EarlToms Podcast - Wholesaling Real Estate

The Role of Wholesalers

June 29, 2021 EarlToms Episode 37
The Role of Wholesalers
EarlToms Podcast - Wholesaling Real Estate
More Info
EarlToms Podcast - Wholesaling Real Estate
The Role of Wholesalers
Jun 29, 2021 Episode 37

In this episode EarlToms discusses the role of a wholesaler in relation to the seller and the buyer. 

For more information to help grow your business visit https://EarlToms.com


Show Notes Transcript

In this episode EarlToms discusses the role of a wholesaler in relation to the seller and the buyer. 

For more information to help grow your business visit https://EarlToms.com


Welcome to another episode of EarlToms podcast. Today we're going to discuss the right ways and the wrong ways to approach a potential buyer. 

One of the main issues that that I've seen, since I've been in this business, because I'm both a wholesaler and an investor. As I've said before I use the money for that I make wholesaling to buy properties to hold. So I understand from both perspectives, and a lot of times when people send me properties, I don't know if I'll actually buy it for myself, or if I wholesale it. But what it what it does, though, is it always keeps the prices consistent. Because what I'm willing to pay for it doesn't really change, whether I'm wholesaling it, or if you know if I'm if I'm buying it for myself as an investment, either to hold a flip. So one thing that always that always do in my approach, whether I'm wholesaling or barn, is always look at it as though I'm the one that is about to ask someone for their money. 

So what always try to do is, buy it in that way that is going to make their life a lot easier. And what that means is, is whether I'm wholesaling or buying myself to keep you make money, when you buy a property, you don't make money when you sell it. So if you don't buy it the right way, you're not going to make money because you're not going to be able to sell it. And that's what a lot of wholesalers struggle with. So that helps me as I go through the process. Whether I'm wholesaling or buying that, you know, if I have an investor, call me a day after I close it and say, Hey, do you have anything that you can sell, you know, hey, I still have something that I can sell, I was planning on, you know, holding it or flipping it. But I've got this an inventory that I haven't done anything with yet. So can I sell it to him. So that's why my prices don't change whether I'm wholesaling or I'm actually buying. Now one thing that the majority of the wholesalers that are out there misunderstand is they don't control anything. There's they have this, this idea that I have it under contract. So I control everything, that's actually not true. You're basically a beggar in the entire process, you're begging the seller, to allow you to, you know, buy this, put it on the contract there dependent on you to keep your word. And then when you look at it, as far as a buyer goes, you're basically a beggar on that as well, because you're begging a buyer to give you their money so that you can keep your word to the seller, and let the seller get their money. You also get paid in the process, but you're begging for lack of a better word. In the entire process, you don't have any control over whatsoever, the seller can back out of that contract. And there's not really a whole lot you can do. Because I've said it in countless episode episodes that if you don't have the means the financial means whether it's cash or financing to actually purchase that property, then you basically broken the law and committed fraud because you didn't have the means to buy that property. So therefore you have no legitimate right? To put that house under contract. 

So when you go when you try to sell the title or something like that, if a seller ever wanted to challenge that you could wind up in jail, because you have committed real estate fraud. The the way that that you kind of get through all of that is you understand your place in the process, to be able to accommodate both sides, you're the mediator, that's really all you are lists and what I try to get across to people is as less less think of a seller and a buyer, as a husband and wife in a marriage. You're in the middle, trying to make everyone happy, so that it's over. You're not always going to make everyone 100% happy. But as long as as they can live with with what's there and come to an agreement. Then it can be resolved. And I can end and when it ends is when you close and you get paid. So that's how you need to actually look at what what your role is in the process when you're wholesaling. You don't have any control. Most of us that are out there, I know I did it when I first got in. Like I said, if we don't have the means to to actually purchase it, we're breaking the law, we're making Miss representations of I'm a cash buyer, those kinds of things. So you're, you're walking on thin ice as it is, and a lot of a lot of wholesalers don't realize this. So when they get a property under contract, and then they wonder why it doesn't get sold, it doesn't have anything to do with the investor, you get in, you get frustrated with the investor, because they they tell you, you know, hey, I need to do this. And you go, we can't do that. You messed up, it's your job, to get it under contract for the right price and the right terms, so that you can facilitate your buyer to be happy, welcome them to, to actually close on that deal in a way that they're comfortable. Because at the end of the day, the people on both sides of it, control whether or not you're going to make any money. 

