In this episode, we dive deep into the critical wholesaling mistakes you must avoid to succeed in real estate investing. Join Don Costa as he shares firsthand experiences and invaluable lessons from the field. Discover the pitfalls that can derail your deals and learn how to navigate the complexities of property wholesaling with confidence. Whether you’re a seasoned investor or just starting out, this episode is packed with insights to help you make smarter decisions and close more deals. Tune in and elevate your wholesaling game!

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Top Wholesaling Mistakes To Avoid: Learn From Real-Life Examples

Another episode of me being by myself. I’m going to do more of these, and talking into a big black hole of a mic is not always fun, but I want to get comfortable with it. Bear with me, this is going to be a good one. I’m going to share what not to do when you’re trying to wholesale a property to somebody. In the meantime, I just wanted to encourage you to go over to FlipTalk.com and check out everything we have going on in the Flip Talk universe.

We have some stuff going on there. We’re also getting ready to launch a cool community. It is off of Facebook. We got all the pieces in place for it. We’ve started to do some invites for that. If you are interested in getting an invite to our Facebook community, a large portion of it is free. We’ll be going live answering questions. There’ll be some free resources and tools, training videos, and stuff like that. Send me an email at Don@FlipTalk.com, and I will make sure that I get an invite out to you.

I could probably have lent that $130,000 and won in this situation, and I might win nine out of ten times. The problem is the one time that I’m going to lose, I’m going to lose way more than I made taking the risk. I think that the point I want to make is the risk they’re asking me to take probably had a good upside, but the downside, it’s just not worth it. How do I know that? Ask me how I know, because I’ve done this stupid stuff before.

 

I was supposed to be interviewing with a guest and I did start interviewing with that guest and they had connectivity issues. They’re actually on a train. I had to basically cancel that interview and go ahead and reschedule it. I’m going to go ahead and use this time to share with you a story about what not to do in wholesaling. It’s amazing, I’ve been around the block for a while.

I get a lot of people to reach out to me about deals and I love those deals when people reach out to me to partner on a deal. Maybe it’s something we can buy as a buyer. Maybe it’s something I have a buyer for. There are a lot of ways we can partner on a deal. The first thing I want to say before I get into the story is if you have a deal that you can’t get rid of, if you have a deal that you want to partner with somebody that has some knowledge, by all means, send me an email with the deal details at Don@FlipTalk.com.

With that said, I had somebody reach out to me and they had a deal. It’s just a weird situation. I get an email and a text message about this particular deal. I’m going to use numbers that are about where the numbers would be, but I don’t have exact numbers in front of me. Essentially, they want 290 for the property.

It’s in an area where I could rehab it, but it’s about three hours from my home base. I’m deciding maybe I can just get this thing wholesale. I could lock this property up but I did not lock it up. I went to one of my end buyers and I asked, “What will you give me for this property?” They said they would give me $330,000 for this particular property.

I went back to this particular wholesaler, somebody that I’ve interacted with, somebody’s been following, somebody’s been listening to the podcast. I said, “What are you making on this?” My primary concern was if they’re making $10,000 or $15,000, and I’m going to make a $40,000 spread, I want to be fair to this individual. That was my whole goal in this conversation. I wanted to be fair. If I’m making more, let’s just combine it and let’s split it. If you’re making $10,000, I’m making $40,000, let’s split $50,000. That was my whole goal in the conversation.

I went to them and I said, “What are you making on this deal?” Of course, their immediate reaction was, “I’m surprised you asked me. That’s not good business. I don’t think that you should have asked me that. I don’t think it’s appropriate for me to tell you.” I explained, “I’m just trying to be fair to you. I want to make sure that if you’re not making more money than I could potentially make on this, I’m fair to you. That I go ahead and make sure that you get a good share of what I could potentially make on this.” Well, then they got a little offended and twisted. I don’t know what the right word is for it.

They still didn’t tell me what they were going to make on the property, but they started saying, “My number was 290 or best offer and blah, blah, blah.” I said, “I could have locked this thing up at 290 and not said a word to you just when I went ahead and reassigned it for a 330. You didn’t care that I was going to reassign it anyway. I’d already told you that ahead of time. I’m just trying to be fair. This is ridiculous.”

