[Music]
Hello everyone and Welcome once again to
another episode of Selling Greenville I
am your host Stan McCune realtor here in
Greenville South Carolina and just a
reminder as always please go ahead and
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do all of those things so that we can
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contact information is always in the
show notes you can reach me at any time
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email address is in there just go ahead
and reach out to me and I'm happy to
help you with any real estate needs that
you might have today we're going to be
talking about buying from a real estate
wholesaler and what that entails and the
reason why we're talking about this is
because it's something that is becoming
increasingly an issue or I shouldn't say
an issue but it's something that I'm
increasingly having to deal with as a
realtor because there are obviously a
lot of homes that are on the market but
some of the best opportunities out there
are for homes that are off market and so
we have a bevy of what we call real
estate wholesalers who are really
focused on the off-market
deals and sometimes they can bring deals
that are pretty good I've bought several
homes over the years several properties
over the years from wholesalers and this
can be a really good opportunity for
you if you're looking to buy
particularly if you're an investor
looking to buy and I have a lot of
connections with a lot of wholesalers so
I know a lot of them I have
relationships with a lot of them and I'm
constantly seeing off-market deals
through them and I've had clients that
have been able to purchase from them
over the years but we need to answer the
question first what is a wholesaler and
why are they there what what is it that
they're doing
and if you already have a lot of
experience with this feel free to turn
it off skip to a different episode
but I feel like a lot of my clients that
are dealing with wholesalers don't
really understand what they're up
against and what to expect and what the
Norms are so I feel like it's it's
important for us to go ahead and get out
in front of this so what is a real
estate
wholesaler the short version is this the
real estate wholesaler is someone who
basically finds
a motivated seller someone who is
willing to sell a property for less than
it's worth and they're able to offer
them something that a realtor would not
be able to offer them for instance maybe
to close in two weeks and a realtor
might say well we might be able to close
in two weeks but they can't necessarily
promise that a wholesaler might attempt
at least to make that promise hey we can
close on this in two weeks it'll be a
smooth transaction there won't be a
bunch of showings it'll be really
straightforward and then you'll have
your money you won't have to pay any
closing costs this will be the actual
amount that you'll walk away with at
closing that is the typical sales pitch
from the wholesaler and so the seller
the person selling this property the
reason why they would do that why they
would sell their property for less than
it's worth to this wholesaler is because
you know maybe they have had issues
in the past selling or maybe they've got
a bunch of stuff that they have to to
take care of and they don't want to go
through the hassle of listing it having
people walk through their home or
whatever the case may be and the
wholesaler is offering them something of
value by making a smooth
transaction well the wholesaler may or
may not tell them this but the ultimate
goal of the wholesaler is not to
actually purchase the property but to
pass it off to someone else and they use
the old model of real estate brokering
that was when when Realtors first came
into the business on Wall Street way
back in the day they use this model
where basically they would find someone
looking to sell a house and they would
say all right how much are you looking
to sell this property for $100,000 okay
I will find you a buyer for
$100,000 and then that Realtor would go
and find a buyer for
$110,000 and then the realtor would
pocket the difference now we do it
more on a commission basis which is
better for most sellers but wholesalers
are still using that old model where
basically now they're going out and
they're trying to secure a buyer for
for more than what they have it under
contract
for and then they pocket the
difference now I mentioned before that
sometimes a wholesaler may or may not
tell the seller that they are doing this
a lot of wholesalers they call
themselves investors and they'll go to a
seller they'll be like hey I own an
investment company and we buy a bunch of
properties and we notice yours and we're
curious if you'd like to to sell it to
us we can close in a couple weeks all
cash it'll be a smooth transaction and
the seller is like yeah that'd be great
so then the wholesaler gets under
contract and then the wholesaler says I
need to come back in to the property
with some of my partners and we need to
completely inspect everything there's
going to be a lot of different people
that are going to walk through and the
seller says okay whatever and then they
bring a bunch of people through that
aren't actually their
Partners they're people that they help
to sell it to and the wholesaler brings
these people through they collect their
offers and then they have a separate
contract that's then basically says that
we are assigning the contract between
the seller and the wholesaler to a new
buyer and that contract is being
assigned for this amount so again the
example before the contract between the
seller and the wholesaler might be for
100,000 and then the contract between
the wholesaler and the actual buyer is
for 110,000 you get to the closing table
the $10,000 goes to the wholesaler or
whatever less you know there might be
closing costs or whatever but he gets
the 10,000 the seller gets
100,000 the buyer pays
110,000 and then obviously there are
closing costs and whatnot but then
that's how all that money gets