So when you take this approach that says, I control everything, you're not going to do this, you're not going to do that you're not you're not gonna have a successful outcome, the majority of the time, you might get lucky a couple of times and get some deals closed. But for the most part, the the buyers, the investors are going to look at you as someone that is that is difficult to work with. And they're gonna stop wasting their time with you. 

Excuse me, they I've got an example of recently that I can basically give on this, um, we already have two houses on the street. We bought from this wholesaler, six, seven months ago, I blocked his communications because he has come he is he's just so difficult to work with, he doesn't listen to anything, he knows everything. He tries to intimidate you and tell you exactly what's going to wind up happening. So my deal is you can't put a price tag on peace of mind. I just removed him from my life or tried to the the partner that I have in these in these properties are still getting his text blast, even though he's unsubscribed from, you know his email because he's an older guy, he doesn't know how to block on the phone. But I have an idea after this deal he he will learn. So basically what happens is is he sends this, these these three houses to my partner on the street. And so the partner calls me and says, Hey, can we look at these, you know, I'd like to have five on the street if you know if possible. So I say okay, I reached out to the guy had to get his number from my partner, because I've already taken it out of my phone, just like I said, removed him from my life didn't want him anywhere near. So I kind of reach out to him, I say, you know, can we look at the houses, okay, we can go look at the houses. So when we go down there to look at the houses, he's only got one house under contract, my partner is working with him on, you know how much we're willing to pay for it. under the assumption everything is in good condition to have the houses have tenants in them, even though they're not really paying anything. So they wind up getting getting removed so that we can have market rent on them. One of the houses was was vacant. So I looked at at one of the houses and just walk down the street to look at the other two in the front.

So I'm telling, you know, hey, there's a tree in the yard. So we're gonna need to knock $1,000 off, you know, to take care of that, that tree, hit, I'm like it and I basically tell him, I do the real estate part of this partnership. He does the contracting part of this, and I know he's gonna want $1,000 off. For this tree. It happens every single time. Now when you look at the cost of materials, that $1,000 is going to be needed. So he basically agrees to it. While we're standing on the street. We get back and I calling because I'm just trying to be nice about it. Then I say which property Do you Want me to take the $1,000 off? Because I know when you go for certain deals like this, you have one house under contract for less than you have another house. So he says I didn't agree to that. And I just tell him, I'm sorry. This is what we agreed to, this is what we're going to pay for him based on right now, with the inspections coming. What would which one would you like the price to be reduced on? I guess he realized that wasn't going to back down off of it. And after constantly trying to argue with me, he finally agreed to it. And I sent him contracts through DocuSign. And he tries to tell me, you know, hey, I'm gonna sign them on Monday, because I sent them Friday afternoon, I'll sign them on Monday, I'm gonna go, Okay, this is another, you know, one of your childish acts. Go right ahead. 

So on Monday, he rolls around and says there's blank spaces on the contracts. I pull up the contracts that had been sent to him through DocuSign, there's no blank spaces anywhere in the contract, everything was typed out. So he says he prints it off and changes some of the things. And when, when he was in the process of this, just to avoid more headache with him, I went ahead and printed contracts and hand wrote every single area on the contract that needed to be filled in, send them back to him. And he said, there were still areas on the contract that were not filled in. And I have copies of the contracts. So I know, he's telling the story that were hand written. And what he was doing is changing the closing date on two of the three. And I put a closing date of July the 19th on there, because it was a Monday, and we wrote the contracts, June 19. As when they were originally written, but it took until the 20s you know, to actually get everything situated. So he put on there July 18, which is a Sunday. We're not going to call this on Sunday, but in order to just move him further out of my life, I went ahead and signed the contracts because a Friday till Monday doesn't really bother me. Well, then we wind up, you know, sign and other documents, things of that nature, have haven't had a single issue out of DocuSign didn't have one that day with other documents that were being sent out. It was only his. 

