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Updated about 8 years ago, 12/04/2016
How a wholesaler just lost me as a buyer
Hi folks,
Thought I'd share an experience I just had...especially for newer wholesalers out there trying to get started. I found a FSBO on Craigslist that turned out to be a wholesaler. Reached out to him about the property and told him I could come to see it that day.
We set the meeting and I drop everything & come out with my GC to view the property. It has a TON of potential. We crunch the numbers and determine an acquisition of 120k will net a solid return on the rehab. I offer 120k all cash with a 21 day close. He tells me he needs more for the deal to work on his end.
I don't negotiate against myself so I ask what he needs to say yes and get the deal done. He tells me $130k and the property is mine. DONE. My initial offer was purposefully on the low side so I told him I would raise my offer to $130k and let's draw up the contract.
He said he just needed to 'check with his partners' really quick but there shouldn't be any problems. 24 hours and nothing back from him. I reach out to him and he apologizes for the delay and that after discussing they accept my offer of $130k and he will send the contract over immediately.
Some more time passes and I inquire about the contract...I've also informed my lender, GC, and attorney that we should have the contract shortly...he says he'll have it right over & he is excited about the prospect of doing more deals with me in the future. In fact he'd already sent me another property that I was going to go view for a rental.
THEN I get a text (not even a phone call) to the effect of "Sorry someone just reached out and they are paying more so we're going with them".
This was after he told me the number they needed and I offered full asking price, told me they accepted my offer, and that he would send the contract right over. Just to chase a quick buck on one deal, he threw away the potential to do a bunch of deals with me AND do you think I will ever recommend him to any of my fellow investors that attend my meetup?
Reputation is everything in this game and this gentleman is doing a great job of tarnishing his very quickly. Situations like these are exactly how wholesalers get a bad rep.
@Dave Hurt - I'm with you on this one. Way too many people are way too short-sighted. A dollar today cost him who knows how many deals with you. One of the things I love about BP is that the vast majority of people here are interested in long-term goals that require offering high quality products and building relationships.
Thank you @Kevin Siedlecki I agree - far too shortsighted on his part. Sure he may not have made as much money on the deal but he had already accepted my offer and promised to have the contract over 'immediately'. In my opinion this shows a lack of integrity and had I been in his shoes I certainly would have honored the verbal acceptance...especially since I was already considering another deal of his.
@Dave Hurt Maybe this guy was trying to pull something else and when it wasn't working, he made it up that someone offered more or wanted you to offer more, either way, it was a very dumb decision on their part. He should have "checked" with his partners before telling you he accepted and the fact that he didn't send a contract right away, something fishy was up.
@Samantha Klein good points! At this point I think I may reach out to the property owner directly & let them know if their current contract (if they even have one) falls through to please let me know and I will purchase the property directly from them.
Thanks for sharing I think that is great incite for long term relationships not just a quick deal.
@Dave Hurt That's a good idea. I would send a text to the person who basically screwed you over that you aren't doing any future business with someone who says one thing and does another, maybe that will stir the person up a bit and they might decide to actually do the deal with you, never know but it's worth a try since it sounds like a deal with alot of upside.
@Samantha Klein I actually did just that - let him know that I value integrity in my business dealings and that I am no longer interested in any of his other deals or to be contacted about any deals moving forward if this is how he does business...his response was "sounds good".
I doubt his approach of burning bridges for a quick buck will result in a long and fruitful career in investing...
@Dave Hurt He doesn't sound like a man with any kind of integrity and it's his loss, cash buyers are essential to a wholesaler's profit, he'll soon learn with nobody wants to buy from him.
He said that $130k was the magic number for him. You offered that number, but he had to go talk to his "partners" IE spam his property for a much higher price and see who bites before finalizing with you.
HUGE RED FLAG. Sorry that happened to you.
Exactly @Simon Ghandil...my response to him was actually "Wait I thought that was your number, are we doing this deal or not?"...against my better judgement I held out...should have walked away right then.
