How wholesalers can overcome negative stereotypes
When I got into this business five years ago, I quickly picked up on the negative connotations associated with wholesaling. I also quickly understood why there were so many negative stereotypes about wholesaling and wholesalers. In my market of Indianapolis, there are many legit wholesalers that are truly trying to help people. But for every legit wholesaler, there is another one cutting corners, chasing the quick dollar, and building a business on dishonesty. From talking with others, the previous statement can be said about just about every market throughout the U.S.
I sat on a virtual mastermind call a few weeks ago discussing conversion rates with other wholesalers. Conversion rate means for every property you get under contract, what percentage of those deals actually close. The average conversion rate on the call was over 80 percent. One wholesaler on the call was bragging that his conversion rate was below 50 percent, and we were all suckers for not getting every deal possible under contract that we could, no matter what the seller was asking. Understanding that this wholesaler is one of the problems with the industry today, I was proud of how many fellow wholesalers stood up and explained how wrong it was to have a conversion rate that low. Many said things like:
- People’s livelihood is at stake when wholesaling real estate.
- Putting a property under contract higher than it should be hurts the seller more than helps.
- A contract is a legal document that you are obligated to perform.
- Your buyers have to be overpaying and probably won’t buy again.
In every business there are some bad apples that can ruin it for the bunch. So how can wholesalers who want to do things the right way overcome the negative connotation and stereotypes that surround this business?
1. What is wholesaling?
In general, most people do not understand wholesaling or what a wholesaler is trying to do. That could be because wholesaling is not a known industry outside of the real estate world. If you think of most industries, people can generally name the top three companies in an industry. In retail, you have Amazon, Walmart, and Target. In shoes, you have Nike, Adidas, and Reebok. In housing you have Zillow, Trulia, and Realtor. But in wholesaling you have… what exactly? Wholesaling is not a known commodity.
If a wholesaler wants to overcome the obstacle of being unknown, I believe that part of the wholesaler’s job is to educate the public on what wholesaling is, how it can be a benefit to the community, and how the process works. If you have been doing this for any time at all, there are so many success stories that can be shared as examples for anyone going through the same scenarios. Use those as case studies for your audience. I know I have been on the receiving end of too many thank you letters, calls, texts, and emails to think that we aren’t having an impact on our community. Those are all stories that can be used as examples to help educate customers on what wholesaling is and could be for them.
2. Wholesalers don’t care about anyone they work with!
I hear this one all the time, and unfortunately, I have seen and heard it in action. I have received that phone call from a seller saying that their entire house was packed up in a truck, ready to move, and were heading to the closing table when the title company informed them that the “buyer” was not able to purchase their house. Wholesalers need to remember that in this business you are dealing with people’s lives and homes. When a seller signs that purchase agreement, it is emotional and real for them. It is usually an enormous release of a burden from their life. When a wholesaler is unable to perform, that burden becomes even larger for sellers. Wholesalers have to be empathetic (not just act empathetic) when it comes to working with sellers.
Most sellers are in a distressed situation. Understanding what they are going through and putting yourself in their position will help you work toward a solution best for them and it will honestly be best for you, too. If you enter into a contract, it is up to you to do everything in your power to perform on that contract.
3. All wholesalers lie and don’t have any money to buy your house!
Please, stop telling people that you are going to buy their house if you aren’t, won’t, or can’t. There is so much bad education and practices out there for wholesalers, saying that their “partner” will be the one actually purchasing the house. That is a lie, and your buyers are not partners. Just tell the truth about the process and respect the seller enough to be honest with them. There is nothing wrong with explaining the true process with the seller.
Let them know what your intentions are, even if you do not have the money to purchase the property yourself. It’s ok to say that you won’t be the end buyer yourself, but you are great at connecting your buyers with properties. And if you cannot perform on the contract that you signed, have the conversation with the seller yourself, while giving them enough time to make arrangements as needed.
If you handle yourself with integrity, your business will be better off in the long run.
Brian Snider graduated from Ohio Northern University with a Bachelor’s in Middle Childhood Education and spent 14 years teaching reading and math. After working on his Master’s degree to become a Principal, he decided that was not the path he wanted to take, so he took a job with Brett Snodgrass and Simple Wholesaling where he was Marketing Director, Dispositions Manager, then COO. He took over as the company’s CEO in June 2020.