Dealing With Greedy Wholesalers

They come back and they want me to now pay $20,000 more for this property. I said, “No, that wasn’t the point here.” That wasn’t the point of having this conversation. Come to find out they’re already going to make a $60,000 assignment fee. Now they want to make an $80,000 assignment fee and have me make $20,000. That wasn’t the goal here. The goal here was to try to be as fair as I possibly could be with you and create a situation where it was win-win, not show you that you need to be more greedy in this situation.

As they say, “The pigs get fed, hogs get slaughtered.” Make sure I can say my words properly. I’m not trying to create a hog here. I’m just trying to create a situation where it’s win-win. We settled at I’m going to pay $10,000 more for the property, I’m going to pay $300,000 for the property, and assign it for $330,000. Instead of making $40,000, I’m going to make $30,000, they’re going to make $10,000 more.

Don't get greedy. In wholesaling, remember: “Pigs get fed, hogs get slaughtered.” Greed can cost you more than you gain. Share on X

I don’t know how I found out they’re going to make $60,000 on this, but at some point, I had found out, maybe it was that early on, maybe it wasn’t, because I know they didn’t want to tell me. They were greedy. We have to close this thing fast. That is the one thing that I know to be true in this situation. We’re negotiating this deal and we have about fourteen days, maybe eighteen days, we got to close this thing fast.

Communication Breakdown And Delays

We go ahead and agree to a price and they don’t hear anything. Krickets, radio silence. Then all of a sudden, I don’t know, about ten days later, about six days to our close date, I had checked in periodically and I said if I don’t get an assignment contract, we don’t get this thing, we don’t get in contact with escrow. We don’t get information on the property. We can’t put the pieces in place to close on time. Every day that you delay and get me the assignment contract is going to be another day that we’re going to delay closing because there are fundamental pieces on escrow and not on us. They’re going to need our company documents. They’re going to need to clear the company.

They’re going to need to get the signature, and the documents done for the seller get the documents out to the seller to be signed, and get the documents over to us to be signed. All this stuff takes time. The longer you wait, the likelihood of escrow being able to do it by your closing date gets slimmer and slimmer and slimmer. It’s reasonable, right?

The individual on the other end of the phone is agreeing with me. They’re telling the party that they’re buying it from. He did, this is the way it’s going to be. I’m assuming at this time that they’re getting this property directly from the owner of the property. Then it comes back to me, sometime in this process, this 10 days, that we’ll call time waste. This vacuum of time is wasted.

Discovering The Daisy Chain

It comes back to me that the individual who’s buying this property is not the seller, that they have direct contact with the seller, and that they are assigning it to the individual that I’m dealing with who is assigning it to me. It’s starting to look like a daisy chain, but apparently, all parties involved know what’s going on.

Supposedly, we’ll just say buyer one, and then you have buyer two, who’s assigned to me and I’m buyer three, and then I’m assigned to buyer four. Supposedly buyer one has to set up an entity to sign the contract over. It’s starting to get confusing. It’s starting to feel weird, but there’s 30 grand involved. I’m going to just ride this train and see what happens.

It gets better, trust me. You’re reading this, it gets better. I’m riding this train and then it’s a Friday night and I get a text message that they have the contract assigned to them. They’re going to go ahead and assign it to me. They go ahead and assign it to me. Then I turn around and assign it to my end buyer. It’s Friday evening, and I’ve assigned it to my end buyer. We’re waiting for Monday to make contact with escrow.

Monday comes and apparently buyer one, if you’re following so far, hasn’t opened up escrow yet with the title company. We had assumed the entire time this property had been in escrow, all the escrow had been done. All the title report stuff had been done, all the initial paperwork had been done, and all the payoffs had been gotten.

Now it’s Monday and there’s confusion. The escrow company that we’ve been putting contact with has no escrow on this property. On Monday afternoon or Tuesday morning, buyer one puts the contract in and opens up escrow. Now, here’s the caveat to this. They’re expecting us to close by the upcoming Friday. Now, it goes from five days to four days. We have to close on this property.

My buyer is rushing their hard money lender to do a quick and dirty on this property to get it closed by Friday. They’re starting to think it may be Monday because there just keeps being these delays, but we’re all working on it. You got one, two, which is me, three, and then four. Buyer four is informed by escrow that buyer one doesn’t own the property.

This is Wednesday. I’m not informed about this until Thursday morning. We’re supposed to close on Friday. Thursday morning, I got involved in a call with escrow, trying to figure out, because everybody’s demanding we close by Friday, and we’re trying to figure out who are we closing with. What’s going on here? Who are we closing with? What’s happening?

