Petition for BP to Discontinue Wholesaling Discussions...
Brandon SturgillBusiness Member
Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votesPetition for BP to Discontinue Wholesaling Discussions...
Most Popular Reply
Residential Real Estate Agent · Orlando, FL · Member since 2015 · 139 posts · 106 votes
11yI'm not sure why I'm even responding to this insulting post but since you've hit a nerve, I'm going to try. Wholesales and wholesalers are an intricate part for many investors. Considering we move 30-50 properties a month to our investors may show that wholesalers play an important role for many investors. We work to provide quality investments and take over all the hard work and time it takes to acquire properties for our investors that don't have the time, desire or knowledge to accomplish. Sure, there are bad seeds out there in the wholesale world, but there are bad seeds in every aspect of business. I find BP to be an incredible resource for me as an investor and a wholesaler. For you to want to begin a petition to rid posts and forums about a particular side of investing seems selfish and a little "one sided". I can only assume you've had a bad experience, but to burn the industry as a whole really doesn't provide much credibility on your part.
311 Replies
- Real Estate Broker · Tucson, AZ · Member since 2012 · 410 posts · 337 votes11y
Originally posted by @Brandon Sturgill:
@Dean Letfus thanks for jumping in...at the end of the day, wholesalers are the bottom-feeders of the REI world...nothing personal, but let's focus on an industry that (believe it or not I have respect for)....but only for the tenacity and the ability to problem solve. Start out in RE wholesaling, but man, you gotta graduate to something better eventually...
"Wholesalers Are The Bottom-Feeders Of The REI World..."
Wow... Now that's arrogant.
Wholesalers are not all "bottom feeders" any more than ALL Investors are "Bottom Feeding Lowballers"....
Trust me... if you are gonna throw rocks, at the end of the day.. you are a INVESTOR.As a Broker.. (Since you're throwing names around) I know buyers who are Investors, as well as REGULAR Buyers who blow more money on a weekend in Vegas than many of your friends and you could on a single week.
Your arrogance betrays you.. Wholesaling isn't a beginning... it is a SKILL...
Thats why wholesalers that I train routinely make more money than you do... REGULARLY.Have a Powerful Sales Day... Even though this post was even more offensive than the first.
- Investor · Chicago, IL · Member since 2015 · 677 posts · 309 votes11y
Allot of newbies have not had the chance or the time to read all the related posts to their questions. They respond out of enthusiasm and interests only. This may be all new to them and they may not realize the amount of guidance already available on BP, its forums, and organization. You will have to forgive them and bare with them as they are simply trying to begin gaining understanding, knowledge, and build up to a point they can realize this is an educational opportunity for them if they learn how to harness it.
There is allot to learn at first. Nobody started out being a seasoned investor in real estate for the most part, I think.
People are trying to figure out if real estate investing is for them and not everyone will conclude it is. There is just allot to it. We would all love to feel and think real estate investing will be easy enough for anyone and everyone to but the fact of the matter is that not all will find it is a good fit to them. There is allot of things that can go wrong. This is why I like to read about the many problems people run into and seek solutions to even when I see clearly they have made what to me would be an obvious mistake or have an obvious solution. To those of us who are more familiar with the process of real estate dealing, transactions, verification, selection, planning, class, and other related topics things may seem like a no brainer but this is not the case for those taking their first look at real estate investing and deal making, contracts, financing and the many things that can be involved and also have to be dealt with.
BiggerPockets is not just a resource for active and seasoned investors it is also a place of newbies to get introduced to real estate investing, educated, exposed to, and begin to understand the other resources available to them if they learn how to use them or even look for them. They need tools, training, and all the resources we can make available to them. This is also an opportunity for us to give back to our community as a form of appreciation for all real estate investing has done for us.
Anyway this is the way I see it. Sorry for those that lose patience but I do believe if we have a chance to contribute to human development then we might find some satisfaction in giving to others.
- 11yJohn HornerPro MemberFlipper/Rehabber · Columbus, OH · Member since 2013 · 1k+ posts · 655 votes
Originally posted by @Jay Hinrichs:
I think your response is accurate for sure in your market.. but this is a very much regional thing when it comes to the RE agent Vs wholesaler who is better discussion.
