What has been your experience with wholesalers?

[David Hines]

I recently got into a lengthy discussion on another thread about wholesalers and whether they bring any value to the real estate industry or not. I am interested to see what everyone's experience has been with wholesalers.

It has been my experience that for the most part, they bring no real value to a real estate transaction. I have come across wholesalers who quote wildly inaccurate numbers on ARV, repair costs, etc. I have come across wholesalers who straight up lie about what price they are under contract for in order to maximize their assignment fee. It seems to me that a large percentage of wholesalers have no ability to actually close on a property. Many seem to be fresh from a local meetup or guru seminar and they are interested in jumping into the real estate industry with no funds of their own to invest. Their actions strike me as not just operating in a gray area, but tending toward outright deception (especially when it comes to getting a property under contract with an uneducated and inexperienced seller).

A note on definitions- it has been my experience that most people who call themselves wholesalers are doing the following;

1) Getting a property under contract for substantially less than it is worth (when I say worth I don't mean ARV, if the property is distressed or in need of repairs then it is worth some lower amount than ARV, when I say worth I mean the amount that the wholesaler knows they can turn around and sell to their buyer list at quickly and easily)

2) The wholesaler does not disclose what they believe a property is worth to the seller, they take the view that they are just making an offer and the seller can take it or leave it. 

3) The wholesaler uses a contract that outlines all the things they may do with a property (fix and flip, buy and hold, assign, etc) once it is under contract, but in reality is fully planning to assign the contract as quickly as possible. 

4) If they are unable to assign the contract, then they walk away and only give up a sometimes ridiculously low earnest amount (I've seen as low as $25!)

It is entirely possible that there is a large group of people who call themselves wholesalers that this doesn't apply to and if that is the case then I am not referencing you and it is just unfortunate that the people who do act this way call themselves the same thing that you do.

One final note - I am honestly looking for everyone's experiences with wholesalers to gauge if maybe I've just been unlucky in the ones I've come across. I know the temptation will be huge for wholesalers to defend themselves on this thread, but please hold off, I'm not interested in having a debate. If wholesalers do tend to conduct themselves ethically then I'm sure a large majority of the responses here from other people in the real estate industry will support them, I just don't want this to become an unwieldy thread where every wholesaler under the sun feels the need to stick up for themselves. By the same token, I'm not interested in "Ya, wholesalers are bad" posts, I'm really looking for concrete examples from your personal experience.

Thank you all!

[Jerry Puckett]

All,

Do you think that discussions like these are a pure waste of time and energy? I don't see how this adds any value, and if I am not mistaken, that is the crux of the argument, that wholesalers do not add value. 

Remembering that when one points a finger, there are 3 pointed back at themselves, before I waste another moment, someone please tell me; do all Licensed Agents pass the sniff test, or are there good ones and bad ones as in every other industry? As has been pointed out many, many times, wholesalers exist because there is a space in the industry that needs to be filled. 

Good wholesalers are hard to find. They need more buyers like a hole in the head. People with attitudes go to the end of the line. 

Conversely, bad wholesalers are easy to find. They want every call to be a lead and every lead to be a deal. They are desperate. They do not last long. If a there is a bad wholesaler out there giving you the blues, wait six months....I promise he or she will be gone. 

If a wholesaler does it right, and provides value to the investor in the form of an "off market" property at a great price, then someone is going to cry and say "had to have been predatory". Isn't that a paradox? In this little box, there is no room to win. It's a zero sum game yes? Get a good price, you're a predator; don't get a good price you're worthless.

I can tell bad Agent and broker horror stories all day long, but at the end of the day, my griping is not going to change the industry. Any more than yet another wholesaler rant is going to change a thing on Biggerpockets. 

I can tell good wholesaler stories until the cows come home, but it won't change the mind of someone who already has it made up.

Wow....there's 20 minutes I'll never get back. What was I thinking?