Joplin Area Real Estate Investor Association

Wholefailing: The Top 3 Reasons For “Failure to Launch”

Community of Real Estate Entrepreneurs



            Go to any real estate association anywhere in the country, and you’ll meet endless excited folks who are sure that their futures—and fortunes—lie in wholesaling houses. Go back 6 months later, and you’ll find that 90% of those folks have never successfully closed a deal. In most cases, this isn’t due to “inactivity” or “fear” or any of the usual excuses. Many of these folks have actually tried and failed, to make a go of it. In my experience, there are 3 main reasons for this:

1. They don’t understand WHY wholesalers make money. They understand, at least in a basic sense, HOW it happens: you put a deal under contract, and you find someone who wants to pay more than you did, and that “more” is your profit.

But they don’t understand something very basic: that buyers don’t just write a check because the deal is available, or cheap, or even because it’s cheaper than other properties that might be for sale in the same area.

Buyers for wholesale deals are real estate investors, right? So, in order to be interested in a deal, the deal can’t just “make money”; it has to make ENOUGH money to provide a satisfactory return for the cash, hassle, time, and energy, that the buyer will have to put into it. No investor buyer HAS to buy a house this week; if he doesn’t see one that gets him a return that turns him on, he can just keep looking.

Wholesaler wannabes who don’t ‘understand their buyers' motivations well enough, and therefore end up spending weeks trying to flog contracts to an unresponsive audience, end up frustrated and convinced that it ‘doesn’t work’.

2. They don’t learn the most basic thing they need to know: how to evaluate properties correctly.  Ok, so you get it: the deals you offer have to be priced at no more than 70-75% of the after repaired value of the property so that the buyer feels compensated for his investment, and that’s the deal you’re offering

  Or is it?

One of the most common mistakes I see the ‘YouTube University' crowd making is that they have no real handle on how to comp properties, inspect them, or estimate repair costs. Someone online told them that a property is worth the Zestimate, or the Zestimate – 10%, or the average of the values on Zestimate,, and And that a roof always costs $5,000 to replace. Or that rehab is always $25 per square foot. And they believe it and operate accordingly, and then think that buyers are “just negotiating” when their buyers tell them that their $10,000 repair estimate is 50% of the real costs.

Reality is much more complicated than these rules of thumb, and it’s just a fact of life that if you’re serious about wholesaling, you’ll get serious about learning how to do the basic evaluation that has to be RIGHT in order for your price to be right.

3. They don’t REALLY understand the process. You’d be amazed at how many wholesale deals fall apart because the wholesaler doesn’t have the right contracts, or doesn’t know when to get paid, or doesn’t know how to guide the deal to the final closing.

You can’t think that your buyers or sellers will have or know these things—that’s up to you.

If you’re serious about making real money wholesaling, you need to be serious about understanding that business. It’s simple, but it’s a lot more complex than the Facebook and YouTube gurus make it seem. If you want people to invest time and money in your deals, maybe it’s time to invest some time and money in your education

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