Escrow Issues And Auction Properties

In the course of the conversation, it comes up that buyer one is buying this property from auction. They are the winning bidder at an auction. They do not have the trustee’s deed and they do not have possession of property but to meet their obligation for this online auction, they have to close by Friday. They have to have the funds in.

I think they have to have that closed by Friday. You have the funds by Monday, but they can’t close because there’s nothing to close on, and for whatever reason, this point gets lost in the conversation. First and foremost, there’s this huge back and forth over title and escrow, whose title and whose escrow. To me, it’s one of the same. I don’t care.

The title company and the escrow company were two different offices. That was conundrum number one. The person I’m working with, buyer number two, who is assigned to me, gets buyer number one on the phone and buyer number one begins to explain to me that if I go ahead and close, which if you’re following on a property that they don’t own so how can I close?

Those funds will be used to pay for the auction. Once they get the trustee’s deed, they will go ahead and we’ll go ahead and I guess close and record and the trustee’s deed transfer to me. I said, “Then that means you want me to give you a loan.” I’m confused, I’m a little bit trying to figure out what’s going on here. I’m not sure if I’m going to get mad or not.

I said, “That means you want me to give you a loan.” I’m just trying to explain to these individuals that if you do not own a property, there is no security. They’re trying to tell me there’s security. My money will be secured by the property. I’m trying to explain to them that buyer number one is not the person who’s the winning bidder.

 

The winning bidder has to close on the property and sell it to enter into a contract with buyer number one, who assigns it to buyer number two, who is assigned to me, buyer number three. There’s no way in that situation that my money’s going to be secured in any way, shape or form. There’s no asset to secure my money, but they’re trying to explain to me that I’m an idiot, that I don’t know what I’m doing. Then my money will be secured in this transaction, my $130-something that they want.

Instead of giving them now the $300,000 to close, they just want me to give them $130,000 for the auction to pay off the bank so they can get the trustee’s deed. No, through this situation, people are living on the property. We are told that at closing, the property will be delivered vacant. I assume that on Friday when we’re supposed to close, which is tomorrow, the next day in this situation, the property will be vacant.

That’s not going to be the case because they’re not going to move out until the trustee’s deed is in hand. He’s got an agreement with these individuals that they will be out when the trustee’s deed is in hand. We’re talking about this whole thing going down in January 2024. I’m recording this in May. I would say probably the second week of January when we’re in this conundrum or having this conversation about closing this property.

I’m trying to explain to them that there’s no asset. That they’re asking for a loan, that’s an unsecured loan, that I would be an idiot to loan money to individuals that I don’t know, buyer number one, I’ve never met. Buyer number two is assigned to me. I’ve interacted with them on social media, but never actually done business with them.

Whoever it is that won the auction, I don’t even know the guy’s name. In this situation, I would be a fool to give them money. Me saying that was having an attitude. According to them, I didn’t know what I was talking about. That they do this all the time, that I should just basically play ball. I should just hand them the $130,000.

I should take their word that the money is secured and that I’m an idiot for not knowing that it would be. The whole time, most people who follow me know that I’m a fairly monotone, easygoing individual. I don’t have a lot of skews and emotions high and low. Even when I’m upset, the people who work for me think it’s scary because they can’t read when I’m upset.

In this situation, I’m trying to decide whether or not I’m going to get upset, but I’m not getting upset. I’m just trying to rationalize where all these people are coming from and explain where I stand. The fact that I just can’t hand you money in this situation with your word. I’m told that they’re going to go ahead and put Heidel on the phone.

We end the call with escrow. I guess escrow and title are different. We’re going to get on a phone with the title, but I don’t get on a phone with the title. I told them to get on the phone with the title. I get on the phone with buyer number one’s business partner who begins to explain to me that this is something they do all the time. That this situation is guaranteed, that I will get my money, that I will be secure.

The entire time, I just feel like I’m being spun around on some crazy town merry-go-round. We end the call on what I think is rational. I don’t know you guys, there’s no security here. There’s no title report on the property. I don’t know if there’s any other liens or anything that’s going to follow the property. Now in foreclosures, typically liens don’t follow the property but I don’t have anything that says that this investment’s going to be secure.

I don’t even know who’s going to be signing the documents for a loan, which I thought was going to be a purchase and a close, and now we have the issue of the tenants not being out of the property and not being out of the property for the foreseeable future. By the way, I’m also being told that I cannot go take pictures of the property. I can’t go knock on the door. I can’t walk the property.

