IC lesson: How NOT to treat your wholesale buyers
I seem to spend as much time telling wholesalers what NOT to do as I do telling them how to do their businesses.
That’s because, unlike most wholesalers, I have one foot planted firmly on either side of the wholesaling fence. I can tell you what to do, because I wholesaled about a deal a week last year. I can tell you what NOT to do, because I was the buyer of about a dozen deals from wholesalers, and about half of those had problems that I had to straighten out before the deals could close.
That’s right, I just said that I had to do the wholesaler’s job FOR them, so that I could pay them and get my properties. And I was only able and willing to do that because I am, myself, a wholesaler—a typical buyer wouldn’t have the first clue how (nor the motivation to) “fix” their deals for them so that they could go to closing.
Good buyers are both a crucial resource in your business AND the party to your deal that can make your life difficult beyond the one deal on the table right then. Annoy, tick off, or treat a SELLER badly, and you won’t get that one deal. Do the same to a buyer, and you’ve lost a source of repeated business, AND risked that the buyer talks you down to other potential buyers, as well.
Your job as a wholesaler is to make my life as a buyer EASY by finding a negotiating a deal so I don’t have to. That’s why you get paid: not for “finding a motivated seller”. Your buyers want to look at the deal you’ve negotiated, approve it, and go to closing with no hitches or surprises in that process. But apparently, some “wholesalers” haven’t gotten that memo. Here are 5 things I’ve experienced more than once in the process of buying deals from wholesalers in the last year that you should never, ever do:
- Don’t give me incorrect numbers, period. There are a number of local wholesalers who are blocked from my cell phone and email, because they apparently either have no idea what houses are worth and what repairs cost, or they’re liars, or they’re making dumb assumptions about how I spend my time. When a wholesaler tells me that a house is worth $75,000 when the highest sale price of a fixed up house in the entire neighborhood for the last year is $65,000, I wonder if they’re stupid, or lazy, or crooked, because it has to be one of the three. When they tell me it’s going to cost me $5,000 to “paint, carpet, replace the plumbing, re-attach the wiring, fix the roof, update the bathroom because the plumbing thieves broke the toilet and vanity and also ripped up the shower”, I can only wonder whether they think I’m going to spend my evenings and weekends doing the work myself or whether they think I get my materials for free. Because, unless they’re deeply uneducated about the actual costs of getting work done, it has to be one or the other.
- Don’t ever tell me you “don’t know” ANYTHING about a property. I’m amazed at how often wholesalers tell me that they don’t know whether a property has its plumbing (I’ve gotten excuses ranging from “I don’t like going into basements”, to “I couldn’t get in because the door was jammed shut”. And yet you can tell me what you want for a property that may or may not have $2,000 in plumbing repairs to be done? How am I supposed to make the decision to buy it for that price? You’re making it MY problem to find out what the condition of your property is? I don’t think so. Solve the problem BEFORE you call me.
- Don’t make your paperwork messes my problem. When you assign a contract to a buyer, you’re asking the buyer to take on both the rights and the responsibilities outlined in that contract. When your purchase agreement is messed up nine ways from Sunday due to simple scrivener’s errors (mixing up “assignor” and “assignee” in an option, making the buyer the seller and vice versa), unclear or incomplete boilerplate language (no mention of how taxes will be prorated, no clear recitation of how closing costs will be split at closing, language that states that the owner must give up possession of the property 30 days after closing, but no mention of what happens if he doesn’t), and so on, you’re asking your buyer to pay you to take on a problem you created. Get your contracts right—by which I mean clear, enforceable, and filled out correctly. And by the way, don’t get angry, as one wholesaler did, when I tell you to fix it before I pay you to get it assigned. It’s not my job to nail down your deal.
- Don’t waste my time with “deals” you don’t even control. Not once, but TWICE last year, I asked wholesalers point blank whether they had properties under contract before I went to see them, and was assured they did. Then, when I told the wholesaler I wanted the deal and needed to see the contract assignment, I was told that there was no “real” contract. In one case, it was “verbal”, in the other case it was literally written out on a piece of notebook paper with just a price and closing date, no prorations or other terms. Neither of those deals closed, as the “understanding” of the wholesaler and his seller turned out to be different when it came to signing a real contract—and I wasted 3 hours of my life that I’ll never get back.
- Don’t ask me for money when you don’t have your ducks in a row. As you know, if you’ve ever actually read or listened to my home study course, I get my assignment fees when I assign my contracts. But before I ask for money, I am able to show my buyer a clean title search with insurable title, and can give my buyer a firm closing date. People who try to sell deals to me want money before even THEY know that the seller owns the property, and can sell at the agreed upon price and terms because there are no liens or title problems.
And my favorite stupid wholesaler story of the year comes from the gal who tried to collect a $10,000 wholesale fee from me on a short sale she’d negotiated. Now, mind you, she had no title search ordered, nor had the bank informed her when they’d be ready to close—and short sales are infamous for falling apart at the last minute, or taking months to close.
But that’s just normal-stupid. The super-stupid part was that the assignment agreement she tried to get me to sign contained this clause:
“It is agreed between assignor and assignee that assignment fee shall be non-refundable under any circumstances”
In other words, once I paid my $10,000, she and I had already agreed that she wouldn’t give it back even if the title was hopelessly screwed up, even if the bank withdrew the acceptance of the price, even if the house burned to the ground before closing.
And her last words to me, before I hung up the phone and blocked her number? “I don’t see what your problem is, I’ve already done all this work on it and I deserve to get paid. Plus, no one else has ever complained about it.”