In your market you deal with homes that cost less than cars.. and unless an agent is a high volume OREO broker probably is not going to get all that excited about those types of properties at least the best agents and most experienced.. so its much like the rookie wholesaler who really has no clue.. RE agents that take a listing on a 20k house are probably newer or less experienced.
And out here on the west coast were average sales prices are north of 300k so average commission are more in the 7 to 10k range per side.. there are many agents who market .. who do yellow letters for listings etc etc. and there are good agents that are very experienced in the rehab realm.. there is one agent here in PDX that just kills it. he can size up a home knows what the costs are and presents a rehab package to an investor makes the commission selling it which is usually 10k plus then gets the list back at another 10 to 15k on the new price.
However in my experience which is pretty deep out your way funding in these areas were purchase price is so low.. I think your correct.. most folks that work in it daily have more knowledge than most realtors who probably don't want to work on 20 or 30k listings..
even 100k listings are only 3k plus split with broker.. I know I would not waste a minute on it. but it does leave a void.. that's for sure.
I am 1 week away from completing one of my 5 flips located in Upper Arlington. I found it from my marketing for $175k, put $50k into the rehab and I am listing at $390k.
If the seller would have put this on the MLS the price would have been bid up to $240k or higher. I could have wholesaled for $220k easily and the rehabber would have gotten a steal.
So maybe if you have a new Ferrari or Lamborghini, but I'm talking about $20k houses here.
- 11yJohn HornerPro MemberFlipper/Rehabber · Columbus, OH · Member since 2013 · 1k+ posts · 655 votes
Originally posted by @John Horner:
Originally posted by @Jay Hinrichs:
I think your response is accurate for sure in your market.. but this is a very much regional thing when it comes to the RE agent Vs wholesaler who is better discussion.
In your market you deal with homes that cost less than cars.. and unless an agent is a high volume OREO broker probably is not going to get all that excited about those types of properties at least the best agents and most experienced.. so its much like the rookie wholesaler who really has no clue.. RE agents that take a listing on a 20k house are probably newer or less experienced.
And out here on the west coast were average sales prices are north of 300k so average commission are more in the 7 to 10k range per side.. there are many agents who market .. who do yellow letters for listings etc etc. and there are good agents that are very experienced in the rehab realm.. there is one agent here in PDX that just kills it. he can size up a home knows what the costs are and presents a rehab package to an investor makes the commission selling it which is usually 10k plus then gets the list back at another 10 to 15k on the new price.
However in my experience which is pretty deep out your way funding in these areas were purchase price is so low.. I think your correct.. most folks that work in it daily have more knowledge than most realtors who probably don't want to work on 20 or 30k listings..
even 100k listings are only 3k plus split with broker.. I know I would not waste a minute on it. but it does leave a void.. that's for sure.
I am 1 week away from completing one of my 5 flips located in Upper Arlington. I found it from my marketing for $175k, put $50k into the rehab and I am listing at $390k.
If the seller would have put this on the MLS the price would have been bid up to $240k or higher. I could have wholesaled for $220k easily and the rehabber would have gotten a steal.
So maybe if you have a new Ferrari or Lamborghini, but I'm talking about $20k houses here.
Sorry, I meant NOT talking about $20k houses.
- 11yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
I would put you in a minority from what I see in the mid west that's for sure.
But how did that help the seller... I think that is part of the point if a Realtor had gotten to that nice of house in that nice of area the seller would have made much more money than a wholesaler taking advantage of what has to be an uniformed seller... :) that's one point of view.
And no I drive a Hyundai but I fly a Cirrus !!! I could buy 3 lambos or Ferraris with what I spent on that money pit... but I love to fly and RE affords me the lifestyle I desesrve... Hum sounds like Guru talk at the opening of their presentations .. just need to add the wife and kids and grandkids and we are all set.
Nice one... those are great spreads hard to do that here on the West coast
- 11yJohn HornerPro MemberFlipper/Rehabber · Columbus, OH · Member since 2013 · 1k+ posts · 655 votes
Originally posted by @Jay Hinrichs:
I would put you in a minority from what I see in the mid west that's for sure.
But how did that help the seller... I think that is part of the point if a Realtor had gotten to that nice of house in that nice of area the seller would have made much more money than a wholesaler taking advantage of what has to be an uniformed seller... :) that's one point of view.
