Why the Vast Majority of Wholesalers Are Not Appreciated

Danny Johnson / 18 comments

The vast majority of real estate wholesalers don’t have a good reputation.

It’s just a fact. I’m actually glad that is the case.

You see, when most wholesalers send out complete garbage (stuff flies don’t even appreciate), investors tend to ignore them. Their emails go unread or are read with such disdain that any hope of them realizing when the numbers are actually accurate is dashed.

This presents an opportunity for people that wholesale real deals. Before I get to what constitutes ‘real’ deals and how to make sure you are not seen as one of the these less-than-human wholesalers, let’s look at exactly why they are seen this way.

There are several reasons for it, both from the original owner’s point of view and from the point of view of potential investor end buyers.

Reasons For Disdain From The Homeowner’s Point of View

From the seller’s point of view, they are sneaky and dishonest because they don’t inform them that they will not actually be the ones closing on the house.

You see, most investors don’t tell homeowners (or real estate agents) that they intend to assign the contract they are signing with them. If they did, the homeowner would probably have a problem with it, if for no other reason than that they don’t understand it.

The only time I tell homeowners that I am going to find a buyer is when I am not sure if I really can find a buyer. This is usually the case when a deal is tight. The numbers don’t quite work but I have a hunch that they might for someone.

But, this gets back into the perception thing. It’s really only a problem if they find out. This usually happens if another investor tells the homeowner that is what is going on or the when the investor can’t find a buyer and therefore can’t close on the house.

If they can’t find a buyer, it really leaves the seller steaming.

Reasons For Disdain From Investor End-Buyer’s Point of View

From other investors’ point of view, these wholesalers always miscalculate the after repair value as well as the cost and level of repairs needed for the houses they are selling.

While I’m sure much of these misrepresentations are simply a matter of inexperience in determining home values and costs of repairs, they are seen as being deceptive by the person that is being pitched the deal.

Many investors view what the wholesaler is doing as trying to find the greater fool. The deals aren’t really deals and they are just trying to find a sucker to buy them so that they can make a quick buck. It’s understandable.

Many real estate investors immediately question why they are even selling the deal if what is stated as the potential profit is true.

Then you have the instances where an end buyer investor is interested and ready to buy the deal. The numbers look good and he/she has done their own due diligence. Then, when it’s time to sign the assignment of contract, they freak out because they see how much the wholesaler is making.

There is just some kind of inner conflict thing that goes on when this happens. The deal is a deal, but somehow how much you the wholesaler are making causes friction. Some people just can’t seem to stand seeing others make a great profit for less work than they are going to have do.

They are just going to have to get over it. If you want to avoid this situation, just suck up the extra cost in doing a double close or find another investor that truly does not care what you make.

The wholesaler also can become the scapegoat.

When an investor buys a deal from a wholesaler, they have certain expectations as to the profit they are likely to see at the completion of the flip. If they screw up (and most people do often), it can be easier to blame the wholesaler for the loss than oneself.

Maybe they did a horrible rehab and got screwed by a contractor. This could result in higher than normal rehab costs and reduce the price that the house eventually sells for. The numbers the wholesaler gave could have been accurate had the rehabber not goofed it up.

Sadly, there is not much that can be done about this situation.

How To Be The Wholesaler That Buyers Are Begging For Deals

I want to show you how to be the wholesaler that everyone is begging to send them deals. To be the wholesaler that always performs for the seller so that they are very happy with their decision to sell to you.

It’s possible to become the one that somehow (almost magically according to other jealous investors) finds the best deals and makes the biggest wholesale fees.

This is really, really simple. Yet, it can be very difficult to continue to do. Greed, hope, and desire conspire to sway you to become like all of the other wholesalers. You have to fight it.

Here it is: You have to make sure that your numbers are accurate and that there is enough meat left on the bone for your buyers.

Common sense, but it’s amazing how many people let their emotions fiddle with the numbers. The house needs 15k in repairs. I’ll just put $12k so that I can make $3k more on my assignment. There was one comparable sale that sold for $150k and the other 5 sold for $120k. I’m not sure why. I’ll set the ARV (after repaired value) at $140k because I’ll bet they can get it. That will really make this look like a deal. Ugh.

If you consistently give conservative repair estimates and conservative ARVs, buyers will love you. They will know that your deals are really deals and do whatever it takes to make sure they are the first investor you call when you get another one.

Now in order to get these true deals, you are going to have to generate a lot of leads. This is a numbers game. I’ve said it before, and I will always repeat it. You have to generate a lot of leads. Don’t be OK with a few leads and get stuck trying to figure out how to turn them into deals. It doesn’t work.

The problem is not the leads you are getting, it’s that you aren’t getting enough leads.

Even though that may sound simple, it really is advice that is golden.

Danny
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18 awesome responses to “Why the Vast Majority of Wholesalers Are Not Appreciated”

  1. @buyhousescheap on

    Spoken like a true wholesaler Danny. My mentor gave me a piece of advise that changed my wholesaling business and that was when looking at a property to wholesale you should always look at it like an investor that is buying the property to flip yourself. If there is not enuff meat on the bone for you then chances are ther is not enuff for your end buyer.

  2. ralph on

    Hello Danny,
    I totally understand, as I too, live in the San Antonio area and have been doing research with these other wholesalers and the numbers seem to be a little off (and I’m just a beginner at this). Their ARV and DOM seem to be inflated and it seems like they always say that their property is in one of the best neighborhoods. BTW, don’t worry about me taking away some of your deals as I have yet to get into the REI world (very interested and tempted though). Maybe in the near future I could be purchasing some deals from you or maybe even sending some your way. I wanted to ask you what your opinions are on buying tax liens from Bexar county? I was there last month and it seemed like those folks got some good deals (with the exception of the 6 month or 2 yr waiting period)..

  3. @buyhousescheap on

    Danny when making offers do you give the seller a price based on the comps and just input a ruff repair est into your formula or do you always have to walk through the house first before making a offer?

  4. Ralph on

    Hello Danny,
    I know you had mentioned previously that you decided not to get your real estate license, but I wanted to know if you could explain and maybe give us some pros and cons on getting it. I would think that having full access to the MLS and saving on commissions would be beneficial.

  5. Mark on

    I’m helping my son whos just into his first rehab and flip. All the numbers worked great the only issue is it’s been on the market since 1 Jan and under contract 3 times now. The first 2 offers feel through for financing even though they had a preapproval letter from the bank. How do you ensure that people are truely qualified. These were all VA buyers.

  6. alex on

    Hi Danny,
    I know you are based out of San Antonio which has a population of about 1.4 million. I am sure you have no issues doing comps with previously sold properties. What do you suggest for those that live in smaller towns and the closest city is about 30 minutes away and only has a population of 200,000? How do we get comps in smaller towns if nothing has sold for quite some time and if we find sold properties they are about 20 miles away? Thanks.

  7. Brodrick on

    Danny You get my respect dude. Your the real deal and just wanted to say thanks for everything man!!

  8. Steve on

    I like your blog,
    How do you do your comps.I want to know
    because its hard sometimes
    buyer come with there own value
    Can you Help me
    Thank You
    Steve

  9. Obi on

    Hey Danny I enjoy your blogs. Are there any good REI clubs you would recommend in the area?