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Sitting on capital and wondering if a wholesale deal is actually a buy signal or just a finder's fee I should ignore

I keep getting sent deals where the wholesaler wants $18,000 to $24,000 on top of a $310,000 to $340,000 acquisition range in South Jersey. The comps they send support an ARV around $420,000, which looks fine on paper until I pull my own sales and land closer to $395,000, sometimes $388,000 on the slower stuff. At $388,000 ARV with a 70 percent rule the max I want in the deal all-in is $271,600. Add $45,000 in rehab, which is what the contractors I trust are quoting on these, and I'm at $226,600 before the assignment fee. Every one of these deals comes in at $310,000 plus the fee, so I'm $100,000 wide before we even argue about carrying costs. I have the capital to move, I'm not stretched waiting on financing, so the gap isn't a borrowing problem. The deals just don't work at what they're asking. What I'm actually sitting with is whether the fee itself is the tell, meaning if a wholesaler needs $20,000 out of a deal to make it worth their time, did they buy it right in the first place or are they just passing a bad purchase to me with a margin on top. I've seen a couple of direct-to-seller situations come across from a friend of mine who bird dogs occasionally, no fee attached, same price range, and those pencil out. So the question I'm sitting on is whether wholesale fees in this market are structurally incompatible with the numbers, or whether the operators sending me deals are just the ones who overpaid.

2 replies

The operators sending you deals overpaid, full stop. A wholesaler who locked something up at $295,000 thinking they'd flip it to a flipper for $310,000 plus a $20,000 fee already told you everything about their underwriting when they signed that contract.

The thing I have never seen work is negotiating the fee down and watching the deal suddenly pencil. Every time I have tried that in a thin-spread market, the wholesaler shaves $5,000 off a $22,000 fee, calls it a win, and you are still $80,000 wide. Your bird-dog friend is the actual signal: direct-to-seller at the same price range clears, which means the acquisition price is the problem, not the existence of a middleman.

South Jersey wholesalers right now are largely underwriting to 2021 ARVs, so that $420,000 comp they send you is probably a Q3 2022 sale on a finished product that no longer exists at this rate environment.

The direct-to-seller comparison you ran already answered your own question. Same price range, no fee, pencils out, that is not a coincidence.

Atlantic County 2022 I took a deal at $298k plus $17k assignment on a house the wholesaler swore comped at $410k. My pulls landed at $379k, sold 14 months later at $371k after two price drops. The fee was not the problem, the entry was, and the fee just made a thin deal impossible to survive.

A $100k gap is not a negotiation, it is a sourcing mistake they are moving off their books and onto yours.

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