Why Real Estate Investors Quietly Hate Wholesalers

TLDR
I owned a wholesale company for years, did over a hundred deals a year, and learned how wholesalers think. The source says a buyer of a wholesale deal, mainly one sold twice, may give up too much of the spread. It favors going direct to the seller and frames that as real sales rather than something immoral.

Table of Contents

How Wholesalers Actually Think

I owned a wholesale company for multiple years. Over a hundred deals a year. The whole goal was to squeeze as much money as possible out of every deal. I’m not saying wholesalers are bad people. I’m saying they’re winners. Sharks. Not snakes. There’s a difference.

Snakes are nasty. Dirty. Mean. Sharks are doing their job. They’re in the fight. You don’t make it in this business without being some kind of shark.

Here’s what matters. When you’re dealing with wholesalers, realtors, and some contractors, you’re dealing with seasoned veterans. Pros matched against pros. It’s like two MMA fighters in a ring. They both signed up. That’s not immoral. That’s the game.

But when you go direct to seller, now you’re dealing with a civilian. They didn’t sign up for an MMA fight. Different rules apply. More care. More honesty. More fair.

The rules are different for pros versus civilians. Know which one is in the ring with you.

The Inner Circle Game

The wholesaler’s job is to close their contract with the seller with as much certainty as possible. The contract with the seller is fragile. It gets more fragile every time another buyer walks the property.

So the wholesaler has rings of buyers. Here’s how the rings work.

Inner circle. People the wholesaler knows will close. These buyers get the first look. Sometimes they get decent pricing because the wholesaler trusts them to close.

Buyers list. Everyone who’s signed up for their emails. This list gets the deal after the inner circle passes.

Outer rings. If nobody takes it, the wholesaler may post on Twitter or Facebook or work with another marketer. That means more buyers, more walkthroughs, and more risk to the seller contract.

The farther the deal travels from inner circle, the more the wholesaler has to skim to justify the extra risk. If you’re seeing a deal that’s been bouncing around Twitter, assume the spread has been maxed out.

Common Mistake
Assuming you’re in the wholesaler’s inner circle because they told you so. The wholesaler will make every buyer feel like inner circle. That’s their sales job. You’re inner circle when they send you deals before the email blast.

Why Direct to Seller Is the Answer

Eventually every serious investor hits the frustration that led me to this video. The student in my community was there. Every deal from wholesalers is getting skinned. Every deal on the MLS is overpriced. You have to be first, or pay over, or take a house nobody else wanted.

The only real answer is going direct to seller.

Here’s the process:

  1. Get a list. There are list companies online. Addresses, owner info, property details.
  2. Add phone numbers. Get the list skip traced to pull owner phone numbers.
  3. Call them. “Hi, I know this is a weird call, but I’m an investor looking to buy a house in this area, and I saw yours. Any interest in selling?”
  4. Refine with pain markers. Filter the list for tax liens, code violations, unpaid water bills, fire damage, vacant owners (they live somewhere else), out-of-state addresses. Pain markers increase the likelihood that the person who answers actually wants to sell.

The recording does not cover consent, Do Not Call screening, caller identity, opt-outs, data use, or state calling rules. A phone number in a data product is not automatic permission. Build any outreach process against current rules; the FTC telemarketing guide is one federal starting point.

Is This Dirty?

A lot of people don’t take this step because they feel like it’s immoral. That’s because we’ve all been taught sales are immoral. That’s because most people are bad at sales.

Good sales tries to set up a win-win. The source is also blunt that most deals are not evenly balanced: one side may win a little and the other a lot. The job is to understand the seller’s real problem, remove friction, and find terms both sides choose without pretending the gains are equal.

And here’s the other thing. The sharks are out there. They are going to get the deal from that seller. They’re not going to care about the pain or the fair price. So maybe it is your duty to reach the seller first and treat them well.

Then I undercut my own argument on camera: human beings are justification machines, so maybe that is me justifying what I do. That self-check matters. A fair process still needs honest facts, clear terms, and a seller free to choose.

Pro Tip
In the numerical example below, a direct price could leave the seller with more and still cost the investor less than the double-wholesale price. That result depends on the real contract, fees, condition, and closing terms.

A Real Deal Walkthrough

Let me break down an actual deal my community member asked about.

The setup: a manufactured house listed on the MLS at two-seventeen. A wholesaler offered to sell it to him at one-seventy-five. He figured he could do a thirty-thousand rehab and sell for two-seventy-five to two-ninety-five. Estimated profit around twenty-five grand.

Here’s what actually happened. When he went to accept at one-seventy-five, the wholesaler said “Sorry, I’ve already assigned it to somebody else. That person is now selling it at one-eighty-five.”

So now it’s a double-wholesale. The original wholesaler is making roughly ten to fifteen grand. The second wholesaler is making another ten grand. Plus the realtor fee when the seller sold to the wholesaler.

Even if one-eighty-five is still technically a deal, it’s hard to accept when you know you’re getting skinned twice.

The Math From the Seller’s Side

The seller is getting around one-sixty. They still pay realtor fees, maybe four-point-eight grand (single side since wholesaler has no agent). First wholesaler pockets fifteen. Second wholesaler pockets ten. That’s twenty-five grand leaving the seller’s pocket (assuming they could have sold at one-eighty-five direct).

My hypothetical direct offer was one-seventy or one-seventy-five, with no agent fee, a fast close, and no inspection condition. That would have left the seller with more than my estimate of the chain and cost the investor less than one-eighty-five. Waiving an inspection was part of this example, not a rule; it shifts property risk to the buyer.

Should He Buy the Double-Wholesale?

At one-eighty-five, if his numbers are right (thirty rehab, two-eighty-five ARV), it’s still a real deal. I told him yes, buy it if you have no better option. Base hit versus home run. Lower price point means safer downside. Staying in the game matters.

But after talking with him, he had another deal almost direct-to-seller that was stronger. A real stick-built house instead of manufactured. More valuable. We decided he’d push the wholesaler with a lower offer, and if declined, he’d go back to the direct-to-seller deal.

The main lesson: you’re in a fight. Know the rules. Fight a little harder. It doesn’t need to be nasty. It needs to be awake.

Key Concept
Every deal has room to mess up. The bigger the spread, the more room you have for mistakes. Direct-to-seller deals usually have more spread than wholesaler deals. More spread means more margin for error. More margin for error means more staying power in this game.

FAQ

Aren’t wholesalers providing a real service?

Sometimes. A real wholesaler hustles to find an off-market deal, negotiates with a motivated seller, and brings a ready-to-close buyer. That’s legitimate work. But a lot of “wholesalers” today are virtual operators making random offers on MLS listings and hoping someone accepts. That’s not adding value, that’s adding a middleman.

How do I actually start going direct to seller?

Pull a list and refine it with the pain markers named in the source: tax liens, code issues, unpaid water bills, fire damage, vacancy, or an out-of-state owner. Then use a contact method that follows the current laws and your own written compliance process.

What if I’m not good at sales?

Good sales, as I define it here, listens for the problem and looks for terms both sides can accept. The source gives no call-count path to skill and no promise that outreach will produce a deal.

Is it okay to buy from a wholesaler at all?

Yes, if the full numbers work. In this case I called the one-eighty-five price a buy if the rehab and exit values were right and no stronger deal was available. The fee chain reduced the margin, but that alone did not make the deal bad.

I’m brand new. What list should I start with?

The source does not use a property-age filter or give a mailing volume. It names tax liens, code issues, unpaid water bills, fire damage, vacant properties, and out-of-state owners as possible pain markers. Each one is a clue, not proof that the owner wants to sell.