dispersed that's basically how it
happens now the the wholesalers do
provide some value in in the marketplace
from the standpoint of they are bringing
kind of quick transactions to the table
obviously if a house is listed there are
a lot of processes that that go into
that and so I understand why some people
would be willing to sell their house for
thousands of dollars less than it might
be worth to List It On the Open Market
so that they can just have a a
quicker transaction with a wholesaler
unfortunately there's a lot of shady
wholesalers in the area I'm not going to
get into all of that right now but
it's not always the best thing for the
seller to to go through a wholesaler
it might actually not be as smooth of a
transaction as they think but that's
usually the sales pitch that they're
getting now we are looking at this from
the standpoint of you potentially buying
a property potentially from a wholesaler
so what does that look like I've done
this several times and like I said I've
helped clients by them here's what you
can expect first off we're going to
start with looking at the house you're
going to use have one opportunity to
look at the property usually it's an
openhouse style walkthr and you need to
do all of your due diligence during that
walkthrough so you really need to have
your contractor handy if you don't have
a contractor that's flexible dump your
contractor get a new contractor you need
a flexible
contractor that isn't just booked out
for weeks and weeks and weeks can
actually go to you know with a day or
two's notice can can go to look at a
property and walk through it you're
going to have that single walkthr
openhouse style
inspection and listen if you're the type
of person that needs to do tons and tons
of due diligence if you're the type of
person that wants to have a full home
inspection and a cl00 which is your
termite moisture inspection and you want
to test for Radon and do all of these
things don't don't even bother don't
even mess around with a wholesaler it's
not going to work out you're not going
to be able to do that you need to have a
contractor that can look at it and make
a quick decision can basically give you
some quick numbers based on on looking
at a handful of things maybe take a
glance in the crawl space look in there
glance at the roof look up there look
around the house etc etc but you're not
going to be able to do a full due
diligence that you would be able to if
you were buying from a home that's on
the market and and again that's part of
the appeal to the seller is that they
don't have to go through all of that now
one thing that's extremely commonplace
at these openhouse style inspections
showings whatever you want to call them
is often times there are just cars lined
up I mean if it's a good deal you're
probably going to be walking through the
house with like 30 or 40 other people
I've run into this multiple times it's
frustrating but it's something that
happens a lot we we had one recently
where apparently there was a guy that
that started to threaten some of the
other people that were there you know
trying to to make them not interested in
the house or something I don't know it's
crazy keep to yourself if you go to one
of these keep your thoughts to yourself
don't talk in front of the tenants or
in front of the seller or whatever you
want to keep your thoughts to yourself
because you don't know what the
wholesaler has told these people the a
lot of these wholesalers don't tell them
the the full story exactly what they're
doing and you may end up messing up the
whole deal by by spewing you know
spewing off and saying whatever it is
off the top of your head you got to be
careful with that and we've had some
situations where some people have
said a little bit more than they should
have at these
walkthroughs so there's oftentimes
going to be a lot of people you you
can't let that discourage you you have
to you know you you still have to look
at it and it's still worth putting in an
offer sometimes you you know even if
you lose out on it I've had situations
where I put offers in I lose out on it
but then the original offer falls
through and because of my relationship
with the wholesaler the wholesaler comes
back to me and says hey you know what
the guy I was working with was just
jerking my chain I want to work with
you I know that your offer wasn't nearly
as high as their offer but I know that
you'll get the deal
done and then in those cases I have
gotten the deal done and so
it's always worth it even if there's
a ton of people to still look at it to
still walk through to still see what
you're dealing with and then usually you
put an offer that's like a verbal offer
so this is very different than for
houses listed as a realtor I never ex
talk I never talk in the world of verbal
offers I mean I might text back and
forth of the realtor and say hey my
client is willing to do this but it's
not nothing's been accepted until
everything is in writing for wholesalers
they operate a little bit more by the
seat of their pants flying by the seat
of their pants they they like to do a
lot of things verbally and then
ultimately they will put it in writing
but if you're again a detailed person
you will not be happy with the contract
that they send I
mean the wholesaler contracts that I've
seen almost all of them are terrible I
dealt with one recently that was one
page hardly had any information on there
I had to write some stuff in and it
it was something else I I cannot believe
you know in South Carolina you can write
a real estate contract on a napkin you
know it it just it has to be in writing
but the actual verb verbiage of it
you know isn't that important as long
as a person doesn't take you to court
but a lot of wholesalers they they don't
have a lot of language on their on
their contract that protects anyone and
that's just unfortunately the way they
do it I don't know why it's not
beneficial for them I think that they
want to keep things maybe simple for the
seller you know not make it like a
