Agent Avoidance

29 Replies

Why would real estate agents who claim to be "investor friendly", not want to work with an investor who is wholesaling?

From my experience, it's because wholesalers generally don't want to pay agent fees.

Also, wholesaling depends on you acquiring the property for less than it's worth, and if you do that, the agent will receive less commission.  If you can buy a place for 50,000 and sell it for 100,000 ... the agent gets 1/2 his/her commission ... and you get 50,000 minus fees and closing costs.

You'll have to establish a relationship with the agent and help her understand that she can get something out of it as well ... and then you'll have to tell her what that something is.

Wholesaling, at least as I know it is a harder sell.  I am a broker and investor in TX, and the wholesellers around Austin want $5k to get a property.  That is 5k up front with no option time. 

From a broker's stand point, that is a huge risk if I rep the buyer.  I want them to get an inspection and do some homework before they close the deal.  Also a buyer can start the process of buying a home from a non wholeseller for less than $1000.  It's even worse if I rep the wholeseller.  They often times know nothing about the property, and are not going to give the buyer any time for an inspection.  From a brokers standpoint, we want things nice and slow, lots to time to understand exactly what we are buying, and for the most part refundable if things are not as we expected.  We do all this so we don't get sued.  

From an investors stand point a wholesale deal with no option period to inspect the property is a risk. In my example I risk 5K if i don't move forward. If the deal was really that great then it would not be a problem, the reward would be worth the risk. For the most part in the Central Texas area wholesellers are using next years prices now. The whole market is crazy. Usually I see home wholesale for at 80% ARV but are marketed as 60% AVR. Which is why I don't mess with wholesellers and why I don't want my clients to either.

Kathleen- When an agent says they are "investor friendly", they usually mean they would like to obtain a long buyers list of people who will rush to purchase a home at full price when the agent calls with a new listing for a rehab or rental.  

Most agents discover pretty quickly that your typical wholesaler is looking for that same list of buyers.... and the typical wholesaler learns pretty quickly how to cut the agent out of the loop.  That's especially true in areas where the wholesaler only gets a thin slice of the pie to begin with...

one of the best reasons to get your own license

I am not a realtor, my position is that im a buyer in the same sense as anyone else buying a property through a realtor. I had the general understanding that the realtor's comission was paid as part of the closing process? And that closing would be the same whether i am the buyer or i have another buyer taking my place at the table? Also yes i would make a rediculous offer but if its accepted, its a sale otherwise they fidnt have. And in your example i would be the buyer in the initial closing and the seller at the second closing following the rehab work when they would get comission based on the ARV.

Sorry so lengthy, im just trying to understand this. Thanks for your candor.

Steve, i hear you!

 @Kathleen Miles  

I will preface that I assume you are referring to the wholesale model where the Wholesaler gets a property under contract to assign to another buyer with no intention or ability to close without finding an end buyer ?

As a Broker for 20+ years, I would be inclined to work with a wholesaler in that regard for several reasons :

-I wouldn't want to gain the reputation as a Broker whose Buyer(Wholesaler) does not perform

-Typically when a buyer makes an offer on a MLS listing, the other Broker/Agent is going to ask for proof of funds and with the model I described above, many will provide fake internet proof of funds and again bring my integrity into question

-Wholesalers using the model above are going to be marketing the property from the MLS while it is under contract which again could bring my integrity into question

For example : While I am a Broker, I primarily flip houses and purchase many HUD homes per month. I have worked extremely hard for 20+ years to have a great relationship and reputation with the many HUD asset managers and I am known by them as someone they can count on to close on the property if my bids are accepted. A couple of Wholesalers on BP have asked me to place bids for them. I have declined as to not jeopardize my relationship with HUD as it is my "Golden Goose" so to speak

For the record,  I do not look negatively at the Wholesale industry and it seems like a viable way for many who can find and evaluate deals.  Just from my prospective,  I do not want to do anything to possibly tarnish my reputation in the industry

How do you get rid of a wholesaler??

Ask for cash proof of funds with name and bank statement and large non-refundable EM that you hold.

That gets rid of 99 percent of them.

Time is money. I know in commercial that I know how to properly underwrite a property to see if it is a good deal or not for my direct clients. Most wholesalers are just throwing stuff around hopefully to get one property out of 100 to be a deal so they can get paid on it.

I want to get paid as much as I can and as fast as I can while I do a great job for my commercial clients. I have learned 11 years in that the less complex or EXOTIC you make something the MORE of a chance it actually has to close.

I like vanilla deals. Strong end buyers and a great property to purchase. If I am working on a property with a lot of problems to it will not be a property for 500k. It will be a property in the millions to tens of millions that is value add for my time. A smaller deal I would work myself as a direct buyer because I get all the upside and not just a commission only. 

