The WholesalerPosted on September 25, 2012 by
Now it’s time to discuss a subject that I have intimate knowledge about, the wholesaler. It seems that no matter which direction you look you will always find a “wholesaler.” From my experience many people are too quick in being self proclaimed wholesalers. Anyone that is truly a wholesaler and a successful wholesaler can tell you that although it is very profitable it is not something one can be learn over night. Good wholesalers are usually a jack of all trades in the investment world. They are knowledgeable about construction, creative financing, determining values and rents, some are investors themselves, and the list goes on and on. When you are dealing with a wholesaler the only thing they are concerned about is the bottom line.
Now that you know what and who you are dealing with you can be better prepared. Many wholesalers will claim to be the owner and in some way they are because, if they have the property under contract as they should, they do have equitable interest in the property. Once you have discovered that the seller is a wholesaler there are two things you want to know as a buyer. First, you would want to know how long they have been trying to sell the property. This will let you know how motivated the wholesaler really is. Obviously, the longer the wholesaler has had it the more motivated he/she is to sell it. Secondly, you would like to know what their spread is between their asking price and what they contracted the property for. You want to know this for one reason and one reason only and it is not to beat down their fee just to beat it down. You want to know this in case your calculated purchase price is a bit lower than what the wholesaler is offering the property for. For example, let’s say you did your due diligence and calculated that you need the property for $50K and the asking price is $60K there is a $10K difference. However, the wholesaler only has a $5K spread so he/she truly can not accommodate your offer. On the other hand, if the wholesaler’s spread was $20K he/she may accommodate if you present a reasonable argument why your offer is $10K less and you are the only serious buyer.
If the wholesaler is an investor as well then it may be a bit more difficult to negotiate the price. These wholesalers are usually more geared towards investing and would sometimes just keep the deals themselves. These guys would usually just keep the deal than give up $10K in potential profit like in the example listed above. However, if you can convince this wholesaler that it would be in his/her best interest to sell the property rather than to keep it you can negotiate yourself a deal. Sometimes you may think that this wholesaler will only be giving you the leftovers but that may not be the case. No one person or organization can keep all the deals that come across their desk. Sometimes they may be willing to let you take a deal off their hands for less if they have a deal they want coming down the pipeline.
As an investor you want to find and work with plenty of wholesalers that are offering good deals with realistic numbers. Wholesalers can be a great source for properties but they area also more difficult to work with if you do not have an established working relationship with them. Once again if you can create a win, win, win you will continue to be successful.