Buying And Selling Used Phones: The Pitfalls
I get asked all the time if I sell used phones. The answer is "I wish but do not at the present time". Why is this the case? Read on and I'll tell you what I know about the used phone business and what you need to know when making a purchase.
There are many reasons I do not currently sell used phones. The primary reason is that I find it's not very profitable. It's a low margin/high volume business, and there are many traps you can get caught up in if you're not careful. I find that the complications of the business are more than I want to deal with.
As far as the financials are concerned, there's not a lot of profitability per-unit. For example, I do have resources for quality used phones. My two biggest wholesalers have them, and occasionally I've bought some phones. But keep in mind these are verified legal to own phones, and they typically cost whatever current market value is. What I've found is that you may have to spend, say, $425 for an iPhone 11 and maybe sell it for $450. $25 profit is not much for the amount of cash you have to tie up in the device. And sometimes the device may have a hidden problem, and the parts costs put you in the red on the deal.
The financials are modest on these devices, that much I can tell you. On top of the situation, if you're a legitimate and honest business, you'll warranty your product. If the buyer has a problem with it, you might have to come out of pocket to correct it. Now your $25 could be -$125. You have to be really careful where you get these devices and check them out thoroughly for any problems. Make sure your supplier has guarantees as well. Even then, you're still running the risk of losing money from shipping devices back and forth to the vendor and so forth. It's not that easy to make a buck in used phones.
In the rare cases where I've bought and sold phones, it's been with longtime customers who trust me and I trust them. In that case I'll typically just get it for them and they'll reimburse me for the cost plus sales tax, no profit. I end up OK in those situations because, again, relationships dictate success. Both parties are trusted, and down the line I'll see them for repairs and accessories. So it works out in that regard. But as far as the used device? No real money made on the initial deal. Quite often though the customer will throw an extra $30 in for gratitude. CDC has the finest customers in the world, so that's par for the course.
There are people who are in what's called "phone flipping", where they buy from individuals and resell. What I find is that many are doing so legally, but they're going to lowball the seller on the phone. Often times the device you're selling to a flipper is worth a lot more than what they're offering, and you can get more cash at GameStop or selling online and so forth. Phone flipping is a legitimate business, however it's a lot like trading in your car at a dealer. They never give you anywhere near market value for the car. Beware of this, forewarned is forearmed. They're not bad guys, but they do things a little different.
Where the used phone business is very profitable is in high volumes. Companies like AT&T, Verizon, and so forth sell their trade-ins at auction. That's why they demand they're clear of iCloud or FRP. And they sell them in big lots. So little CDC is not going to approach Verizon and ask to buy 1 or 2 phones. They'll sell you 300-500, and it's typically by auction and there are fees, typically 10% of the sales price. You need hundreds of thousands of dollars for this, and they are as-is buys. So again, the financials need to be looked at here. You can quickly overpay for a lot and lose money, and also factor in that some may not meet QC and are unsaleable. You really need to be a big player and know what you're doing at this level. B Stock is another source, and again they're about big numbers. They also require minimum weekly spends or they won't do business with you.
With all of that as competition, where does it leave us? You can make a little bit on used phones in certain situations. For example, occasionally one of you guys might upgrade and want to sell off the old model. If it's a fairly recent phone and you're reasonable in price, sure! That's OK because the phone is paid off and can be cleaned up and sold. I'm fine with that, however lately most people have been getting sky high trade in prices from the carriers, so the pickings are slim. I've been more of the go-between to get them repaired for trade-in, which is a win-win for all of us. But buying from one of "Y'all" is good because we have that trust and relationship.
But it's when you buy a used phone from someone you DON'T know that can be dicey. Keep in mind that the ESN number on these phones are traceable, as are Google and Apple's cloud link. You can trace where that phone is located at any given time. And the newer phones have that ability even if they're turned off. The potential is there for getting caught up in buying and selling stolen merchandise, which is something you don't want to EVER get involved in.