13-page contractor that the seller has
to look through and and start freaking
out about if they just have a onepage
contract and you have a seller that's
wanting things to be quick and easy
seller looks at that and says oh okay
well this is simple this is exactly what
I was hoping for so it's good from
that standpoint I guess but really it's
it's not good I would prefer you know at
least a few pages it kind of spell
things out most wholesalers they don't
do that and you're not going to be able
to get them to do that again if you're a
very analytical engineer type of mind
and you need to to see every all the
terms spelled out in the contract
working with a wholesaler probably isn't
going to be the best arrangement for
you you'll have to put down almost
certainly a non-refundable earnest money
deposit
now this didn't used to be quite as
much the case as it is now the the
market has really shifted I guess
because it's more of a sellers Market to
make it more appealing and to be more
careful to ensure that they don't
have people just you know like I said
jerking their chain a lot of
wholesalers now are requiring several
thousand doll of non-refundable earnest
money some up to I've seen up to $5,000
non-refundable and that can be a tough
thing to do but again you have to be
decisive you have to know right away
okay this is the property that I want
for this price if I get it for this
price then I'll put down the money right
that's the way you have to be going into
it you can't be wishy-washy if you're at
all wishy-washy then don't even put in
the offer to begin with because you
don't want to be in a situation where
you're disputing over non-refundable
earnest money or earnest money that you
had put in writing that was not
refundable not a good situation to be in
but you need to understand that pretty
much all the wholesalers right now are
requiring that that's pretty standard
practice even though it's not standard
practice for homes that are listed on
the market in the MLS maybe that will
shift maybe we'll start seeing more of a
shift to that model If the sellers
Market
continues but up to this point we
haven't not not with homes that are
listed on the market by a
realtor and of course you'll need to
be able to come up with the money
quickly a lot of wholesalers don't
require you to to provide proof of funds
although I always do that for my clients
if they're submitting an offer to a
wholesaler just to show that it's
legitimate but a lot of wholesalers
they aren't going to require that but
they will want you to close very quickly
they will expect that you're closing
with cash now I did a wholesale deal
recently that I
purchased that there was a long
enough period they the wholesaler had
it under contract for about a month
and so because of that that gave me
enough time to secure financing on the
property I could have bought it with
cash if I needed to but I had enough
time that I was able to go through a
credit union that was able to to
Finance the deal that's very very
unusual usually the wholesalers want to
close in 10 to 14 days likely not going
to be enough time for you to secure any
type of traditional financing of any
sort and so you need to have the cash or
be able to come up with a cash in order
to do that quick
closing and then you get to the
closing table and here is probably the
worst part of dealing with a wholesaler
is you never know what you're going to
deal with when you get to the closing
table and often times there is closing
table drama and the reason is because
a lot of wholesalers are are again a bit
Shady a bit Shifty perhaps greedy I
don't want to judge but but I've seen
this and there have been times and
and I think I've referenced this in
previous podcasts but where the
wholesaler is actually making more money
than the seller and the you know
sometimes a wholesaler doesn't even show
up to closing and it's just the seller
and the buyer who have never met before
the seller maybe doesn't even know that
there is a different buyer than the
wholesaler he's been dealing with and so
here they get the settlement statement
the seller looks at it and the seller
says I'm selling this house to you for
for 30 or
$40,000 and you're buying it for 80 and
the wholesaler is pocketing the
difference and there have been deals
that have fallen apart at the closing
table thankfully none that I've been a
part of but there I've heard plenty of
stories of deals that have fallen apart
at the closing table because the
wholesaler was not upfront with the
seller about that it can be
irritating to the buyer I always
encourage my buyer clients hey you're
getting a deal on this right you didn't
find this property the wholesaler found
the property and there's value to that
the the property that I just
purchased that I referenced that I
bought from a wholesaler and I financed
the wholesaler these are cheap
properties all right and the wholesaler
made over
$30,000 on it and you know what some
people would be like man that that's
insulting to me that he made $30,000 on
that that's such a huge percentage of of
my purchase price but you know I didn't
bat an ey because he brought me a good
deal and I was happy with that I
couldn't have found that deal on my own
I I didn't have the relationship with
the seller that he had and you know what
it it's worth the $30,000 in my opinion
he he brought value to the table he made
the deal happen and you know what it it
is what it is do I wish that I had saved
that $30,000 absolutely but at the end
of the deal I didn't know that seller I
didn't find that property and if
$330,000 is is what that wholesaler
makes in order to provide that value
I think that it's worth it that's just
my opinion but there is frequently
closing table drama when there's a
wholesaler involved the the good
wholesalers they'll all sit in the same
room kind of like a realtor with Theo
with the seller with the buyer and make
sure that everything goes smoothly but
I've seen seen it done a whole lot of
different ways I've seen it where the
wholesaler doesn't show up at all and