And no I drive a Hyundai but I fly a Cirrus !!! I could buy 3 lambos or Ferraris with what I spent on that money pit... but I love to fly and RE affords me the lifestyle I desesrve... Hum sounds like Guru talk at the opening of their presentations .. just need to add the wife and kids and grandkids and we are all set.
Nice one... those are great spreads hard to do that here on the West coast
There are more ways to help a seller then get the them the most money for their property. Many of our sellers have more complicated problems then just money. Closing in 5 days often helps our sellers. Waiving an official inspection helps our sellers. Paying cash and not needing to use banks for approval helps our sellers.... these are all things an agent can't do no matter how good they are.
- 11yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
again I think its a regional issue what you describe as being some great service IE all cash, close in 5 days, waive inspections.. that's standard operating procedures for rehab flips In our market that are sold ON the MLS.. and of course the very few wholesalers that work this market are the same...
If that house was here in PDX it would be in a high end, high demand area with the numbers you described it would have brought 20 plus offers in one day.. all of them all CASH all of them close in 5 to 10 days and most of them no contingencies.. that house would have bid up to about 250ish like you said... 6% commish is 15k or so seller nets 235k in the same time that it took you so close so 60k more in their pocket ...
So its a great deal for you the point is a Realtor with those type of assets in a hot and strong market will get more money than a wholesaler will generally pay because the wholesaler is then trying to flip to a rehabber.
When you are the wholesaler and rehabber all in one like it appears you are.. then you can pay more or get the benefit of ripping a deal like you did here..
I know when I was in the timber business we got some HUGE deals that dwarf what your talking about.. and it was in deed Caveat Emptor was not our job to educate a timber owner about the Japanese export market that was paying 40% more than a domestic mill.
Where I strongly agree that a typical KNOWLEDGABLE wholesaler can help is with complicated estate problems , Probates,, and other title issues that take time to figure out I agree the average or even better than average agent is not going to put the time into those.
I have 4 of those going personally at this time.. 2 in Charleston SC that will take at least a year.. and I had to front the attorney 5k each to work on them the sellers either would not or were not capable of doing it.. and no agent is going to do that. And the 2 in Oregon are also full blown quiet title actions that will take 5 to 10k to flush them out.. this is definitely were a good wholesaler who has MONEY can help.
and of course the cheapie houses.. those are the province of wholesalers by and large.
- Investor · Atlanta, GA · Member since 2011 · 79 posts · 38 votes11y
Well said Gilbert. I was once a newbie and now consider myself seasoned having worked over a couple hundred transactions and counting. There is a lot to learn. Reality is wholesalers aren't going anywhere. It's a fun business. So is rehabbing. So is buy and hold. So is really a lot of real estate niches.
When quality people work together with integrity, good things happen. It's really as simple as that. And while a realtor maybe could get more money for that house than the wholesaler, I have also seen this flipped where the wholesaler got the deal moved where as the realtor couldn't. Sometimes Sellers don't like the way agents present themselves and let's face it, we can argue yay or nay but it's up to the Seller to decide what they want whether wholesaler or agent. Some of them have very strong opinions, let's not forget that. Just had a call today from a lady who's agent couldn't get the deal done so perhaps we can. My point is there is quality and not so quality people in every real estate niche. Work the quality people with integrity and the method will take care of itself. This has been my experience quite consistently.
One of my favorite things to do is when we have the wholesale meetup that I run is we get to share quality information with the group, whether other wholesalers or Buyers since we get both. We get newbies and seasoned. We have had people do deals together. And we have had plenty of people come back because they are better investors from getting quality knowledge. Bigger pockets to me is online version of what we've been doing in person.
Let's support each niche because whether agree with them/like them or not, they all add value to someone and that is proven every day. Let's celebrate that and keep growing together.
Frank
- Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes11y
Originally posted by @John Horner:
Originally posted by @Jay Hinrichs:
I would put you in a minority from what I see in the mid west that's for sure.
But how did that help the seller... I think that is part of the point if a Realtor had gotten to that nice of house in that nice of area the seller would have made much more money than a wholesaler taking advantage of what has to be an uniformed seller... :) that's one point of view.
And no I drive a Hyundai but I fly a Cirrus !!! I could buy 3 lambos or Ferraris with what I spent on that money pit... but I love to fly and RE affords me the lifestyle I desesrve... Hum sounds like Guru talk at the opening of their presentations .. just need to add the wife and kids and grandkids and we are all set.
