Do’s and Don’ts of Wholesaling a WholesalePosted on August 1, 2015 by
Wholesalers send me deals daily but I have started to notice that many of these wholesalers are wholesaling another wholesaler’s property. Before proceeding, I want to be clear that I have no issue with this but there is a right way and a wrong way to go about it. Also, understand that if a buyer/investor receives the same property from multiple sellers he/she will contact the seller with the best price. Wouldn’t you? Keep in mind that you did nothing to acquire this property. You merely sent it out to a buyers list you put together, which with today’s technology takes only a few minutes. So what should you avoid and what should you do when wholesaling a wholesale?
Let’s list a few of the major DON’TS:
- Don’t wholesale another wholesaler’s property without permission. It is best to ask and establish a long working relationship with that wholesaler/seller. Just imagine if you end up having a buyer for the property but the wholesaler/seller has sold it or maybe he/she is not interested in working with you. It is best to get all this out of the way first.
- Don’t add on a ridiculous fee to the price if it is not justified. The last thing you want to do is be known as the wholesaler who markets deals with very little to no potential profit. What’s worse is if the property is being shopped by multiple wholesalers in the market area and your price is the highest.
- Don’t waste time marketing another wholesaler’s “deal” until you have seen a contract. Many times a wholesaler will claim to have a deal under contract but in reality he/she is still just waiting for it to be executed. Pre-marking is fine but don’t spend too much time on it until you see a contract.
- Don’t contact the original seller of the property. If you run across the seller at the property and want to know more about the condition of the property or the neighborhood that is fine. However, do not discuss price, closing dates, mention wholesaling, etc. These are items you discuss with the wholesaler/seller you are working with. The last thing you want to do is jeopardize another person’s contract or be accused of trying to go around the other wholesaler to contract the property yourself.
Now let’s list a few of the major DO’S:
- Do get an agreement between you and the wholesaler/seller. The best thing you can do is get an option contract but most wholesalers will not do this. Now, if you are certain that someone on your buyers list will buy it I recommend you contract it. Make sure you or your buyer can close because this is your reputation on the line. At the very least agree that the person with the first contract and down payment gets the deal. Hopefully, the wholesaler honors the agreement and does not try to hold on to it until one or his/her buyers is ready to commit.
- Do your own analysis and/or due diligence. When you put out an investment property you are in a way saying, “Hey everyone, this is a deal I stand behind. I have analyzed it and believe it is a property you should purchase as an investment.” As most of you know there are many “wholesalers” out there that have no idea what they are doing. They are simply contracting properties, marketing them, and hoping they find a buyer. Before you market a deal make sure you qualify it beforehand.
- Do ask for a copy of the contract. I mentioned this earlier and I mention it again because it is that important. This is even more important if the contract will be an assignment. Some wholesalers will attempt to simply give you an assignment page to sign but DO NOT SIGN!!! By signing the assignment page you are agreeing to all the terms that the wholesaler agreed to with the original seller. Ask for a copy of all the documents that were signed between the seller and the wholesaler. The wholesaler may have agreed to pay closing costs, title policy, a judgment, some back taxes, etc. that you may have never agreed to doing. These added costs could make a deal less attractive.
Investment real estate has become a small community where everyone knows or has heard of the people in their market. You all go to the same investment groups/club, the same happy hours, use many of the same service providers, and go after many of the same deals. When one wholesaler gets a deal, you can work together to get it closed but make sure it goes smoothly by following the do’s and don’ts provided here.