Well-executed wholesale deals feel like well planned checkmate.

89 Replies

I just wanted to share in my excitement on another wholesale deal closed with my bigger pockets family. I recently closed on a wholesale transaction all by my lonesome. The reason I'm extremely excited about this deal is not because of the assignment fee I was awarded or the fact that I actually did every aspect of this deal by myself (oppose to doing a J.V.) But because of the help I was able to provide this particular homeowner. Which ultimately brings me gratification-knowing I’m helping individuals in need, who would otherwise be in a difficult situation.

The reason I love wholesaling is because generally individuals in financial difficulties have very little avenues to go about liquidating their hard assets. Often times the properties that distressed owners are selling aren't in habitable condition and most banks won't finance a loan on an uninhabitable property. Therefore the owner is reluctant to list the property with a realtor or is uncertain that it's not in a condition to post on the MLS. So the homeowner feels stuck between a rock and a hard place.

That’s when the art of wholesaling comes into play.

My last wholesale transaction was with me assigning my contract from an elderly man to an end buyer. This particular gentleman was a 74-year-old retired mechanic. He and his wife had just moved out of their three-story home to a much more comfortable and convenient senior citizen complex. The couple had contacted me through an infamous bandit sign and told me they were looking to sell their home. During our conversation about me viewing the property the gentleman “Mr. Brown” hinted to me that he would need transportation for him to show me the property, I agreed to pick him up as well as transport him back without a second thought.

After viewing the property and conversing with Mr. Brown, I detected that he was in serious need of some money and the home was in need of major repairs. The repairs included a leaky ceiling, mechanical and electrical upgrades. Selling his home of over 40 years was the only way he could get the finances he needed. I was able to make Mr. Brown an equitable offer, which he accepted.

I then began to work tirelessly on marketing this property, which was purchased 4 weeks later by a local investor. The beauty in this deal was 1) I was truly able to assist this homeowner with the finances he needed with genuine compassion and concern for his wellbeing and 2) the investor has acquired a property with great profit potential after rehab.

That my friends is why I love wholesaling, checkmate!!! 

What a wonderful share! Making a positive difference for people means the world to them. 

Sounds interesting!  I love to learn about wholesale stories like yours.  Can you share the numbers?   What did your investor pay and what did the seller receive?   Where was the house located?  What address?

@Jamal L.

Encouraging post

Mr. Lee, I am a new investor in the Philadelphia area, began my LLC last week. Your testimony is very inspiring, especially because you did this deal by your self and was able to help someone in the process. I am looking to begin my journey in wholesale but I don't have the experience or knowledge to move forward. What information can you give to an aspiring investor so I can get this ball rolling? I have put out business cards, in the process of making fliers to post, also creating a database of possible buyers (rehabers, realtors, investors, etc). What should be my first step? How do I prepare a wholesale contract?

Great Post. Wholesaling is not just a way to make money in the real estate industry, its also a great way to help people get into a better situation from a bad or challenging one. Great job. 

Originally posted by @Courtney Murray :

What a wonderful share! Making a positive difference for people means the world to them. 

Yes Courtney, it's so gratifying 

Originally posted by @Tom V. :

Sounds interesting!  I love to learn about wholesale stories like yours.  Can you share the numbers?   What did your investor pay and what did the seller receive?   Where was the house located?  What address?

@Jamal Lee

 @ Tom V. 

if you check out one of my post in the market place for Baltimore Maryland within the last 3 months the numbers are laid out completely as far as the ARV and rehab cost. The seller received 24k the buyer purchased it for 30k and my assignment fee was 6k.

@Jamal L.

Thanks Jamal - I will have to check out the market place post.  

Did you consider listing the house for sale on your local multiple listing service?  I see fixer properties listed all the time that will not qualify for bank loans.  

Would that have yielded a higher price for everyone?  

Thank you for sharing Jamal. We are also new to wholesaling in our area and this was inspiring. I love how you didn't hesitate when the seller talked about transportation. That shows true integrity and professionalism. I bet you made a great connection with the end buyer too so that you can both help each other and another seller in need in the future! I look forward to posting our first success story too!!
Originally posted by @Jamal L. :

I just wanted to share in my excitement on another wholesale deal closed with my bigger pockets family. I recently closed on a wholesale transaction all by my lonesome. The reason I'm extremely excited about this deal is not because of the assignment fee I was awarded or the fact that I actually did every aspect of this deal by myself (oppose to doing a J.V.) But because of the help I was able to provide this particular homeowner. Which ultimately brings me gratification-knowing I’m helping individuals in need, who would otherwise be in a difficult situation.

