When To Walk Away From A Wholesale Deal
Posted On: November 6th, 2019
When wholesaling properties, transactions don’t always run smoothly, sooner or later you’re bound to come across some deals that don’t go your way
The more experience you get as a wholesaler, the more will you be able to manage these imperfect situations. Other times, however, you’ll find that the deal just isn’t going to be worth your time, that’s when it’s time to walk away.
Sometimes you can’t agree on a price, other times circumstances change, that’s why you have to have an ironclad contract with contingencies that will allow you to get out if needed. Having something in writing will protect you when you’re faced with adversity or a worst-case scenario. To be a profitable wholesaler, you need to stick to your plan. Hold firm to your requirements and don’t allow yourself to be taken advantage of.
A good buy will ultimately depend on how well you negotiate the terms and conditions of the contract, it’s a give and take. Do not bend on your principles or agree to terms that don’t fit your strategy. On the flip side, this is a negotiation, so avoid being too hard-nosed, as well. If you can’t agree on critical criteria, it’s time to walk away.
When you locate a property, you’re eager to get the property under contract so you can find a buyer and collect your check. As with any other business transaction, when there are multiple people involved, timetables can get messy. Inspection dates and closings get bumped all the time, so you should allow for a reasonable amount of flexibility. One of the keys to successful wholesaling is seller motivation. When deadlines are not being kept or if you feel like the seller is stalling, it’s time to walk away.
This sounds like a no-brainer, but if you won’t make enough money, then don’t waste your time.
There are a couple of reasons for little or no profit. First, the After Repair Value (ARV) is too low. There’s no point in buying a property if won’t be able to sell it for a profit. Second, there isn’t enough equity. Sellers want to walk away with at least a little cash in their pockets, but if they’re upside down, you’d have to configure a short sale. A short sale brings an extra hassle, but it is possible. However, very often, sellers don’t have the money to bring to closing. So if either of these is true for you, it’s best to walk away.
The world of real estate is forever changing. New laws, new code requirements, new zoning ordinances are changing the face and landscape of real estate. Stay abreast of current changes to avoid getting stuck with a property under contract and not being able to find a buyer for it. If any newly introduced factor will prevent you from being able to turn a profit, it’s time to walk away.
As you grow your wholesaling business, you’ll learn to spot warnings signs that will trigger your instincts. You’ll have a sense when there isn’t enough upside to make the deal worthwhile. Not all of your transactions are going to be home runs, but do your due diligence and stick your plan. There will always be another property that will fit your parameters. When you see that things are headed south, it’s just best to walk away.