I consider myself "investor friendly". But I define an "investor" as someone with the intent, and ability, to actually buy. Not someone looking to simply tie up a property, at either a an unrealistically low price (which is not in the best interest of the seller) so they can flip to a real investor, at a below market price, OR tying up the property at near FMV with the hopes of flipping for more than all the other buyers looking at the MLS are willing to pay. Either way, not a great chance of success. The typical pure wholesaler is Not an "investor", even if they like to call themselves one. So, investor friendly yes....wholesaler friendly, not so much.

Same reason agents don't want to work with investors looking to buy rental property with no money down.

WOW Joel and to a lesser degree, Wayne - OUCH. Didnt we all start somewhere!? True i would rather be buying and holding multifamily units and commercial properties, creating generational wealth, but im not currently in a financial position to do that. So after a successful 40 year career in nursing i am starting my second career in the mailroom so to speak (which is fine), trying to build capital and find creative financing so i can become a "real" investor. Isnt that the name of the game? Hopefully there will always be those with something to teach me and to whom i can teach something. 

Steve had a good solution and although I dont disagree with him, Im not trying to be a real estate agent, it isnt something i want to do, i want to partner with some to make multiple deals over the long term on non performing properties that result in wins for all concerned. 

Unethical people exist in all professions. And sometimes things dont work out. But to judge everyone starting out in the business of investing as a wholesailer as such, is something else. 

What do real estate agents need, in order to value the role of someone sourcing properties for cash buying investors, for a fee?

 I would not work knowingly work for a "wholesaler" or any "buyer "who is not able and willing to close on the subject property. This has nothing to do with the amount of commission collected FYI. It has everything to do with ethics and honoring you FIDUCIARY duty to  your client.  I wont intentionally work with ANY clients who don't have money or approved funding to buy the property they are attempting to buy.  who would?

NOW Let put the shoe on the other foot and see how it fits...

Lets say you are a seller (which if you are an investor you will be a seller at some point) and you decide to or need to sell one of your properties so you contact the best agent in the area and ask them what your property is worth in the current market. ( by doing so you have established a fiduciary relationship with the agent. a relationship of  the highest trust)  The agent says that its worth 50,000 and you sign a listing agreement.

 the agent leaves the listing apt call their pal the "Wholesaler" and says  "I need an offer for $50,000 on this property its worth $100,000." The wholesaler writes full price cash offer for 50,000 tying up the property. then he call his pal to sell it for $75,000 100,000. he collects his 25,000-50,000 assigns the contract  for a fee or Double escrows to another investor or end buyer.

Now that you are the seller who was just robbed by the advisor whom you paid to HELP you (oh and who is legally obligated to act in your best interest) what would you do??? 

Bye Bye reputation

Bye Bye Real Estate Licence

 Hello Lawsuit (that's if your lucky... cause where Im from you might just end up in a ditch somewhere for stealing 50K from the wrong persons mama)

Originally posted by @Kathleen Miles :

.....Im not trying to be a real estate agent, it isnt something i want to do, i want to partner with some to make multiple deals over the long term on non performing properties that result in wins for all concerned......What do real estate agents need, in order to value the role of someone sourcing properties for cash buying investors, for a fee?

Kathleen why wouldn't you want to be an agent? What do you think you are doing when you are sourcing properties for cash buying investors, for a fee? 

You are operating as an unlicensed agent.

 

Originally posted by @Kathleen Miles :

Steve had a good solution and although I dont disagree with him, Im not trying to be a real estate agent, it isnt something i want to do, i want to partner with some to make multiple deals over the long term on non performing properties that result in wins for all concerned. 

 One option that being licensed will open up for you will be to assist buyers and sellers with short-sales.  I think representing actual investors as an agent will probably be more educational trying to get great deals for others as a wholesaler.

Sarah, surely the agent you speak of is operating in an unethical manner. But as to price, buyers (investors and contractors) typically try to negotiate their best deal to make a profit at resale, and baring unethical behavior, the seller has to accept the deal and will only if the deal is worth it to them. I have bought and sold personal and estate property, i have been a landlord. When it came to selling the property i had to weigh the offer and decide if it was a good enough for me.

James if i was trying to be a real estate agent i wouldnt be coming to one to facilitate the deals. I worked a lifetime in a true service profession, which i see REAs as. Its an admirable profession, but its just not what i want to do in my second life. Im simply looking for a bridge to the world of "real" investing with capital to do buy and sell and buy and hold deals. I had simply hoped to find an understanding of the issues and relationships, real or perceived, which i have found; and some resources with which to move forward.

Thank you all for candid input. I think we all have to continue to change and reinvent ourselves to survive and prosper.

Hi Kathleen,

Understand it's nothing personal in nature at all about wholesalers. You just can't expect professionals to be excited about working with them.

I have a database now of investors and clients that are individuals with lot's of money to sell direct to that I have built up over a decade.

If you want to wholesale just know it is an uphill battle. If I can list a property and land a direct buyer it is clean and I get paid quickly. Wholesalers often try to tie up a property for little to no money and you do not know the capabilities or qualifications of the end buyer. The wholesaler doesn't buy when the deal falls through and the sellers property has been tied up for months. The seller is even more damaged because the buyers who were around have no gone on to buy something else.