it's just a seller and the buyer and
then the wholesaler collects his check
later I've seen it where the the
wholesaler and the seller go into one
room and then the buyer goes to another
room or where they each sign their
documents at different times there's all
sorts of ways that they do
it and no matter how you skin the cat
it it's it's going to feel a little bit
Shady it's going to be a little bit
awkward
but this is just the way it is and and
unfortunately this is usually the time
when the seller realizes that they made
a mistake that they probably should have
just listed it with a realtor but it's
too late at that point they could
technically back out but then they know
that there's going to be a much longer
process for them waiting for their money
there's you know obviously the
possibility of litigation if the
wholesaler or and or the buyer were to
were to try to come after them
so it it's usually at that point not
worth it for the seller and so the
wholesaler is willing to kind of take
the risk at the closing table that that
that you know it might actually fall
apart because by that point by the time
it gets there the wholesaler is in the
the position of power at that point and
the buyer is as well and the seller if
the seller doesn't like what he sees
there's not a whole lot that he can do
at that point but there are deals that
are out there I I because I've connected
and I've networked with a lot of
wholesalers around here I'm seeing deals
every week that are decent deals that
are good every now and then I'll see a
deal that's great that's the one one
that I purchased recently I've helped
some of my clients purchase ones that
are great just depending on on what
type of properties they're looking for
and so these wholesalers that are out
there they can do a good job a lot of
them don't fully understand what the
market is like they think that they're
presenting you a good deal when they're
really
not and I'll I'll have that happen where
a wholesaler will text me about a
deal that's out there and then he'll
keep texting me about it you know I'll
get a text a couple days later and then
a couple days after that it's very clear
that nobody is interested in this
property because it's not a good deal
shouldn't even be wasting his time
should just pass it off to a realtor and
have the realtor list it but that's
the way the market is right now everyone
is trying to get their hands in the
cookie jar wholesalers if the deal is
remotely good they're trying to get
someone to to buy it get someone to snag
on it and every now and then I see
one that really fits the profile for
what my sellers are looking for and I
present that to them at that time and
then we kind of take it from there there
me as a realtor I still can can handle
the whole process from start to finish
if there's a wholesaler involved I can
still represent the buyer we have to
negotiate with the wholesaler whether my
commission is going to be paid by the
buyer at closing whether that's going to
come out of the the wholesalers
commission obviously it's a lot less
interesting of an offer to the
wholesaler if if if the buyer
is expecting him to pay my commission
I have some clients that when they
flip houses they use me as their
listing
agent and so if there's a situation
where there's a really competitive
wholesale opportunity out there there's
a lot of competition other people
wanting the
property there are some situations where
I'm okay with just kind of connecting
the buyer with the wholesaler maybe I'll
just submit the verbal offer
to the wholesaler and then if it's
accepted then I just connect the buyer
and the wholesaler and I don't do
anything as a realtor because I know
that on the back end I'm going to get a
commission when my client then flips
that house and sells it so there are
some Creative Solutions like that in
order to ensure that someone gets the
property that that you get the property
if you're looking to buy it even with
me involved as a realtor I I just have
to be careful because if I do my job as
a realtor I have to be compensated for
it because my firm has to be compensated
because they are the ones that are
insuring me in case I get sued so
there's a lot of different things
involved like that so at the end of
the day I either have to fully represent
as a realtor and be fully compensated or
not represent at all for all of my
clients that use me I'm always happy to
give free advice I have to give free
advice all the time and I do that
frequently for a lot of my clients in
these
situations so all of that to say if
you're looking at investment properties
I will obviously look for you and get
you set up on an automatic C the MLS for
what's actually on the market but I'll
also be scouring what's off market and
when there are off Market opportunities
I will always present those to you if
they fit your criteria because I want to
make sure that my clients have all the
properties available for them to on
their own and maybe none of the
wholesale opportunities are good ones
for them but every now and then one of
them works out it's not very often but
it happens from time to time and I feel
like with my network that I'm able to
provide as many of those wholesale
opportunities as are pretty much out
there and also because I have
relationships with the wholesalers I can
kind of tell my clients okay this guy's
a little bit shadier than the other guy
this guy does it well this guy doesn't
umI know this guy he owes me a favor
etc etc there's a lot of of of things
that are kind of going on in the
background with the whole sale deal as
well that I can for sure assist with
that's all for today's episode obviously
if you have any questions let me know if
you're interested in investing in real
estate if you're just getting into it or
if you've been in in it for a while but
you need a realtor I'm your guy give me
a shout all my contact information is in
the show notes love you guys stay safe
and enjoy the nice cool weather outside
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