Nice one... those are great spreads hard to do that here on the West coast
There are more ways to help a seller then get the them the most money for their property. Many of our sellers have more complicated problems then just money. Closing in 5 days often helps our sellers. Waiving an official inspection helps our sellers. Paying cash and not needing to use banks for approval helps our sellers.... these are all things an agent can't do no matter how good they are.
Disagree! An agent cannot have a client waive an inspection? Since when? An agent cannot get a deal closed in 5 days? Since when? An agent cannot bring a cash buyer? Since when? It sounds like you want to convince yourself why "wholesalers" are good...but posting "facts" like these certainly won't convince everyone that knows better! I see a lot of "wholesalers" boasting bulloney just like this! Somehow they are better, more generous, smarter, help poor old grandma in a way no agent ever could, etc. I have yet to see any of this in real life. I have, however, seen a LOT of posts on BP from dishonest, unethical, bulloney spouting "wholesalers" about how their inspection period is running out and they don't have a buyer, how they have NO FUNDS yet sign contracts to purchase, how they mislead many sellers, etc. Like Jay says: unlicensed brokering. Glad to see Ohio clamping down on it and would love to see FL do the same. Many of these people are operating outside of the law, and without a doubt operating in a dishonest manner. If any reader anywhere would care to defend operating in a deceitful and dishonest manner...have at it. BTW FYI--I don't condone agents acting in deceitful and dishonest manners as well. Wrong is wrong no matter what someone claims their profession is.
- 11yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
those are nice thoughts Gilbert but the reality is in many ways folks that pop on here and other sites and or guru class's with zero education or understanding are out there dealing with peoples lives their properties.. which to most sellers is their biggest asset.. For sure there are pro's but to unleash a swarm of folks that really have no clue on these unsuspecting sellers is really a disservice to the industry as a whole and dangerous to the public..
Like we said there are good and bad actors in each category.. I can't tell how many people I rescued that were about to loose their homes over the years because some newb with no money had promised the world then disappeared.. All though in reality they did me a favor by the time I got to them they were ready to sign because they were going to lose the house in 24 to 48 hours.. But we always gave them equity.. most of the newbs would just try to tell them they were saving their credit.. etc..
I walked into one living room sat down with the folks and they said they had signed a contract to sell but nothing had happened... I said show me the Paper work.. it was not a contract it was a Freakin Deed. .one of the two people that came was a notary. and they recorded the thing with 10 dollars of consideration.. I looked at them and said well you just sold your house for 10 bucks. plus debt.. this house had equity,, I would only be to houses with equity.. they insisted they were duped.. I got the person ( wholesalers number from them) had a stern talk with them that if they did not go to the court house that day and record a new deed back to these folks I would turn them into the AG and the DA they were thieves.. scared the Crap out these people deed was recorded.. I bought the home and all was well. not only that thye had no money these people I gave them all my cash I had on me 200 bucks so they could buy groceries.. LOL So yes some of us have real world esxperince with terrible wholesalers and other frauds like the foreclosure resue companies out of FLA that were finally all put out of business.
- Investor · Chicago, IL · Member since 2015 · 677 posts · 309 votes11y
My comments were toward attitudes about questions newbies pose on here not about them going out and doing business when they do not know what they are doing. Obviously it is important to education, train, inform and do our best to turn out good knowledgeable people to work in this field. Your example of the harm that can be done by someone who does not know what they are doing and either unaware of the harm they can do or simply doing something they just should not be doing or allowed to do just shows all the more why those that do really want to learn this business the right way should be encouraged and guided along.
There are bad apples in any industry and hopefully guys like you will help a few folks who have been duped. I hope that real professionals can also be there for more and more folks to better exemplify how things work when professionals do it.
This should serve as a warning to those that attempt to do this business before they are ready that allot of harm can be and is done and allot of good folks are hurt very badly by incompetent and or bad meaning persons.
More should be done to warn those that want to learn this business and not just give them only all the positive things real estate can do for you. We should include in our discussions situations exactly the kind you have described so that those learning can see and say OMG!!! be careful people , there is allot that can go wrong with making real estate deals and with what we do to gain people's trust. I have stated in my comments throughout BiggerPockets that we are responsible to maintain the public trust in our profession and that we should do our business with integrity and care.
