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Monday, May 9, 2011

Comentary on "wholesale sellers"

First off, Happy Mothers Day. Everyone’s got one, everyone should appreciate theirs.

So on this Sunday, I was posting a few rental ad's, and happen to see a couple "wholesale property" video's on YouTube. I never understood why people believe the "wholesale" idea. To do so, one would have to believe that the wholesaler has an abundance of properties that cost less then retail, and just can’t wait to sell them off. If they did have quality properties for below retail, why wouldn’t they just list them and get full market price? They often sell them as “good rentals”. Again, if they would make a good rental, why are they so quick to sell them?

The reality is, banks sell their houses through realtors. They just do. Before it hits the market, it will have been viewed by an appraiser, a realtor who is not the listing agent, and a property inspector. The only thing that goes to auction, are groups of unsellable homes that were determined to be too damaged, or carried too many taxes etc to make it cost effective to list. They get sold for pennies on the dollar, and there's a reason, they are nightmares to deal with. Often back taxes must be paid, there are tickets against the house, past due water bills, and clouded titles.

Perfect example. I had a great guy contact me from California about 2 years ago. He had just picked up a "great wholesale property" from another local company. He asked us if we would manage it, which of course we did. He had paid 12K for a 3 bed bungalow in Redford. Market MLS prices for a foreclosure in the area runs about 16-18K. On the surface, great deal right?

Well he received this on a quit deed. This means, taxes and water had NOT been paid at the closing. It carried a 1700 water bill, a number of violations from the city, and nearly 4K in back taxes. Suddenly, not nearly such a good deal.

The wholesale company had set this client up with some contractors, who of course, had done the repairs without any permits or city knowledge. Not only did this result in a number of costs and hours to clear up. The repairs we're done poorly. On the surface, they looked great. But the plumbing wasn't actually connected, outlets were wired wrong, and a "new" furnace with a cracked heat exchanger had been installed (heat exchangers keep fresh air and carbon monoxide separate in a furnace).

Needless to say, once he added it all up, it would have been less expensive as well as faster to purchase a property through the MLS, with a proper closing. He’s gone on to do another 15 houses with me, all done the traditional way. And every other house we’ve done, out performs his original property year in and year out.

Beware of what we in the office call, the "Big Watch Guys". You know who I'm talking about. All their info has a picture of them in an expensive suit, or with some big house in the back ground. And they generally have a watch the size of a wall clock on their wrist.

No matter who you include in your team, it's imperative those people have real experience. There's no room for those looking to get rich in a few deals. It's like any other business, success is built over time, by doing 1 solid deal after the next. Taking short cuts never leads to quick success.

About Me

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Roseville, Michigan, United States
Detroit Property Management - www.MetroDetroitRentals.com. - www.DetroitRealEstateInvesting.com We are one of the fastest growing Investment and Management Companies in the area. We have a unique blend of talents, that no one else can match. A licensed, Appraiser, Builder, Realtor, our insites into the market have allowed to double in size, during the "worst real estate" market of our lifetime.