Thanks for the confirmation, Ben. You're right that an up-front, non-refundable $5K fee required in conjunction with contracting to buy a property is a standard practice used by most wholesalers, including New Western. But there are other ways that I personally prefer. For what it's worth, I've done more wholesale transactions than I can count, I've never asked for an up-front fee, and I've only had a problem with a buyer not performing one time. It was years ago, I learned from that experience, improved the language in my wholesale paperwork, and haven't had that issue come up again since then. BTW, I've also never paid an up-front fee to a wholesaler even though I've bought multiple deals from wholesalers.
The primary objection I have with the up-front fee is that so many new investors aren't able to do their due diligence quickly enough in independently determining the cost of needed repairs/updates and feel pressured to trust the valuation and repair cost estimates of the wholesaler as he says to the nervous newbie, "Hey, don't worry about it. I have appointments scheduled with other potential buyers about every half hour all afternoon who are very interested in this property. If you're not ready to buy this one, maybe I'll catch you on the next one."
This might still be fine for the newbie investor if the After Repair Value (ARV) and repair cost estimates of the wholesaler could always be trusted, but, sadly, the ARV estimates of wholesalers are often optimistically high, and the repair costs are almost always woefully underestimated. I've talked with way too many new investors who either broke even or lost money doing deals that way.
Please note that I am most assuredly not rendering an opinion one way or another in this public forum on whether you personally, Logan, or anybody else at New Western or any other specific company intentionally or unintentionally misleads investors with inflated ARVs and/or underestimated repair costs. What I am saying is that those who decide to pursue deals from wholesalers (most of them) who charge an up-front fee of multiple thousands of dollars better put on their "big boy" pants, pull & analyze their own comps before they leave home, and be ready to thoroughly evaluate a property and make an offer on it the first time they see it.
Buying investment Real Estate from wholesalers who send emails to LOTS of potential buyers is a combat sport. Part of the way I define my job as the President of DFW REI Club is to make sure those who think they want to play the game understand the risks, the rewards, and the rules.
