Etiquette of using a wholesaler to find a personal residence?

Question

Hi Wholesalers:Wanted to check the etiquette of this: We are wondering what the situation would be as far as reaching out to a wholesaler with the intent of finding a personal residence to owner occupy?We have been thinking of purchasing something on >1.5 aces in the Palm Bay, FL area and was thinking working through a wholesaler and fixing it up on our own would make a ton of financial sense, but would want to respect a wholesaler's business model while still wanting to find something that was personally the home I want.Anyone have thoughts?

Shari Peterson · Answer

@Kyle Critchnau makes some good points. A cash buyer is definitely preferred. If you can't pay cash @Michael Zagorsky then look to a smaller local bank or credit union that knows how to think creatively and can understand the value of giving you a loan within this completely legal scenario. You will need to disclose the circumstances of how you are acquiring the property. For a local bank, seek one out that will do a portfolio loan -- this is a loan that is held in-house without the intention of selling it to an institution. The reason this is important is because a portfolio lender makes their own rules on the underwriting of the loan. They don't have to "comply" with guidelines set forth by institutional lenders.That being said, Chris Mason) and mortgage broker (Chris M.).

Jay Hinrichs · Answer

@Michael Zagorsky I don't think wholesalers really care were the buyer comes from.your job is to weed out the flakes that try to wholesale deals. you must look at wholesalers simply as brokers and some are notorious for giving totally puffed up values and understating rehab.. its Caveat Emptor to the second power...

Priscilla Z. · Answer

Wholesalers are great to work with, some of our best rehabs and best cash flow properties have come from wholesalers. With that said, make sure to know your numbers as some wholesalers, both new and old, do not get the value of the property nor the amount of repairs correct since they haven't been on the "other side" as far as doing the rehab or being the landlord.@Michael Pullins gave you some good advice about the title company. PM me if you are in need of one and I will recommend the one we use. You can also send me what you are looking for and I'll mention it to the wholesalers I know in case they come across anything.

Kyle Critchnau · Answer

@Shari Peterson Thanks! You make some very good points as well. @Michael Zagorsky I'd recommend using a bank you have a relationship with, although wholesaling is legal in most states, it'd be a good idea to make sure the bank understands the process and is OK with it before you get under contract with the wholesaler. I don't want to discourage you; this scenario is certainly doable, but you'll need to make sure you work with a wholesaler who has a good team in place and not just someone who read a book and decided they could wholesale. Transactional funding is probably a must for this on the wholesaler's end in order to satisfy seasoning requirements, and expect the fee for that to be passed on to you in the price.

Brent Bowers · Answer

@Michael Zagorsky I think you are on to something here. As long as you have the time to wait you will probably do quite well with a good wholesaler. Not all of them are created equal. Just be careful with the escrow deposits. Make sure you see the property and have a legal contract with the seller and your escrow deposit is refundable. Trust your instincts and make sure every i is dotted and T is crossed. I wholesaled a couple properties a few years ago to some investors and it was a great experience and I learned SO MUCH.

Michael Pullins · Answer

I agree with Chris, you will be fine working with a wholesaler. My only advice, find yourself a reliable, trustworthy escrow company that understands the wholesale transaction and will help facilitate it for you. Cheers

Kyle Critchnau · Answer

I'm a wholesaler, and I don't know how Florida is, but I'd be concerned with the legal and financial ramifications of finding someone a personal residence unless they were paying cash. If you're paying cash for the house, then no problem. But if you're planning on financing any part of it, you'll run into one of three scenarios, depending on how the wholesaler structures the deal:1. If the wholesaler does a double closing, your bank will probably freak out and not underwrite the loan because the wholesaler's name isn't currently on the deed. 2. If the wholesaler does an assignment deal, your bank will freak out and not underwrite the loan because there's cash at closing going to someone that's not an agent or the title company.3. If the wholesaler just wants you to pay him cash outside the transaction (i.e. a finder's fee), that's technically practicing real estate without a license and could get him or her in hot water.

John Ching · Answer

Hey Michael, I'll throw in my .02$ and say that using a wholesaler to find your personal residence is a great idea. Why not? Wholesalers are just moving paper so why would they care if you are the end-user?But to reiterate what has already been said, keep your numbers on target.I've wholesaled deals myself and continue to do so. But one thing I find many wholesalers lack is the knowledge to accurately peg rehab costs and/or comps. Reading books on estimating rehab costs is great, but nothing beats first-hand knowledge. Do your due diligence and I don't see a reason why a wholesaler wouldn't want to work with you as the buyer.

Chris Boyd · Answer

I'm pretty sure there are wholesalers in your area willing to work with you. Good luck on your purchase!