So if you're looking at buying from someone on Craigslist or Facebook Marketplace, that's OK provided you take some specific precautions. They are:
Make sure to meet the person in a public area that's safe. Never get into someone's car or go to their home. Safety is important! People have been robbed or worse in these phone transactions. Have them meet at CDC and let me give the phone a look or do your deal here. This is a safe place. Or maybe meet at a police station, which is common practice.
Make sure that if the phone is locked to a passcode, the person can unlock it. If they cannot, walk away.
The big one! If it's an iPhone or iPad, check to see if "find my phone" is on. If it is, the seller must be able to turn it off via the Apple password tied to the Email address listed. If they cannot, walk away. It's a brick and highly likely it's stolen. Google also has a similar system called "FRP" or "Factory Reset Protection". If you reset an Android, it will ask for the Google account and password associated with the device. If the seller doesn't know, walk away.
But that's just one layer to worry about. The status of the ESN/IMEI matters. You need to verify that the ESN is clear and the phone can be activated. Sometimes the carrier blocked it and again you're buying a brick. There are services that verify the status, one of which is called "SICKW". It's a subscription service, so it's not free. But it will tell you if the phone is financed, ESN status, whether it's lost or stolen, and so forth.
The four above listed rules are crucial to successfully purchasing a used device. Now let me give you some real-life examples that I've personally seen where things go wrong.
I had a lady stop off a while back with a used iPhone 8 Plus she purchased online. The seller listed it as "Grade A like new". The lady tested it and had some doubts, so she was very smart and brought it in to have me look it over. Uh huh! "Grade A like new" my tushie!. There was some OCA separating from the screen, and in "Display and Brightness" there was no setting for "True Tone". "True Tone" is a function all i8 and newer iPhones have. If it's not present, that means the screen was replaced and not properly EEPROM flashed. Sure enough that was the case. She paid a lot for this phone, but fortunately my inspection saved her. She got a refund.
Sometimes repair shops like CDC will get people that walk in off the street looking to sell a phone. Quite often it will be a new one, like a shiny S22 or i13. They'll say something to the effect of "I don't need this one, it's brand new, would you like to buy it?" And these guys will take anything for it. It could be a $1k phone, you offer them $300, and they'll take it. They'll take less sometimes. Why is this so? Two scenarios here, I'll describe the first one: a financed device. People will sign up for a new plan and look for the $0 down deals. They'll sell the phone and monetize the situation. They'll even demonstrate the phone is active with a SIM card. It will be, but not for long. They'll default on the plan and the carrier will blacklist the phone. It's a brick and you're now out $300. That's why you run SICKW or something similar and get their name and address. They won't want to, so don't buy the phone.
The other scenario is a stolen device. While less common, it's still a factor. You might recall there was civil unrest in the country a few years ago, and the Apple stores got looted in many cities. Uh huh! I saw that here at CDC. There were some incidents in DC and surrounding cities as you may recall, and just a day or two afterwards I got phone calls. "Do you buy iPhones?". Nope! I knew these were highly likely to be stolen devices. What these folks don't realize too is that they're traceable, so you'll likely get caught. Don't get involved in that stuff, trust me.
Another example I saw was fairly recent. The person was honest, but clearly didn't understand what he got into. He had several iPads that were locked up. They were purchased from a police auction. Stay away from these auctions, you'll end up throwing good money after bad. Even if they're government auctions, the devices need to be verified as I've stated above. In this case, they were lost and found items that police departments have. They sell that stuff off after a period of time. This guy bought several iPads thinking he got a deal and could flip them. They were all bricks, and one was listed as lost with a contact number on the front. I gave them back to him and advised he take them back where they came from.
These are the real world situations I've seen and learned from in my 9 years at CDC. Used devices are a challenge as far as buying and selling. You have to have experience in dealing with them and know when to walk away. These devices are more secure now than they ever have been, and should not be in your possession unless properly vetted. If you see a phone on the ground that's lost? Turn it in to the police and do not keep it. If there's a contact number on the screen, call the person and tell them you found it. Don't keep these devices, you're just asking for trouble either financially, legally, or both.