How do you keep an abnormally large profit in a Wholesale assignment from your buyer?

Question

I was told by several people in the business that when doing a wholesale assignment deal where I stand to make a larger than normal profit, it is best not to disclose exactly how much I'm actually making. I was likewise told that a 'double-close' would better help me accomplish this as it would keep my buyer away from the line on the A-B HUD-1 that shows my actual profits.

However I was told by my mentor to always give a copy of the original A-B contract to my buyer. My question is, "how would giving them a copy of the original A-B contract not expose my original A-B purchasing price? I wanted to hear what you guys thought about this before I received my mentors explanation. Thanks Reggie...

Shawn Holsapple · Answer

I almost always double close.  It keeps the deal clean and no one gets their feelings hurt!  Yes, it's human nature to feel like they took too little if they find out that you are making more than them.

Heck, I still cringe sometimes, under my breath, when I see what some of my colleagues made on a deal they bought from me [I'm sure some of them do the same thing when this is reversed].

For me, I'm glad the next guy is making money and that just means we will do another deal together.  Unfortunately, most buyers are not like me, @Ashley Mullin , @Guy Raveh or @Ben G. .  I've had to fire about 3-5 buyers per year over this exact issue.  They whine and complain AFTER we close that I made too much or they just won't do the deal if they think I'm making too much even after they begged me to buy it from them AT their price!  Go figure.

I would highly recommend you double close anything that has more than a few thousand [~$4k-$5k] in profit just to keep everyone happy.

Ashley Mullin · Answer

I don't trust title companies that do double closes without A-B funding in for the closing...Also, I deal with several wholesalers in Indianapolis and I don't mind what what their fee is as long as its a good deal for me.

Larry Turowski · Answer

It depends.  If you have a rational end buyer is like @Guy Raveh then just do an assignment fee.  He knows it is still a deal for him.

But most people, and even many buyers are not rational.  They will be offended at not getting an even better deal.  Unfortunately, for those buyers you'll need to double close.

Guy Raveh · Answer

While I may be alone with regards to my feelings about this subject:

In Las Vegas I am a buyer. If you bring me a deal that makes sense to me I won't care about the profit you have made in the middle. I would only care about the price that I am paying. If it makes sense I will be happy to buy it from you even if I know that you have made a huge profit. Again though - this is just me. I think many buyers may feel differently.... Why they feel different is beyond me though. By the way not only will I be happy to buy from you; if the deal makes sense to me I will beg you to keep bringing me more :)

Guy Raveh · Answer

By the way if a buyer cares too much about what the wholesaler made, the wholesaler should ask:

"So if a property is worth $150,000 and I just got it for $zero am I still expected to sell it to you for $5,000?"

Mike D'Arrigo · Answer

Originally posted by @John Horner

"I would not use the word "brokering", that would be illegal without a license."

Is that the ONLY part of Tom's advice that is a problem?  LOL

Ben G. · Answer

I've only been wholesaling for a year, but I have yet to encounter a buyer in Indianapolis that is worried about my fee.  They all love getting good deals and they are happy to pay me a premium for all the time and money I've invested to find motivated sellers.

Tom V. · Answer

Just be honest.

Tell them that their house is worth a lot more than you are paying them.

Tell them that you don't have a real estate license, but you are brokering the sale of their house to another individual.

Explain what a large piece you are trying to take out of the transaction and that they should be happy to get any cash at all.   That if they wanted the fair value of their house, they should have been working with an actual real estate agent who would help them get the highest price possible.

Or just find a way to lie to them.

Best of luck.

Aaron Mazzrillo · Answer

I've very curious what you consider a "larger than normal" profit? Also, why do you care if your buyer knows how much you make? I have my buyers close, via assignment, but mostly directly with my seller and I'm listed on my buyer's hud as Marketing Fee. As long as the numbers work for my buyer, he/she never cares what I make. My goal is to have my buyers pay me 5 figures on every deal.

Ashley Mullin · Answer

@Shawn Holsapple

Remember that one time we double closed ;)

How do you keep an abnormally large profit in a Wholesale assignment from your buyer?

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