Sponsered by KW? Do you believe wholesaling is "unethical?"

5 Replies

Hi! My name is Kent and I currently reside in Corpus Christi, TX. I've been snooping around this website for around 1 and a half years and feel its time to start asking some questions that pertain to the goals I desire to shape towards being successful in Real Estate Investing.

One of my goals is to earn my Real Estate License this year and to under go training through Keller Williams. I have already taken the required class work, had my finger prints done, paid the application fee yaddayaddayadda.... and now study everyday to pass the real estate exam. Besides gaining sponsorship, passing the exam is all I have to do to gain the license.

After talking with a top recruiter at Keller Williams, he revealed that he believed the wholesaling method of real estate investing to be "unethical" by stating that it takes advantage of the seller in several ways. I have read similar views on this method of Real Estate Investing. Before hearing/researching this angle, I was pretty gung-ho on accomplishing/refining the wholesaling technique in investing before others.

If I plan to be trained and sponsored by the Keller Williams firm, should I realistically  give up hopes on developing proficient wholesaling skills? My main desire for aspirations in real estate is to be an investor and NOT a salesperson. I wouldn't mind the experience and training that is offered there but if the company's standards doesn't fit my aspirations I should try to attain a more fitting path towards moving forward, right?

It certainly can be. Stealing equity from uneducated sellers is unethical. All kinds of stories of people "negotiating" with people in their 90's or someone who just lost a parent leaves a bad taste in my mouth. On the other side some people just flat out want to sell their house today. I was once working on a house and guy just drove up and asked if I bought houses. Long story short he said he couldn't let it go for less than 80 and I said you could probably get that if you hired a realtor but I'll give you 43 and he said OK. Why? I have no idea. I told him he'd probably get 80 selling on the MLS. Some people just don't want to be traditional or maybe just don't care.

So in practice in my opinion it can be both OK and taking advantage of people. I think honesty and being upfront that you are reselling them to make a profit goes a long way of making it less unethically.

I recently went into a house for one of our PM clients that was going to buy it from wholesaler. I met the daughter of the seller there with the seller in a hospital bed with tubes all over the place; most likely on her death bed. The wholesaler had in under contract for $500 more than they bought it for 15 years ago. Talk about a "win-win." I left and told our client to find another person to do business with and I told the seller's daughter to hire a realtor. I know what it's like to be young and hungry, but that can't be worth the money. It is unfortunate that so many low income people have this house as their largest asset and have zero clue what's it worth and tend to make bad decisions when faced with their greatest financial challenge. But they do because they don't know any better. I think you should at least inform them that you are an investor and going to sell their house for more money than what you are buying it at.

Just ask yourself if your mom inherited a house would you rather have her sell to a wholesaler or hire an agent?

Wholesaling is not unethical...but there are unethical wholesalers, like there are unethical Real Estate Agents. Once you establish your REA license, you'll find that depending on who you broker with, that brokerage may have rules that will restrict you in doing some of the things you would want to do as a REI. That doesn't mean those REI things are illegal, immoral or...unethical.  It just might be against policy.

You may need to make a decision, once you get more established in your REI training/education. Do you want to be a REA or a REI?

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@Kent Mayes , you wrote: "My main desire for aspirations in real estate is to be an investor and NOT a salesperson" (as if that would lend itself to wholesaling instead)?

My point is: neither Realtors or Wholesalers are Investors per se! Nor is being a Wholesaler any less ethical than being a Realtor, in concept. In practice though?

Here's a recent thread about wholesaling:-https://www.biggerpockets.com/forums/93/topics/351...

Can you detect anything that could be described as "unethical" in the following quote:-

""Subject to partners approval within 15 days of the date of this contract." This way, if you can't find a buyer, you can say your "partner" who is imaginary of course, didn't approve this purchase and all you lose is (the $20) earnest money deposit you paid"...? (emphasis added).

There are plenty of Wholesalers out there (both ethical and unethical) that also have their License, but INVESTING (retaining ownership for its returns) is a different topic altogether! Either way - it's FULL DISCLOSURE to those Sellers you're buying from that decides ethicalness! My 2c...

Your license will give you the education to write your own offers plus MLS access. Sounds like your recruiter has the ethics issue and wants you to remain an agent instead of encouraging you to grow. Don't be one of the clones, follow your dream and become your own broker when you have the resources. Good luck in your REI career.

IMHO, NAR should prohibit "wholesaling" in the code of ethics. Whether assigning or using a double closing, the transactions taken as a whole are really an attempt to squeeze more compensation, for what is brokerage activity (with a fig leaf of equitable title) or as a maneuver to make net listings, otherwise illegal, legal. If you think your brokerage services to list a property are worth $15,000 or 10% or whatever else, you can negotiate that commission. If you can't get your potential seller to bite, I doubt they would appreciate your earning that by "alternative means".