Why Bidding Wars Can Backfire For Wholesalers

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Episode Transcript

Speaker 1 (00:10):
Welcome back to the series where we talk about some
of the biggest mistakes newerwholesalers make, and today
we're going to be talking aboutstarting bidding wars during
dispositions with our end buyers.
Now, the reason why I don'tagree with the bidding war
strategy and I believe youshould set your price and once

(00:30):
you receive that, you shouldaccept it and assign the deal is
because the end buyer is,technically, our customer.
It is the person that we wantcoming back to us over and over
and over again and, I believe,to be a successful virtual
wholesaler.
One of the things that youshould prioritize is building

(00:51):
relationships with your endbuyers, and one of the things
that I feel like can tarnish arelationship between an end
buyer and a wholesaler isbidding wars.
For example, I have bought manydeals from wholesalers and one
of the things that irritates meand rubs me the wrong way is

(01:12):
when a wholesaler says, hey,check out this deal that I have
for $200,000.
And it's a great deal and thisis the reason why you should buy
it and you stop what you'redoing during your day.
Now, mind you, as an end buyer,you are busy throughout the day
, right?
You're managing your projectsand your contractors and trying

(01:33):
to get loans and close the dealsand meet with notaries and all
these different moving piecesinside your business.
So to stop what you're doingand then to truly analyze the
deal, to look at the picturesand the videos and run the comps
and do your rehab analysis, or,even worse, go out and

(01:54):
physically do a walkthrough ofthe property to then say I will
take this deal at $200,000.
And for that wholesaler to thensay deal at $200,000.
And for that wholesaler to thensay, well, hold on, we have
multiple offers.
I need you to come up with yourhighest and best.

(02:17):
It, to me, completely ruins mydesire to ever want to work with
that wholesaler again.
And so for that reason alone,we do not do bidding wars.
Now you might be sitting therethinking to yourself well, rj,
what happens when I get a dealand I go on to investor lift?
Then I blast it out to mybuyers and I immediately get a
ton of traction.
That's your job as a wholesaler.

(02:38):
That's great.
First come, first serve.
The first person that says Iwill take that deal.
I've already performed my duediligence.
I don't need an inspectionperiod, I don't need an option
period.
I'm willing to sign anassignment and put down
non-refundable earnest money.
That's the person it goes to.
And the reason why is because Iwant that guy, that end buyer,

(03:03):
to be so happy with doingbusiness with me that in the
future when I send them a greatdeal, they don't even need to
run numbers.
They trust what we are sendingover to them.
Now I feel like newerwholesalers make this mistake
because they see wholesaleoperations like the Kegleys and
the New Western Acquisitions andthe Net Worth Realty's running

(03:25):
this business model.
Now you have to understandtheir business model is high
volume of newer end buyerscoming in and they basically run
through them and get as manydeals as they possibly can and
then realize they're going totarnish that relationship.
That's why they're constantlyputting out bandit signs and
trying to bring in newer endbuyers.

(03:47):
Now, if you want to run yourbusiness that way, you can.
I personally believe that is anightmare scenario and you're
basically always on the hamsterwheel of who's going to be my
new end buyer for the next oneto three deals.
I would prefer to have a go-toend buyer in each market that I
know.

(04:07):
If I get the deal that hitstheir specific buy box, I know
exactly who's going to buy mydeal and that's what's enabled
us to be sustainable in ourvirtualing wholesaling model.
When you go out and you do thebidding wars, the other thing is
that you're prioritizing yourdeal over everything else that's

(04:28):
going on inside of theirbusiness.
Again, when you come from acustomer service background like
I did, that to me is poorcustomer service.
You're asking an end buyer todrop what they're doing to then
prioritize running the numberson your deal, instead of saying
hey, man, whenever you get achance today, take a look at
this deal that I sent you, runyour numbers and let me know if

(04:50):
it's a good fit for you.
I want to know that it's a gooddeal for them when they have
the opportunity to do all of thedue diligence up front.
The reason why is because Irely on my end buyers to be
successful on the transactionsthat I sell them.
I need that person to still bein business in 2026 and 2027

(05:11):
because of the deals that I soldthem, not despite the deals
that I sell them.
So when we send them over a deal, I want them to take their time
.
I do not want them to feelrushed Now.
Of course, we want to providesome sense of urgency.
They can't sit on it for sevento 10 days, but if you give them
seven to 10 hours, that's acompletely different scenario.

(05:33):
We want to see that they'reinterested, that they want to do
walkthroughs and that they'rewilling to make offer on the
deal.
Now, when we do these biddingwars, the other thing that comes
to place is a lot of times it'sa group showing.
I also do not believe in groupshowings.
I think that you should givesome respect to your end buyers

(05:57):
to allow them to come in andperform all their due diligence
that is necessary and not feellike they're a dime, a dozen.
Again, this comes back toprioritizing what's important
inside of our business.
On the acquisition side, wetreat each lead as a priority.
We want to make sure that weare truly listening to their

(06:17):
scenario and offering them asolution.
And then, on the dispositionside, we want to build long-term
relationships with our endbuyers, prioritizing that we're
getting them in the bestposition possible to be
profitable in their business andmake our spread and our profit
in between those two situations.
I personally believe that isthe best way and ultimately the

(06:41):
best way to build a successfulvirtual wholesaling model.
If you're constantly runningthrough your end buyers because
you're one doing bidding wars.
You're tarnishing thatrelationship.
You're making them feelpressured into making decisions.
Inevitably they are going tomake a mistake and get into a
deal that they probablyshouldn't have.

(07:01):
And where will they point theblame?
Where will they point thefinger?
It's going to come back to you.
They're going to say you forcedme into making a quick decision
on that and I was not able todetermine that this property had
foundation issues, roof issues,something that came up that
cost me more money long days onmarket, and they're going to

(07:24):
blame that on you and not wantto do future business with you
moving forward.
So for me, I think you shouldprioritize setting a price,
knowing exactly where you'regoing to make your money and
then allowing your buyers tocome in.
Now, if you were to ask a buyerto pay $200,000 and the offers
are coming in at $190,000,$185,000, $180,000, you

(07:48):
absolutely continue to try toget them up to your price.
Educate the buyers on why youset the price where you did and
see where the disagreement is,but if it comes in at your
asking price, your priority thenshould shift to how are they
funding the deal?
Can they close in the timelineand vetting that buyer out, not

(08:11):
pressing them to get anadditional five to $10,000.
You make your money on theacquisition side of things, not
by pressure tactics and scaretactics into getting your buyer
to overpay for a property.
This is how you build along-term, sustainable virtual
wholesaling model.
So, as a newer wholesaler, don'tfall into this trap of feeling

(08:35):
like you need to have biddingwars and mass showings and using
scare tactics to get yourbuyers to come up.
Treat them like the customerthat they are for your
wholesaling business.
Prioritize that relationshipand also prioritize that they're
getting in to the mostprofitable deals as possible.
Now, if you've been a virtualwholesaler for any point in time

(08:58):
, let me know if you agree withmy take on this.
I'm sure some of you out therewill wholeheartedly disagree
that you should be.
I want to hear you in thecomments.
Let me know why you believe thebidding war is the better
strategy for a wholesalingbusiness.
Regardless, show me some love,like today's video, and we'll

(09:18):
see you guys tomorrow.