- Property Manager · Bixby, OK · Member since 2015 · 52 posts · 13 votes11y
Wholesaling seems like a lot of work to me but they are a legal part of the market equilibrium. Much as. Option traders, margin investors and speculators are to the stock market and commodities exchanges. If you do not want wholesalers to be involved in the market invest enough in the market for the need of wholesalers not to exist but it seems like an unnecessary if not futile endeavor.
- 11yJohn HornerPro MemberFlipper/Rehabber · Columbus, OH · Member since 2013 · 1k+ posts · 655 votes
Originally posted by @John Thedford:
Originally posted by @John Horner:
Originally posted by @Jay Hinrichs:
I would put you in a minority from what I see in the mid west that's for sure.
But how did that help the seller... I think that is part of the point if a Realtor had gotten to that nice of house in that nice of area the seller would have made much more money than a wholesaler taking advantage of what has to be an uniformed seller... :) that's one point of view.
And no I drive a Hyundai but I fly a Cirrus !!! I could buy 3 lambos or Ferraris with what I spent on that money pit... but I love to fly and RE affords me the lifestyle I desesrve... Hum sounds like Guru talk at the opening of their presentations .. just need to add the wife and kids and grandkids and we are all set.
Nice one... those are great spreads hard to do that here on the West coast
There are more ways to help a seller then get the them the most money for their property. Many of our sellers have more complicated problems then just money. Closing in 5 days often helps our sellers. Waiving an official inspection helps our sellers. Paying cash and not needing to use banks for approval helps our sellers.... these are all things an agent can't do no matter how good they are.
Disagree! An agent cannot have a client waive an inspection? Since when? An agent cannot get a deal closed in 5 days? Since when? An agent cannot bring a cash buyer? Since when? It sounds like you want to convince yourself why "wholesalers" are good...but posting "facts" like these certainly won't convince everyone that knows better! I see a lot of "wholesalers" boasting bulloney just like this! Somehow they are better, more generous, smarter, help poor old grandma in a way no agent ever could, etc. I have yet to see any of this in real life. I have, however, seen a LOT of posts on BP from dishonest, unethical, bulloney spouting "wholesalers" about how their inspection period is running out and they don't have a buyer, how they have NO FUNDS yet sign contracts to purchase, how they mislead many sellers, etc. Like Jay says: unlicensed brokering. Glad to see Ohio clamping down on it and would love to see FL do the same. Many of these people are operating outside of the law, and without a doubt operating in a dishonest manner. If any reader anywhere would care to defend operating in a deceitful and dishonest manner...have at it. BTW FYI--I don't condone agents acting in deceitful and dishonest manners as well. Wrong is wrong no matter what someone claims their profession is.
I wasn't trying to convince anyone of anything and I don't even wholesale anymore. My point was that wholesalers CAN bring value to deals, which is valuable to some sellers and buyers alike.
- Investor · Chicago, IL · Member since 2015 · 677 posts · 309 votes11y
There is more that should be said. This particular tread got started by someone concerned about the incompetence and poor job being done by untrained, irresponsible, and generally people that have no assets or money to back up what they are doing by getting involved in real estate transactions that should be done only by those that can be held accountable for their actions and truly offer a service to the community.
First of all I agree that by encouraging people to get involved in asset management of those that have worked hard for many years if not all of their lives can produce bad results because they simply are unqualified to do so. Can people get hurt? Yes, Should people be taken advantage of? No. Can people who have gotten in bad financial situations be helped ? Yes, but real estate transacting is a profession better left to those that can do it right and have full understanding of what they are doing and also have adequate experience. However what I do not agree with is that we should ban having discussion of the subject of wholesaling or ban the profession of wholesaling properties.
Are there incompetent doctors? Sure
Should we ban the practice of medicine because of that? No, I strongly do not think so
The better solution is to make a greater effort to produce more better qualified doctors.
Same in real estate investing and transacting.
It just so happens that more people can and do chose wholesaling as their entry into the real estate business because it does not require as much money , credit or other qualifiers. We have allot of snake oil salesmen posing as real estate gurus touting to everyone that you can get into real estate with no money and no credit or even any experience whatsoever. They tell people what they want to here. People hear that not only do you not need money or credit but also no license, that you can just start working in real estate today just like that having no experience whatsoever. They are told to find motivated buyers, those that are desperate to make a deal and that is just what they go out and do. It takes time to mature and fully understand how you can affect people's lives by getting involved with affecting their assets, a major asset like real estate.