So in the contract, it basically says, I have 21 days to inspect. You need to grant access, things like that normal things that are in the contract. And what winds up happening is is he I asked him I say Are we good to go, you know, for a home inspection on this day. And this time, because it had already taken him a week to get these these times scheduled. And we were the home inspector was about to have to push it back, he had already pushed the button one time because he wasn't getting us access to it. So I asked him if we were you know, good to go for both houses, own, you know, that this day in time. And he said, uh, he sent a text back, but basically asked, Do you need to see them? And I said, Yeah, I haven't been inside them when I don't buy anything unless I put my eyes on the inside of it. And he said, Well, that's not a good idea to have me in the home inspector show up. So I just apply back to the barn without not seeing it is not a good idea. And you know, I don't buy anything unless I actually physically inspect it. He picks up the phone tries to, you know, basically overtop me, intimidate me, whatever you want to whatever you want to call it. And I basically just told him, I said, Look, we've gone down this road too many times. We're the ones that that have the money. We're not spending money unless it's all in our terms. I can back out of this contract tomorrow because it's got the color of the sky if I want to. You can read it. And you can see exactly what I'm talking about. Or we can see the the contract. Well, he decides he wants to tell him ask me where I'm at because we need to talk. And I just told him I said look, buddy, when you call him down, you send me a text that tells me whether or not you want to proceed with these contracts and get these things inspected. Or if you want to cancel the contract because we're not buying, unless we see. 

So instead of replying to me, he responds to my partner. And my partner basically understands what he's doing. So we're going this morning, because I told him, I said, Look, he's not gonna be there, he's sending his little partner out there, he's not gonna be there. So why don't I just stay back, and you go out there, and you look at him with, you know, that way. You know, the people that are not getting alone are not involved, you don't know his partner, he doesn't know, you. Just see if the see if the deal is there. And if it's not, it's not. And he, you know, he agreed to that he was because we're both kind of rational people, neither one of us get attached to deals. But this wholesaler, by the way, he conducts himself, we'll never sell us another house. Because we've given him enough opportunities, this will be the fifth house if we get all three of them. So by the fifth house, we've we've purchased from this guy, and every single time it has been a headache, he doesn't. He doesn't understand or doesn't care how investors buy. I don't know many investors that will buy a house sight unseen, if they do porn in my direction, because I can sit there and sell them many houses without giving them an a report on what kind of condition it is and sell it to them for this price. Personally, I would never do that, because I don't think that's ethical. But you know, there are wholesalers out there to do this. So we're going are going this morning to do the inspections all around lunchtime. I don't know whether or not we're going to get the the three houses that are involved in this. But the the moral of the story is, don't go into a deal like you're the man, because you're not when you're wholesaling. 

And I do it myself. When I'm wholesaling. I am the beta, the buyer is the alpha every single time because it's their money I'm trying to get. You're thinking of it with a, you go in and you try to buy a car, anything that you're trying to do you go in, and that person is trying to appease you, because they're trying to get your money. You look at a car sales, when they say $600 a month, and you go, I can only afford $550 How can we get down to this price. And you sit there because there's there's you have a limit is $550 is what you can pay, you can't get to $600, you may actually have to change and move to a different car. But $550 is all you can pay every month, and you know that so it's the salesman's job that's sitting in there to go Okay, well, how can I structure this deal so that I can get them this car for $550 a month? Or are we just gonna have to move to a different type of car to meet their payment. It's, it's not the salesman's job to sit there and say, Oh, $550 is all you can pay, I don't care, hey, we're gonna sign you up to $600. And you're gonna walk in there, and you're gonna buy it, and you're gonna drive it off my lot. There is not a car salesman on this planet, that would be in business more than a day doing that. It's just not possible. 

