Homebuyers, real estate investors get reality check on Wednesday

Finding a real estate property below market value has grown harder as more buyers chase the same shrinking pool of listings, which has pushed a growing share of investors and everyday homebuyers to look for deals well before they ever reach a public site.

For investors, that search often ends at a wholesaler, an operator who ties up a property under contract and then sells the right to buy it for a fee. The appeal is a faster route than the open market, though it can arrive with similarly inflated asking prices, figures that don’t pencil, and the same address landing in hundreds of competing inboxes at once.

On Wednesday’s episode of the BiggerPockets Real Estate Podcast, a listener wrote in stuck on that decision, unsure whether to keep leaning on wholesalers or start hunting deals on his own.

“When I look at a deal from a wholesaler, I pretend anything they say isn’t there,” said Henry Washington, an active flipper who’s done hundreds of deals and co-hosts the BiggerPockets Real Estate Podcast.

Why a bad real estate deal is usually on the buyer

Washington’s starting point is that wholesalers are a legitimate way to source property, not a category to avoid. Bad operators work in the business, but bad agents and bad contractors do too, and investors keep hiring from both groups without fairly assigning responsibility for deals gone wrong. To Washington, the distinction that matters is less about whether a wholesaler can be trusted and more about how much weight their claims deserve.

His framing puts the responsibility for a poor purchase squarely back on the buyer, which is a reality check for those who have disproportionately removed their share of ownership from the process.

“If you bought a bad deal from a wholesaler, chances are that’s your fault and not their fault,” Washington said.

This logic rests on where the risk actually sits in this type of real estate transaction. A wholesaler’s sheet usually leads with an estimated after-repair value and a repair budget, the two figures that decide whether a purchase pencils. Taking either one on faith is how a buyer ends up overpaying, since both come from the seller’s side and tend to be tuned to make the property look ready to sell.

“The only thing that matters on a wholesaler sheet when they send me a property is the address so I can do my own due diligence,” Washington said.

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Everything after the address becomes the buyer’s job. Pull the comparable sales, build a repair estimate from the ground up, and settle on a price that’s irrespective of the number printed at the top of the flyer.

While this conversation was for investors, the core principles apply to everyday homebuyers as well. Wholesale deals are not the only ones where an appropriate level of due diligence is necessary. Even in more straightforward real estate transactions, the seller’s side can paint a much prettier picture than what a buyer is actually inheriting.

As for Washington, his habit in wholesale deals is to land on a number and send that offer no matter how far under the asking figure it falls. A wholesaler is free to pass, and many will, but a buyer never absorbs a loss on a price they set themselves.

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The questions to ask in wholesale deals

The second risk in wholesale deals is tougher because it has nothing to do with underwriting. Laying out some of the logistics and complexities of these deals, Washington talked through a process where a wholesaler is supposed to control a property, holding it under contract before selling anyone the right to buy it. However, this is not always how it plays out.

As a hypothetical, a wholesaler could take a property already under contract at $100,000, walk it to a buyer at $105,000, and keep the $5,000 gap as a middleman with no real stake in the outcome.

Washington’s protection against this is a short list of questions asked before any money changes hands.

“I would always make sure you ask the question of the wholesaler, ‘Hey, are you in direct contract with the seller?’” Washington said.

He also tells buyers to test a claimed record instead of accepting it, asking how many deals the operator has closed and which title company handled them, then calling that company directly to confirm the sales were real and closed without trouble. Then, a final safeguard lives in the paperwork.

“Never sign an assignment contract without seeing the original contract,” Washington added.

Again, these are wholesale-specific safeguards, but the same buyer behavior can benefit anyone looking to purchase real estate. Being willing to ask questions, and walk away if the answers aren’t right, is the type of discipline that can save anyone from getting burned when buying property.

Key takeaways for investors and homebuyers vetting deals

Treat the wholesaler’s sheet as an address and little else: Washington said the only line worth trusting is the property address, and every value and repair figure should come from the buyer’s own comps and budget, with an offer set independently even when it lands well under the asking price.
A deal that goes bad is usually the buyer’s own doing: Washington said accepting a wholesaler’s stated after-repair value or repair costs without checking them, rather than underwriting from scratch, is what turns an off-market purchase into a loss. This same principle applies to all real estate deals.
Confirm the wholesaler actually controls the property: Washington said buyers should confirm the wholesaler is contracted directly with the seller, a guard against deals that get marketed but were never locked down.
Demand the original contract before signing an assignment: Washington added that a buyer should never sign an assignment without first seeing the original agreement.
Being willing to walk away is critical: Homebuyers who can sense when a lack of transparency or consistency on the sellers’ side spells trouble can save a bad deal by walking away.