholesalers are seeking an easy way to that destination. 

We aren't, it is serious work and for every wanna be wholesaler there is just as many wanna be flippers, agents and landlords. 

I'm not saying it isn't good to be realistic but a lot of negativity and talking down to occurs this specific forum. 

Maybe we all need to get outside a little, breathe some fresh air and remember how awesome life is and how great it feels to be nice and encouraging to others. 

This is about lap 345 of our "going in circles" maybe we wave the black flag and end the race that nobody can win.