So when you're wholesaling, stop going into it as though you're the mind. Because you're not. I'm not when I wholesale, what I buy, I have a little bit more say in what I'm going to do, and the terms that I'm going to agree to, but my process never changes. Because if I wholesale or I buy, I still put my eyes on it. Because I have to make a representation to a buyer of what kind of condition it is whether or not you know, it's a good deal for him something, you know, those kinds of things. If I'm buying it, I have to know what I've got to fix. If it's a good deal, that nothing changes about the process. But what changes is how I treat after I've looked at so if I'm buying it, then I know I'm going to just write the check for it. So I say okay, here's the check, tell me when to when we're ready to close, give me the hood. We'll move forward. When I've got a buyer on the other side, that buyer says okay, well, you've seen it. You've given me a lot of pictures, you know, I can get a good idea of what it is But I still need to send, you know, myself or a contractor, whoever it may be out there to look at it, you have to make that available to them. If you think that's going to be an issue, then you take them when you originally looked at it, so that they, you only are in there one time. Because if you're actually wholesaling the right way, you already have an idea of which buyer you're going to send this to, and which one is going to actually purchase it from you. So you don't have to sit there and send it out on a mass list and this and that. Because if you buy it the right way, and you treat your investors the right way, you're never even gonna have a buyer's list. I've never used a buyer's list, not a day in my life, have I ever used a buyer's list, because I know which houses are going to fit which investors. 

So when I put it on the contract, it gets closed, because I'm buying it the right way. And I'm buying the the houses that meet their criteria. So that's my job in the wholesaling process, it's providing them an easy path to invest. It's not your going to do what I say when I say it and how I say it. That's not how this business works. So when you are going through the whole process of it, you buy it the right way, you compromise on the terms for the the seller, but you're also looking forward. Because when you're looking at a house, you should have an idea of what buyer is going to be interested in it. So you're looking forward on that compromise that you're making with the seller. And figuring out whether or not that's going to work for the buyer. So what you wind up having to do is kind of compromise a little bit more of the seller, to say hey, and tell them ahead of time, I'm gonna need access to it, I'm gonna bring bringing an inspector contractor over to, you know, to look at these things. So and the way that I always do this, as I say, so I can hit the ground running, when we close, I don't have a wait time, when I'm bringing the contractor out, after our clothes, I don't get a surprise after our clothes, I can plan for it. And and by the time that we close, I'm ready to go. That's the way that you get through that with the seller so that when your buyer says hey, I need to send my contract or my Inspector, it's already been discussed with the seller makes the process easier. And then the buyer says, Let's use this title company. And you say, okay, works for me. Because it doesn't matter. If you if you double close or you assign whichever one it is, it doesn't matter. Because you go when you're providing a service. 

If you're dealing with those buyers that are more worried about what you're making, than what they're gonna make, then I've said it many times before, you're not gonna be selling them many houses anyway. So don't worry about it. Find the ones that are that want everything to work for everyone. And you'll be a lot happier. So if you're going in with the like, what's your contract with the seller you already have in there, buyer to choose title and attorney. Okay, that's great. Because now, whoever you're selling it to is the actual buyer, let them pick it, let it let their life be as easy as possible. And you will close more deals. If you take the approach of this guy. You're not gonna sell that buyer many houses because they're gonna look at and go, You know what? It's just too difficult to work with this guy. He doesn't listen. He tries to intimidate you. He sits there and gets on the phone says Where are you at? We need to talk. Like he wants to come fight. And I don't know where you're from. But I have a large family. I have three sisters and a brother. This would not be my first rodeo. I'm not gonna say I would sit there and win and I don't want to get into a pissing contest. But I can promise you I am not going to be intimidated because I am the youngest of all of the siblings. So I got my you know what kicked many a time growing up. But I try to be calm about it and say when you calm down, you give me a you give me a text that says Do you want to move forward? Or do you want to cancel the contracts? And hopefully they realize I'm acting like a five year old child. I need to calm myself down. And then a real analog of what I'm doing and move forward. 