That somehow when one of my team members took pictures from down the street of the house, I offended the tenants and I did a big no-no. I can’t go to the property, I can’t take pictures of the property, I can’t interact with the tenants in any way, shape, or form or these people are going to have a fit and they don’t own the property.

We leave it at that. It just doesn’t make sense. I tried to be apologetic, I tried to be nice about it, I tried to explain to them that I’ve done hundreds and hundreds of foreclosures, and I know how these things work. It just doesn’t make sense to me. I thought we left it on a good note, a fairly understanding note. A couple of days later, I got a call from the gentleman I’m working with, which is buyer number two, who’s going to be assigning it to me.

He says that they got the money, I think it was the next day, they’re going to go ahead and pay off the trustee, they’re going to get the trustee’s deed. Then they’re going to go ahead and move forward with the transaction. We’re still in this thing, is where I’m at. No, I’ve lost my buyer. For now, at least. Then they’re obviously in the same situation.

They don’t know what the hell’s going on, but I know I can move this property. It’s in the Bay area. I’m going ahead and I’m sitting tight. I have an inner circle event. We do an intercircle meeting at Austin. I go back to life in general and then I’d say a couple of weeks later, I’m not sure if I checked in with them or they checked in with me, to be honest.

The message I got from buyer number two, who’s assigned it to me, the one I’m working with is that they’re going to sell it to somebody else. This is probably 10 days later, two weeks later, I’d waited for some time. The message I got was, “They’re in escrow with somebody else, you’re not going to get the property.”

Why am I not going to get the property? I’m confused. I thought we had a deal here. I thought we were still moving forward. I have a contract with you. You have a contract with them. What’s the deal here? I had an attitude problem and they didn’t like the fact that I didn’t agree with them or follow along and that I was somewhat of a know-it-all.

Fine. I have an attitude problem. That’s one of the reasons I worked for myself. I do have an attitude problem. I don’t like authority. I’ll concede to that but in this particular situation, I did not have an attitude problem. I was just simply trying to grasp what they were trying to get me to do, what they were trying to convince me to do, and explain to them all the reasons why I couldn’t do it, but apparently, that was an attitude problem.

I just didn’t hand them the money so they’re going with another buyer. The deal was already done and it was closed and that was the message I got. Tenants are still not out by the way. They had the trustee deed in hand. He’d assured me that the tenants would be out when he had the trustee’s deed in hand because that was a deal but in this particular situation, the tenants were still not out.

This is now mid-February-ish. This is going down. Now I’m not getting the property because I haven’t added to your problem. I said, “Whatever, forget it. Lose my number, don’t call me again. I’m not going to deal with this.” It’s stupid, this is a game. I don’t need games in my life. I have too many things going on. I think this thing is done. I think this thing is dead. I think this thing is not going anywhere.

Don't waste time on games. Focus on serious, trustworthy deals that add real value. Share on X

Then the last text that I got was February 8, 2024. I guess that was the conversation where I wasn’t going to get the property. You see a February to March and then March to April. Two months later, from February 8th to April 11, 2024. On April 11th, I got a text with a handful of pictures of the property and an explanation that it was ready to close and to let them know if I was still interested.

The Final Straw: Losing The Deal

I’m confused. First and foremost, I thought I was out of the deal. I thought you had another buyer and they were closing. That buyer didn’t perform, and that buyer didn’t close. Two months later, the tenants are finally moving out. They’re in the process of removing junk and helping the tenants move. I was told that they would have the trustee’s deed.

If you’re following the timeline here, within about 10 business days after they gave the bank the auction funds, they’d have the trustee’s deed, and the tenants would be out when they had the trustee’s deed and that was etched in stone. If I just lent them my $130,000 with no security, I had their word that the tenant would be out in 10 days. Two months later, they’re moving the tenant out.

Now, they want $325,000 for the property. I said, “Wait a minute, we had a contract for $300,000.” You’d come back to me at one point. I think they want to do $310,000 or $315,000 because they closed the property and the cost had gone up. Now, the cost had gone up again. There was no money in it for me at this point. I’m just confused. We had a deal. They had $300,000.

