Landlord · Dallas, TX · Member since 2012 · 505 posts · 34 votes
Lets assume the wholesaler in this case did their due diligence, provided solid ARV comps and brought a contractor along thats investor friendly to produce estimated repair costs.
The wholesaler provided all the information possible, and believed in the property themselves and put it under contract. Not trying to mislead or be negligent by not doing their due diligence. However what happens when it goes bad for the for the end investor? If you call back in a few months and find out the investor incurred additional costs out of the ordinary, perhaps several leaks under slab or other hidden issues that the contractor didn't even pick up, and greatly reduced the profit margin or now the investor is now breaking even.
How would you try and maintain the relationship from there?
I think the question should be.....should you have known? Your reputation will be questioned. If a reasonably aware real estate professional should have been aware of such hidden defects then step up and take responsibility. If such defects could not be foreseen, reasonabaly, you need to make your feelings known, as to how sorry you might be that those issues were there and convince them that you had no idea. Stuff happens, it's the risk we all take buying RE. The other guy knows that too. So if it was something unforseen I'm sure that end investor is upset they didn't catch it too, but they may have no basis to blame you for such issues. Good luck
Can't imagine that being my problem. My contract states the as-is nature of the sale about 10 different ways and says that seller (me) is not a general contractor nor home inspector and gives no warranty about condition. I know quite a bit about houses and I brainstorm with rehab buyers that I already know about issues and solutions. But they are on their own. Just like if they bought it from a bank or through an agent on the MLS.
I'd say the more relevant issue for me is the buyer's expectations of rents and/or re-sale values. Lots of new investors are way off on that. I never give those values and make the buyer do all due diligence but some of them live a dream world no one can shake them out of.
If they’re giving you a hard time about it, then the only mistake I would say you made was working with someone inexperience enough to understand that stuff happens. Everyone experienced in this business, really any business, understands that sometimes you’ll hit a home run and sometimes not.
Do I detect guilt on your part, as if there was some reasonable way you could have known in advance? No rational person could hold you accountable for the unforeseen if your and their due diligence was thorough.
The best way you can maintain the relationship is to provide them more properties that will (presumably) make them money. If they’re smart, they’ll appreciate that.
I believe the wholesaler's first mistake was bringing along a contractor to provide estimates for a potential buyer. Buyers have to get their own contractors and rely on their people, not my people. I am not selling them a sure thing, not ever. Nobody is selling me a sure thing either. This business is all about risk and he or she who assumes the most risk will, hopefully, win. Trying to take the risk out of the process is not ever going to work.
1) Property address.
2) How much I can buy it for.
The rest is just noise.
For real. Anybody who pays attention to how great a deal is - according to the sales person - is a fool.
As a wholesaler, you really only need to know the cost of things so you can maximize YOUR bottom line while still pricing it to the level that the market will buy.
If you do want to help your investor get bids I would make sure you help them get at least 3 bids. Personally, I like to look at a house at least twice prior to finalizing my #s. Now, any reasonable investor knows there's no guarantee -- like everyone else has stated that's just not possible.
If something does go wrong -- I would make sure you don't just disappear. You help assist them in any way possible to remedy whatever problem they're having and perhaps give the investor a discount on the next deal.
If you didn't knowingly do something negligent, the investor is reasonable, and you do whatever you can to assist them ...then I think you should be fine.
But, again...this is real estate. If everything went perfectly, then it just wouldn't be real estate. :)