So I can get these deals closed. Because people like like that. I mean, he's sitting there making. I mean, if he struggles this way with with selling houses, I can only imagine what he's got him under contract for, he might be making $2,000 or $2,500 a house. If he's making more of it, it would surprise me. I mean, he could very well, but it would surprise me. It's just, he's, he's not a very inviting kinda person, it's a, we have a problem, let me intimidate you now, try to strong arm you into doing what I want you to do. Not realizing I don't have to buy this. And now he's two weeks into his contract. He just lost his whole bag, because he's not gonna find another bar that goes over there and get too close by the time his contract expires. So let's go make his life even more difficult having to come up with lies to tell the seller, oh, we're waiting on title or we're doing this or we're doing that, instead of just saying, You know what, I got a buyer, I'm gonna make money on it. Let's just make it easy. 

So what I want everyone to do, when you're wholesaling is realize you're the beggar on both sides of it. Do not in any ways act like you're more than a beggar on either side of it. Now, I'm not saying give away the house, when you go and get it on the contract, or when you go to sell it. That's not what I'm saying as far as the beggar goes. But you don't have a legitimate legal right to be able to do any of it. Because an assumption, as you probably don't have the actual financial means to be able to put that house on the contract anyway. So if you push it, eventually, you're gonna find that homeowner that has an attorney friend and says, you know, hey, they showed up in a beat old old Camry, and I'm promise you, they didn't have enough money to buy this in the first place. And then all of a sudden, they gonna return, turn it over to the attorney general, the Attorney General was gonna look in look into you. And then all of a sudden, you're gonna be dragged into court, because you tried to intimidate somebody you went at it hard. Instead of winning it as the backer. 

When you go in and as the beggar. You don't make enemies. You make friends, you make referrals. You provide a service that the seller and the buyer are happy with, and they want to come back for more. That's the point I want to get across to everyone in this. You can make money, but you want to make money long term, not 1, 2, 3, 4, or 5 houses. There are certain clients out there, I've made hundreds of 1,000s of dollars off of because of the way I treat them. There's clients out there that have given me an offer on something that I would have made $40,000 or $50,000 on and I said you know what, that's too much. Give me this. And we'll move on to the next house. And they appreciate that. And they come back. And then when you need an extra $1,000, $5,000 or $10,000 on a deal. And then it's potentially there. You get it back. Because it's a working relationship where it's a given take how a marriage works instead of going through a divorce. Because no one can agree on anything. one side's trying to storm the other side. So don't be the wholesaler that I've that I've described in this in this episode. 

But with that, I want to wish everyone luck. Prepare for what's coming. The market is about to get start getting flooded. I've talked to many realtors, many bankers. It's coming. So keep an eye on it. Pay attention to what's going on on the ground. As always telling me one of the most successful wholesalers and the most successful people in real estate are the ones that are out there beating the pavement because you're talking to people you're getting a feel for what's going on. You're not just sitting there waiting for the phone to ring and have no idea what's going on. So the business is about to pick up. Prices are going to start falling. Be prepared for plan for start looking at different financial and economic indicators so that you know where your market is. And when this when this breaks open, you'll make you'll make a good amount of money because you'll wind up having them having people For the need to sell the house a lot faster and are willing to excuse me, were willing to work with you. Because they're in a more, I'm not gonna say desperate situation, but a lot of times that's what it is, but the time becomes const. They need, they need a decision, they need a resolution within 30 or 60 days, or it impacts them for the rest of their life instead of what we've been going through for the last four years that people are not as fast moving. They're, oh yeah, we can sell it, we'll do it this you know, so you're gonna get better prices, you're gonna have people that are ready to move a lot faster. But you need to prepare for it and need to plan for it to be successful when it happens. 

We're gonna draw this episode to a close I hope you've enjoyed it if if you need some more help growing your business, run over to EarlToms.com. There's plenty of resources over there to kind of show you things that you can do to be able to put the foundation in for your business. But again, that's EarlToms.com. 

We will see you in a couple of weeks with a with another episode. 

Thanks for listening