The reason I love wholesaling is because generally individuals in financial difficulties have very little avenues to go about liquidating their hard assets. Often times the properties that distressed owners are selling aren't in habitable condition and most banks won't finance a loan on an uninhabitable property. Therefore the owner is reluctant to list the property with a realtor or is uncertain that it's not in a condition to post on the MLS. So the homeowner feels stuck between a rock and a hard place.

That’s when the art of wholesaling comes into play.

My last wholesale transaction was with me assigning my contract from an elderly man to an end buyer. This particular gentleman was a 74-year-old retired mechanic. He and his wife had just moved out of their three-story home to a much more comfortable and convenient senior citizen complex. The couple had contacted me through an infamous bandit sign and told me they were looking to sell their home. During our conversation about me viewing the property the gentleman “Mr. Brown” hinted to me that he would need transportation for him to show me the property, I agreed to pick him up as well as transport him back without a second thought.

After viewing the property and conversing with Mr. Brown, I detected that he was in serious need of some money and the home was in need of major repairs. The repairs included a leaky ceiling, mechanical and electrical upgrades. Selling his home of over 40 years was the only way he could get the finances he needed. I was able to make Mr. Brown an equitable offer, which he accepted.

I then began to work tirelessly on marketing this property, which was purchased 4 weeks later by a local investor. The beauty in this deal was 1) I was truly able to assist this homeowner with the finances he needed with genuine compassion and concern for his wellbeing and 2) the investor has acquired a property with great profit potential after rehab.

That my friends is why I love wholesaling, checkmate!!! 

Hey Jamal,

I know that feeling and it's a great one. Irregardless of negativity from other people on BP or wherever it definitely matters when you know that you are doing right by all parties and often that's the best reward. Sure numbers matter to stay in business but that's not what its all about all of the time.  If you're a genuinely good-hearted person it doesn't matter which hat you wear in the business, people will see you for who you are and God will bless you. 

Kudos,

Mary

Great post Jamal. This was very inspirational.

Thanks,

-Keith

Keep getting it done Jamal! These stories inspire us wholesalers. 

@Jamal L.

Jamal - 

I'm not sure exactly what everyone here is so enthusiastic about.  You did this wholesale deal with a seller who by your own admission was 74 years old and 'desperate for money.'  You took a 20% spread out of the guy, and now you feel like you have 'checkmated' someone.   You checkmated the old guy with no money?  You brokered a real estate deal without a real estate license (unless I misunderstood that you have a license).  This isn't a business, this is opportunistic treatment of old people in need.  

I've made snarky posts before about people doing wholesale trades like this, and I could go look up the Maryland Real Estate regulators and quote you chapter and verse about how you are breaking the law.  I've been reprimanded by the guys who run the site, so I'll avoid that here.  I would just say, what you have described is not a real business and I know that I wouldn't want to squeeze $6K out of an elderly couple whose principal asset was worth $30k.  You gave him a ride to see his own house?  Wow - big deal.  That's the sort of common courtesy that a real estate agent offers as a matter of course.  

If you want to sell real estate, get your license and sell real estate.  "Helping old people" in this way is not to be celebrated in my opinion.   I would be ashamed to have done this deal the way you describe.  Good luck and remember the golden rule to treat others the way you want to be treated.  

@Jamal L.

I am glad someone has stepped up to exemplify that real estate investing is not or does not have to be all about the money and that we can establish ourselves as community leaders not just leaders in our industry. This is true professionalism at its best. 

Success in any business endeavor can and does provide us with opportunity to grow as people and not only to represent our industry as a way of building wealth and planning for the future but as a way of taking responsibility in fulfilling the needs of others and resolving financial issues within an organized society. 