Thanks for the insight, I'm sure I would never do anything underhanded like that but it is good to hear what to never do anyway. Some people huh!
That's right @Jerry Smith - of course he didn't do anything illegal because we didn't yet have a recorded contract but quite underhanded it was...and he definitely burned a bridge!
Sounds like you dodged a bullet on this one. This wholesaler is not thinking long term and does not have enough intelligence to understand what he did. As a wholesaler be my word is my bond. And I always know what my happy number is. It is best to have a solid offer than waiting for the pie in the sky offers. Your reaction is the right one, if I cannot trust you to follow through on what you say then I cannot do business with you.
In an interesting turn of events he reached out to me today to inform me that his other buyer backed out and he'd like to move forward with me again...
It's a good deal so I'm inclined to purchase it but I almost don't want to just so he won't make his assignment fee!
I personally would not be doing business with him at this point, after what he did. I would go direct to the seller and see if there is a way to buy direct. Seller might get creative, if you offered him 130,000, and the wholesaler might learn his lesson.
I've been in the wholesalers position where I get an offer at price A and later that day I get a higher price. One time it was literally 2 minutes apart. Buyer A told me $30K and I knew he was legit. Buyer B had a 2 day jump to make a decision but didn't respond until right after buyer A. Buyer B was $3K higher and everything in me wanted to cancel with buyer A.... but I didn't. Since that sale, buyer A has purchased 3 additional properties from me.
As far as this situation, I bet the wholesaler did not have a contract with the seller but just a verbal price. I bet he had a number from the seller he was trying to get- maybe around 130K. He needed to go back to the seller to reduce the price so the 130 worked so he could get paid. Seller wasn't moving so he couldn't do anything and lied to you he found a higher buyer. If you really care, go look it up and see who still owns the property (give it a few weeks to record if this story is recent).
I think I would either go around him and contact the owner directly or reduce my offer back to $120,000 or $125,000 with the explanation that the property is not worth as much when he is involved and you can't count on anything until the contract is signed
@Dave Hurt Let us know what you decided in the end.
I can't tell you how many times wholesalers have wasted my time. I only work with a select few because of this. Most are very shortsighted, most lack any true business skills, are not transparentand, do not know the business, understate the rehab and are only in it for themselves. Again not everyone, as I work with a few good ones.
- Alex Craig
- 901-848-9028
This is why I don't do residential and I don't work with wholesalers. Not only do many not have integrity they also have no clue whatsoever about the value of a property.
Really clowns in a circus out there. You might find 1 in 1,000 wholesalers that actually know what they are doing. Since I source commercial properties directly through many different avenues I do not need them. When I can do it directly I know from my evaluation what the property is or isn't versus the wholesaler giving me horrible information.
If people are in real estate just for the money you are doing it for the wrong reasons. There are relationship components that can last a lifetime in this business. It comes down to trust.
With my clients it might take 6 or 8 months sometimes to find the right property and another 3 to 4 months to close on it so 1 year. Sometimes it can take just 1 or 2 months. There are others in the industry who just bombard the buyers with **** properties hoping they will buy anything right now just to get a sale.
I take the long term view and need to sleep well at night. All these people screwing others for a quick buck will churn and burn through the industry. If you do the right thing and put relationships first year over year your business will keep growing because of your reputation. The money will take care of itself.
- Joel Owens
- Podcast Guest on Show #47
I would have just accepted the offer by the fact it was first accepted to contract. That wasn't so good for long term business on his end long as he got the full asking price, it shouldn't have mattered just gave one of my buyers a 5K discount after his GC quoted more work that was needed to be done to close in two weeks we work towards building solid relationships and helping one another grow to prosper.! Sorry Dave we live and learn keep pushing forward
Right now I am just beating him up on the price as I have the upper hand in this situation...if his contract expires then I'll go direct to the property owner.
