Are wholesalers useless?

Question

If finding good deals are so easy once you know how to market, then why do rehabbers pay wholesalers a finder's fee when they can just find a deal by themselves for more profit?
And even if I do find a really great deal and get it under contract, can't they just steal the deal from me by contacting the owner behind my back and setting up their own contract that is more appealing to the seller? If that's not possible because of my signed contract, then won't they at least try wait out my left over days for it to expire, and THEN set up their own?
I was just wondering.. because I feel like if experienced investors are tempted with a deal that has a VERY high ROI, they will try to take advantage of beginners like myself who have very little clue as to what they are doing. One of the reason why I haven't started is because I have a strong fear that I will be taken advantage of a lot!

Brandon Turner · Answer

Hey Steven Vaughn - as an occasional Flipper - I know that I would pay for a deal because its something I don't have to do - because I just don't like it. I don't like dealing with bandit signs, negotiating, meeting with sellers, etc. I like overseeing a project, doing the math, staging, etc.

So, if I'm totally willing to spend $40,000 on a property and you come to me with the contract signed for $35k - I don't care if you make $5k.  Good for you. It will encourage you to go get more deals. If I screwed you - I wouldn't get that 40k deal again. Most investors, the ones worth dealing with anyways, think "big picture" and "relationally."

Furthermore- if the deal is truly good then you, as a wholesaler, have a valuable commodity. You aren't asking for favors - you are offering a product- and a darn good one.

And if you have a signed contract (purchase and sale agreement) then no - the seller is legally obligated to sell it to you or whoever you assign it to. Sure, the investor could wait you out and then scoop the deal, but if that happens you could just go to another buyer.  If you can't find another buyer - you don't have a good enough deal or you haven't built your buyer's list up good enough yet.

Does that make sense?  Honestly - I don't have a wholesaler in my entire county. I wish I did. I would pay well for great deals - because I don't have the time to go find them!

Hope that helps! Also - a quick tip: be sure to put up a profile picture! You will build much deeper (and more profitable) relationships by having a picture on your profile! :)

Ibrahim Hughes · Answer

Steven, Brandon Turner gave you some great advice. I would only add two things.

1) You stated "One of the reason why I haven't started is because I have a strong fear that I will be taken advantage of a lot!". Fear in an of itself can be paralyzing. But to fear an issue that's not even an issue yet is totally irrational. I don't think you could go through hundreds of posts here on BP and read anyone mentioning what you're overly concerned about. My opinion is that (at least in my neck of the woods) it barely happens.

2) The one thing I see many wholesalers overlook is the importance of establishing a good 'rapport' with your seller. Make them comfortable to do business with you and I doubt that anyone will be able to take your deal. I've had a few attempts over the years (12) made on my deals. But they've all been pushed aside by my seller because he/she felt really comfortable with me over a fast talking toe-stepping-on used car salesman masquerading as a wholesaler. Work on your people skills ('How To Win Friends & Influence' is a GREAT book for this) and you'll barely have to worry about your deals being stolen.

Glenn Espinosa · Answer

You can't be taken advantage of as a wholesaler since you are the one setting your prices. You find the deal, you find the buyer, and you set your wholesaler fee. Now if you set up every deal so that you only make $100 then thats another story...

Like Brandon Turner said, if your deal is truly a deal then you should not have a hard time finding an end buyer. A rehabber can't wait you out since they know you could have other buyers looking to scoop up the deal.

And lastly, finding good deals is not necessarily easy. Wholesaling is a full time job. It only seems easy because the best wholesalers have set up a system where they delegate a lot of the grunt work and focus on mainly closing deals. Setting up that system takes a lot of time, however, and is definitely NOT easy.

Breshaun Black · Answer

Coming from another line of business I'm a Graphic Artist. I have a friend who's an artist manager, so he knows TONS way more artists, rappers, etc. than I do, so he comes to me with tons of flyers for shows, album covers and things, and I'm glad to give him a small cut of the project profit because he's doing all the leg work of contacting his artists and bringing me jobs. Without him I can advertise to artists and all that, but its too much work.

Tiger M. · Answer

Even as a broker (wholesaler by profession), we are always looking for deals. If I have a client waiting to dump 7 figures in rentals, they don't care if you make a buck as long  as you aren't gouging. If I ask how much your making, it's because I need to disclose it, not because I want to stiff you. With inventories as low as they are for us in Vegas, if you walked in my office every day this week with a deal, you would walk out with a check. You can be fairly paid for your efforts.

Brian Burke · Answer

Steven, I buy about 10 to 15 houses per month.  I don't have time to go out and market and do all of that stuff. I also don't have a lot of time to spend analyzing any one deal.  If a wholesaler comes to me with a deal that I can make money on, I don't have time to find ways to scheme around them, and I don't care that they are making money.  I don't say all of this stuff to toot my own horn, I say it because it is important for you to understand what is going on in the mind of your buyer.  If that is not the mindset of your buyer, you might be dealing with the wrong buyer.

Brandon nailed it, what he said is exactly right.

John Espinosa · Answer

Looks like I'm moving to Washington, give me a couple weeks to get things rolling Brandon, I'll find you deals. wait.. how bigs your county? lol

Are wholesalers useless?

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