Yes, real estate investing can be used to build personal wealth and income but it can also be used to address the problems of the less fortunate as well. Today I live in a very new, nice, ultra modern building with an entertainment area, nice landscaping, water fountains , lawn area, security etc. etc. However the first home of any kind I ever knew was constructed of bushes, dried tree branches, card board boxes, and everything tied together with shipping string, had dirt floors, no plumbing, no electricity, and not water. When we moved up we moved into an ex barn that had been used to house milk cows but had been converted to have a kitchen area and a toilet. The loft was full of bats, vampire bats at that. Still to me that was heaven compared to living inside a bush on a hill side and nothing but card board boxes for cover which all blew or fell apart at the first sign of rain. 

It irks me to read the post on hear by seasoned or otherwise financially well healed investors that criticize wholesalers for not having too much money to invest and ridicule first time investors for their questions or difficulties. How about contributing to creating and providing opportunity for others?

I commend the sponsors of Bigger Pockets for providing a place where one can obtain a great education and be exposed to so many problems and situations that are real estate related. It also provides a mean to network and get connected with so many like minded people who share a common interest. 

It is sobering to hear once in a while people like Jamal Lee talk about the human aspects of doing financial transactions through real estate.

Jamal Lee, I hope you never lose that tough for people throughout your real estate career. 

OP is a gentleman wholesaler for sure. Some folks should be taking notes - class is in session.

Congrats, @Jamal L.

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@Tom V. is wrong because if you were FLIPPING the house you would still try and get it for as low as you could. A lot of rehabbers are ALSO wholesalers. For instance they'll get a property with 50k spread in it. If they don't have time to flip it themselves they sell it to another rehabber for the 40k spread and take a 10k "finders fee". That is the exact process of wholesaling. So this false sense of virtue that Tom has, that you're not supposed to get the very best deal you can because "profits are evil" is manifested by people who "thrive of judging" versus doing. 

great job @Jamal L. every new investor needs to read this
dont pay attention to realtors giving you  a hard time,i have never worked with a realtor that did not take their fee at closing 
just make sure you disclose to the homeowner what you are doing 
if in your state wholesaling is seen as selling without a license then get your license 
just curious what was going to be your plan if you could not find a buyer?
good luck 

Jamal, congrats on getting through the entire transaction on your own, way to go, BUT:

The reason I voted for Tom V.'s post was due to the spread, 20% is out of line to act as a "strawman". 

Had you been a real estate agent, picking up some elderly or disable person is actually required under ADA, equal opportunity and access. That is required of agents, just good business for everyone else. 

I do not hammer wholesalers because most are starting out with little or no money! I wasn't born with a silver spoon in my mouth, I started like most of you, flat broke! So, the money thing is irrelevant.

It's pretty much about attitude, ethics and the law.

Attitude, that whatever you can dig out of a property owner is just good business. The more you can take the better you are. Wrong attitude! That is what shisters do, what con artists do and what crooks do, deceive an owner as to the value of their property then profit from that deception. And please don't try to tell me that wholesalers tell an owner a property is worth $30K but they will only pay them $24K and an owner agrees. 

Ethics, the 20 somethings might think it's just doing the right thing, that's only part of it. It is not a religious matter, it's a social, legal and economic matter.  Don't worry youngsters, there are dealers in RE in their 50's and 60' that still don't get it. Business ethics are based on norms, acceptable practices, NOT what one or even a few may consider as acceptable.    

For those who have never really studied real estate, (especially those with Constitutional views as to your freedoms and rights) land ownership is a keystone to our democratic society. It is the foundation of our economy, there is nothing more sacred to citizens than the right to own land! You might recall, at one time voting was restricted to land owners, are you getting the picture of how sacred land ownership is in our country?

First and foremost, land owners are held at the highest levels, in law and in equity protecting their rights in our economy and in law, not buyers, not wheeler-deals, not operators or investors, but owners!  Failing to protect these covenants effects the foundation of our society and our rights.

Which is why we have laws! Laws aren't made to give investors a road block in making money, they are made to protect owners rights, equity, use of their property, quiet enjoyment and the fruits of the land (fruits of the land meaning profits derived from their ownership). It's not about you, it's about all of us!

And, as to what is acceptable; Every service, every function, every business transaction has an established value that is based upon similar or like services or functions or transactions. Values are not arbitrary, as to what some dealer decides to try to obtain today because he feels like it or thinks he can get more out of another party. While there is a great bit of leeway in our ability to profit, going beyond what is customary or acceptable is a predatory matter. 

