How Do I Avoid This Wholesale Paradox?

[Carl Flint]

Hey guys

I have yet to do my first deal. I have 6+ months of research and the “learning phase” under my belt. At this point, I know that in my market I want to start with wholesaling.

I am going on realtor.com and other similar sites and texting/calling 10 agents a day just to say I’m an investor and I am looking for good cash deals.

I firmly believe that as long as you have a good deal then you’ve got something to work with. So, I’m on the hunt for a great deal.

Here’s what I’m afraid of: I don’t want to tarnish my name among the community as someone who talks a big game but can’t close... what if someone brings me a great deal to wholesale but I can’t find a cash buyer?

And conversely, if I go out and start networking with cash buyers as “someone who can wholesale them great deals” before hand to get a base of buyers... how do I avoid becoming known as the guy who can’t deliver when it comes time to deliver a deal?

Does that makes sense? Please help.

[Don Konipol]

@Carl Flint

There are a few people who claim they're able to wholesale deals found on MLS but I have only seen this happen in a very dismal market, certainly not today's market. If you think about it, if a property is listed on MLS, why would a buyer need you're services? Your fee on top of a Realtor's commission? There's no value added.

At best wholesalers may have a role with lower priced property, in bad shape, in dangerous hoods. That is where Realtors have little interest in pursuing. And in reality, a Realtor can’t sell a $30,000 house, earn half of an $1800 commission, and stay in the business. A wholesaler can buy it for $25k and sell for $30k and be good to go.

As for not being able to close, I would suggest that you inform the seller up front that you are selling to flip the property, and won’t be closing if you can’t. Will you lose most deals; probably, but there’s more downside to not being honest upfront with the seller.

Finally, you need to consider how “wholesaling” is regarded today vs how it was regarded in the past. In the past the wholesaler was regarded as a buyer, who would close if the property could be flipped, or would exercise a weasel clause to get out if he couldn’t. Now, a wholesaler is regarded as an unlicensed agent or broker, i.e., someone who’s representing the seller in trying to sell his property. Depending on where you operate, state real estate commissions are beginning to put some teeth in licensing requirements and filing charges against wholesalers operating without a brokers license.

Many newbies think wholesaling represents the ideal solution to (1) no money and (2) no risk. In truth it’s an extraordinarily difficult way to earn a living. The successful wholesalers I know either (1) spend $75,000 or more annually on marketing or (2) wholesale as a by product of a fix n flip operation, like Homevestors.