First, we had a deal at $290,000. Then we had a deal at $300,000. Then they came back and wanted $315,000. I had to go through my texts and see the exact number, but they wanted a little more money. It wasn’t a deal killer for me, but then I was out. I had an attitude problem and they weren’t going to work with me anymore because I didn’t know what I was doing, so on and forth.

Now they’re back in April and it is now $325,000 for this property. I was thinking, “What the hell?” I’m going back and forth via text message. They’re telling me that I had a buyer at $345,000, which I didn’t. I had a buyer at $300,000. There’s this whole song and dance about how this gentleman’s going out of town with family. He’ll get back to me and he gets back and I haven’t heard anything since.

Now, we’re talking about, we’re recording this on May 15, 2024. A month later, I still haven’t heard anything about this property. Probably went to somebody else. I don’t know. I haven’t checked with my buyer and that property to see if they went around me to my buyer, which is what I probably should do. I think the long and the short of it is this, I will never entertain any property by this individual again, or any of the individuals associated with this situation.

It is because, in my eyes, all they do now is jerk my chain, number one. Number two, they’re trying to convince me to do things that are bad business. They’re just not bad bad. They’re not good business. I could probably have lent that 130 grand and won in this situation, and I might have won nine out of ten times. The problem is the one time that I’m going to lose, I’m going to lose way more than I may have taken the risk.

I think the point I want to make is, that the risk they’re asking me to take probably had a good upside, but the downside, it’s just not worth it. How do I know that? Ask me how I know, because I’ve done this stupid stuff before. I’ve lent money to people without security and had issues and everything else with it. I’ve done the crazy deal trains and had them crash into a brick wall and not work out.

Lesson number one, don’t jerk your buyers around, especially good buyers, buyers that get open doors for you buyers and create opportunity for you because we’re going to close that door on you quick if you’ll just jerk us around. Don’t get greedy. Pigs get fed, and hogs get slaughtered. In this situation, this gentleman got greedy and he kept getting greedy.

Who knows if he got his money for the property or not? All I know is anytime that I see any property of his, I’m going to make sure everybody I know, knows not the work with this individual. Number three, the shady stuff. It’s not worth it. You know what I’m saying? Loaning and security with people that you don’t know. It’s not worth it.

I guarantee it. How many times does this gentleman tell me that he guaranteed that they’re going to go ahead and close and I was going to get the property and the tenants will be out by the time they got the trustee deed and all that, and none of that happened? I was able to see through this timeline. Everything that he said that was going to happen didn’t happen, at least when he said it was going to happen or didn’t happen at all.

Had I lent $130,000 on a property that nobody owned and had no security on that, I didn’t know these people, I still would have had to wait months for this property to be vacant. In the meantime, knowing how these individuals think I worked now if I had waited to officially close until the tenants were out, then they would have said I hadn’t performed on the property like they did the previous buyer.

I know they took a $10,000 deposit from the previous buyer. You remember the situation where they put a buyer in my place because I had an attitude problem. They took a large down payment from that individual and kept that down payment because they said that individual didn’t perform. I’d almost bet that individual didn’t perform because the tenants weren’t out and then they promised it’d be delivered vacant.

Shady business. You’re going to make some money, but you’re not going to get very far. You’re going to get blacklisted. You’re going to get your name called and you’re going to end up with a lot of problems in the long run. Hopefully, this is a lesson of what not to do. Also if you’re going through “Gobbledygook” crazy garbage like this on your day-to-day, just know that others are going through it too.

I’m going through it myself and I will say it keeps it interesting. If you have real deals, if you are not somebody that’s going to try to wholesale something you do not own and you want somebody who is a cash buyer in California, primarily in California, I will be either a cash buyer or I will have a cash buyer in my pocket and we can work together on the deal.

I pretty much do this nationally, but I love California because it’s my home market. I’m always looking to partner with people if they have deals. I’ll even help you sort through some of the issues you have with deals to get them to the finish line. I do this all the time with our ICE community and our ICE Accelerator community.

I partner on projects all the time, and I enjoy doing it. With that said, hopefully, you got some value out of this episode. Make sure you go on over to FlipTalk.com and check in our previous episodes. Everything we have going on in the Flip Talk universe. As I mentioned before, if you have deals and you want to partner on them or you want to join our free Facebook community, you can go to Don@FlipTalk.com and just send me a note, and I will make sure that you get taken care of. With that said, hopefully, the story entertains you. I will talk to you again. Have a wonderful day.

 

Important Links

• Don@FlipTalk.com
• ICE community