While wholesalers may truly believe they add value (and you do) most have no concept of the value they bring to facilitating a transaction. I can do a deal in 3 hours that may take a newbie 3 weeks to accomplish. Jut because you worked longer and maybe harder, does not make what you accomplished more valuable. I've read the wholesaling threads with people trying to justify their superior talents over real estate agents in accomplishing a deal.......horsefeathers, you don't have a clue what agents do, as they do everything a wholesaler does. 

Yes, agents send out yellow letters, they drive for dollars, they estimate rehabs, they look for buyers, they cure title issues, they even wash their car. There is nothing a wholesaler can do that a good agent can't do. Let me put it this way, what can you possibly do that I can't do? Really.....

Facilitating a transaction has an established value, it is comparable to an agent's compensation, period. 6 to 10%  per transaction is the long established value to facilitate real estate transactions. I'll put it this way for the hard headed, you certainly don't know what I know, you're not more accomplished in RE than I am, your education in RE is much less, business knowledge is most likely much less and I have greater skills in this business, now, that said, to be ethical, within acceptable margins of profiting, if I simply facilitate a transaction I am limited to that 6 to 10% range of compensation, period, that's what that service is valued at in RE. So, please explain why you think you're more valuable in a deal than I am? Horsefeaters!

Go above that and begin to steal owner's equity! 

Too bad those wanting to get into real estate begin because of misinformation, lies and deceit by gurus, most of whom belong in jail! Learn real estate before attempting to deal in real estate! 

Hope that didn't hurt too much. :)   

  

If the seller had listed this with an agent at 30K how much would the seller have netted? Did the seller save money, or did they lose money using an unlicensed agent? Was 30K a true FMV or did the seller get shorted even more?

All this discussion about what is an ethical percentage commission is all useless in this wholesale deal I did a few months back:

Seller is an out of state landlord who bought a dump in Chicago southside 3 years ago. House is vacant and is a money pit for the past 3 years. He regretted this mistake. He called us on our marketing. He gave us the property for $1. What is it worth? The seller does not care. This has been a big headache for him.

We sold that headache to a local landlord for $2,000. That's a 2000% profit margin. Oh that's super unethical. Or is it? Real estate agents would never dare sell his property. He deeded me the house. I got to sell it because it was now my house and my problem. So what if I made 2000% profit on it. $2,000 on a deal is way below my average profit per deal. But someone got to help the poor guy. Real estate agents won't even list his house.

Is what I did unethical @Bill Gulley ?

By the way, our buyer who bought it will put $10K into it and rent it for $700/month. Was I unethical for selling him a house that will make him money...even though I made a 2000% profit on it?

Bad mouth wholesalers all you want. The good and diligent wholesalers provide value that real estate agents are not willing, nor are able to provide.

What value do agents bring to the table to for a seller?

MLS access.

So let's just say that everyone that wants to sell their property should just hire an agency to put their listing on the MLS for a flat free and reap about 99% of a Realtor's value for pennies on the dollar.

How many agents point out this option to a home owner on a listing appointment?

Of course you still better offer a "reasonable" buyer's agent commission in your ad or don't expect anyone to show their clients your property, since how are they going to get paid?

Their clients would surely be pissed off to have to pay since they were told that the seller pays.  The agent omits the fact that is ONLY if it is a listed property that offers a co-broker commission.  Of course since any listing by another agent will have this they just run with the majority and won't show the sliver of places that don't fit that model (even if it might be the perfect place for their buyer clients).

So are most agents money grubbing unethical scumbags?

It would seem that way... 

Account Closed

Hello Wendell......anyone home? Lights are on......

You didn't WHOLESALE that deal Wendell, you bought it! You took title. You took the risks of ownership! I've bought dollar houses, disposed of them in time, but that is not simply facilitating a transaction as wholesalers do. 

Taking title means you are now that protected owner, the risks of ownership were conveyed to you and I, liability of holding title of some dump even for a day, there is often uncertainty in owner such properties, many don't want them at all. 