Just no benefit there really. Hope it helps.

P.S. If you have been in nursing 40 years you have a vast network of doctors and nurses to talk to about r.e. investing etc.    

I do believe your question was " Why would a REAL ESTATE AGENT who is investor friendly not want to work with a wholesaler?"

Which I answered for you. I don't mean it to insult you as an investor but clearly you can see from my description  (which is only one example)  the ethical pitfalls for someone working in an agent capacity. Someone who is not a fiduciary can act in  there own best interest without disclosure that they have more knowledge and experience than the seller. If you are an agent you are hired as an advisor so you cant act like that.   As an agent we are held to a higher professional standard. This is one of the reasons that many investors choose not to get real estate license.  :)


Originally posted by @Kathleen Miles :

Sarah, surely the agent you speak of is operating in an unethical manner. But as to price, buyers (investors and contractors) typically try to negotiate their best deal to make a profit at resale, and baring unethical behavior, the seller has to accept the deal and will only if the deal is worth it to them. I have bought and sold personal and estate property, i have been a landlord. When it came to selling the property i had to weigh the offer and decide if it was a good enough for me.

James if i was trying to be a real estate agent i wouldnt be coming to one to facilitate the deals. I worked a lifetime in a true service profession, which i see REAs as. Its an admirable profession, but its just not what i want to do in my second life. Im simply looking for a bridge to the world of "real" investing with capital to do buy and sell and buy and hold deals. I had simply hoped to find an understanding of the issues and relationships, real or perceived, which i have found; and some resources with which to move forward.

Thank you all for candid input. I think we all have to continue to change and reinvent ourselves to survive and prosper.

when I started buying I had the same problem.I met an agent who most would not work with.He was very poor,hardly had a car, proper clothes etc. I had him right 20 deals a week.finally we worked out a system where I presigned contracts and would would submit deals as soon as they came on MLS.I took care of him gave hI'm closings front and back.etc.The moral of the story find a new or hungry agent

@Kathleen Miles I have to agree with the other agents/brokers on this thread. I would also add that (at least in the Greater Portland Metro Area) most wholesaler deals are completed off the market since there really isn't enough profit to be made through the MLS.

Wholesalers will generally low-ball their offers and as an agent, I would not work with someone who did that because it's my reputation on the line . . .  once that reputation has been soiled, I may as well pack it in. My reputation is my business.

Originally posted by @Kathleen Miles :

James if i was trying to be a real estate agent i wouldnt be coming to one to facilitate the deals. I worked a lifetime in a true service profession, which i see REAs as. Its an admirable profession, but its just not what i want to do in my second life. Im simply looking for a bridge to the world of "real" investing with capital to do buy and sell and buy and hold deals. I had simply hoped to find an understanding of the issues and relationships, real or perceived, which i have found; and some resources with which to move forward.

Kathleen you are missing my point. What I am trying to tell you is the specific activity that you are performing is a brokerage activity. You are connecting a seller & a buyer together to collect a fee. This is the function of an agent.

@Kathleen Miles  One of the previous posters gave good advice: find a new, hungry agent to work with to write lowball offers for you. 

I'm a wholesaler but I don't work with agents this way, however. Rather the best value-add is to source off-market deals yourself through marketing direct to potential sellers, put them under contract at a great price, then you can use an agent to sell the property at a top price on the MLS.

You create no fiduciary pitfalls for the agents, as the only agent you are working with is the one who works for you. They will try to get you the price you need, in the time frame you need. Also, they benefit doubly by being able to both collect on the buyer's agent fee as well as the seller's---approx 6%. 

@Kathleen Miles  As long as you make sure that there is no legal language barring you from assigning the contract for cash, and you make sure that you do proper, exhaustive due diligence than you have nothing to worry about.  If you negotiate hard, honestly and often than you will eventually land a great deal.  Wholesaling is not un-licensed real estate brokering as some have suggested on this thread.  You are acting as the negotiator for whichever company/person that you are going to assign the contract to.  There is a very fine but clear difference between a wholesaler and a buyers agent.  You opened up a can of worms by asking all the vanilla investors on Bigger Pockets to come and deflate your balloon but understand that there is a market for what you want to do and there are people who do it successfully,

Just think of yourself as an acquisition manager but, instead of for one company you are doing it for numerous companies. 

@Kathleen Miles  -- I don't think anyone here has tried to talk you out of wholesaling, and nobody has said they look down on people who choose to start their investing career as a wholesaler.

You asked a specific question -- why agents who say they want to work with investors treat wholesalers differently than other investors.  I think that's been answered pretty thoroughly.

The next question for YOU to answer is "how do I get wholesaler deals without working with a licensed real estate agent?"

There are a LOT of answers to that question.  Successful wholesalers understand that they can make money in spite of the attitude licensed real estate professionals may have about them.

Thanks Jacob, William and David for the support and sound advice. I really appreciate it.

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