If you could sell that for $10,000, all well and good under those circumstances. I really doubt you told the seller his property was only worth a dollar. As long as you are not gouging, selling over market value to some uninformed buyer, from an ownership position, more power to you. He wanted out from under it and you were willing to accept his headache, I'd say he was totally aware.

That wasn't wholesaling, you didn't simply pass paperwork you took title, that's not just providing a service as you also took responsibility as the owner. BIG difference!

Back to RE 101! 

I realize too Wendell, you work with wholesalers (or do it) I believe, so it wouldn't really hurt to have another 200 misguided folks trying to bring you deals. 

It's not really a debate, it is what is expected in the industry and wholesaling is NOT an industry, it's a niche. 

I was going to mention too:

Few years ago, there was a survey of the general population done by the BBB, what they wanted to see was which business and professions were viewed as the most ethical, fair dealing, professions or trades.

Realtors came in just below used car dealers, in the bottom 10% but, beat out landlords who were near the bottom, I think it was home improvement contractors who were dead last. General contractors faired  pretty well with architects. Bankers topped lawyers, but not teachers, the highest held in greatest esteem were doctors and police officers....oh my!   :)       

Originally posted by @Shaun Reilly :

What value do agents bring to the table to for a seller?

MLS access.

So let's just say that everyone that wants to sell their property should just hire an agency to put their listing on the MLS for a flat free and reap about 99% of a Realtor's value for pennies on the dollar.

Bill here: I'm not sure I follow you at reaping 99% of the value of a Realtor, but it's obvious you don't really understand what all is included in representation. 

How many agents point out this option to a home owner on a listing appointment?

Don't know the agents that have solicited your business, but a listing appointment gets rather involved as to what both sides do in co-brokerage and who is responsible (the listing broker is)

Of course you still better offer a "reasonable" buyer's agent commission in your ad or don't expect anyone to show their clients your property, since how are they going to get paid?

It's me again: MLS listing are on a co-broke basis, that is already understood by agents, if you're speaking of a FSBO, yes, you'll need to give authorizations to show and agree to compensation, putting that in your ad will probably get feet to your property.

Shaun says: Their clients would surely be pissed off to have to pay since they were told that the seller pays.  The agent omits the fact that is ONLY if it is a listed property that offers a co-broker commission.  Of course since any listing by another agent will have this they just run with the majority and won't show the sliver of places that don't fit that model (even if it might be the perfect place for their buyer clients).

Sellers who list pay the listing broker, not the selling (buyer's) broker. The listing broker offers it on the MLS and offers a commission split to the selling broker. Each broker pays their agents

At the request of an owner, some brokers may take a listing and not go to the MLS, in fact, not all brokers are Realtors! This is more common in commercial.

A licensee is never paid directly by a buyer unless there is a specific agreement to do so. All property owners must authorize and agent (representing a broker) to show and contract any property, the agency relationship must be created. If there is only one agent involved states have requirements for different agency relationships such as acting as a transactional broker, agents may not serve two masters, basic business/agency law.

Now that you're bored with that, here's another aspect.

Licensees are 1. formally educated in all the basic aspects or real estate to ensure both parties are represented by a knowledgeable person, 2. they are to understand and employ legal and ethical representation. 3. They are bonded and insured for errors and or omissions. 4. they offer other services and products, such as counseling and warranty programs, transfer services, . 5. Regardless of their abilities, they are held to higher ethical and legal standards than Jon Q Dipstick, if they leave out some material fact or have an error in judgment as to what should have been discovered, they are held accountable and their insurance kicks in to protect the public from financial losses. 

So, the real fact of the matter is, a wholesaler who just facilitates a deal isn't really worth as much as a broker as they can't provide any assurances to either party as to their competence, ability to facilitate a transaction, cover any error or omission, offer related services or be held to a greater degree of responsibility to either party.....all of that is also included in that 6 to 10% realm. Do wholesalers offer such assurances and services? NO, they can not!

Most getting into real estate including many who have been dealing for awhile have no clue as to what Realtors or agents and brokers do, what they must do, must not do, how they are required to safeguard and conduct transactions or what responsibilities they have. It sure goes far beyond what a free lancing operator has to do or does. 

Which is why I urge serious investors and operators to learn real estate before attempting to deal in real estate.    

Otherwise, it's the blind leading the blind. :)

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