It's for the most part going to take allot of people a long time to become seasoned and mature in this business. That is one reality people should understand from the start. Some like in anything might and do get lucky to strike a few good deals right from the start and hopefully no one gets hurt but we should be aware that the potential for hurting not only others but ourselves is very real and present. Take a cautious step in starting and develop your skill, knowledge, and ability step by step because real estate investing should be approached as a career but of course it can also be done on a one time basis of just a few time during our lifetime.
In my part I never did a single wholesale deal. I started out doing construction and always worked with buildings that were empty, were distressed, abandoned, had fire damage, or involved all new construction so I cannot say I personally had anything to do with getting anyone to sell me a property that they were living in or wanting to sell motivated by any emergency, divorce or other immediate need. To be perfectly honest reading about wholesaling here on BP is my first experience or knowledge about wholesaling.
I also never got control of any property through using any no money down payment method or purchasing a property without my own money. I have never gotten any loan for the purpose of owning or controlling any property. Now that I am increasing my awareness of different methods one can use I can imaging a right time to leverage my money by using loans to keep expanding my real estate holdings under the right conditions of course and knowing I can do it responsibly.
I have been at this for over 30 years believe it or not so sites like BiggerPockets are providing me with an expanded awareness of the many tools, methods, and resources available for real estate investing.
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes11y
Originally posted by : @John Horner
So, I gained some insight here (which was the point of this post...I think)
1) The majority agrees that wholesaling is a necessary evil (except for those that claim to be "professional wholesalers")...
2) The only reason wholesaling exists is because there is a lack of licensed agents in the overall RE market to adequately meet the needs of investors (agreed and agreed)...
3) Individuals ("investors") would rather educate folks to become good wholesalers through continued discussion of what not to do as a wholesaler so they can profit more in the future when they buy from them...?
Right?...
#2 is way off. RE Agents don't find off market deals. That is where wholesalers come in. I have bought 25 deals in the last year and all 25 have been off market deals from my marketing. Now I don't really wholesale anymore, but I market like a wholesaler. There are a lot of investors who are buying off market deals from wholesalers because the MLS is so competitive.
Bottom line, wholesalers bring something to the table that AGENTS CAN'T. IMO, almost every GOOD wholesaler I know has WAY more knowledge about investing then even the best investor-friendly agent.
I also agree with all the folks who said that being an agent is not investing either, so why not ban forums about them?
Agents don't find off market deals? How do you think they get listed in the first place? Were they not off the market?
I don't think you really know a good broker/agent. If you think there is some greater value you can bring to the table than say @J. Scott or @Michael Quarlesundefined or myself, please in lighten us.
I'd guess that if asked a wholesaler how links and chains are used in RE, they might say to lock a tenant out!
Translation of "investor friendly" means a professional in real estate that is clueless as to what an investor wants to transact and is willing to do something illegal or unethical or, they know better but are still willing to appease that investor in such transactions.
There is nothing wrong in doing creative deals, you can invest legally and ethically, it's when the investor gets off track (usually with guru junk) wanting to deal in gray areas that real professionals become concerned. Fact is, Realtors love investors, ones who can actually buy. :) @John Horner
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes11y
Originally posted by : @John Horner
I am 1 week away from completing one of my 5 flips located in Upper Arlington. I found it from my marketing for $175k, put $50k into the rehab and I am listing at $390k.
If the seller would have put this on the MLS the price would have been bid up to $240k or higher. I could have wholesaled for $220k easily and the rehabber would have gotten a steal.
So maybe if you have a new Ferrari or Lamborghini, but I'm talking about $20k houses here.
Good example of what the professionals, Realtors, attorneys, appraisers, etc. see as predatory dealing.
An ARV of 390, an MLS sale at 240, less commissions being about 225.6. 50K rehab costs. Convincing an owner it's worth 175 and offering 175. At an offer at 200, the seller would be in the ball park of a FMV off the MLS.........but, no, you need to dig into the owner's equity as much as you can 73% of an estimated MLS net sale price.
Shooting to make 165, I think paying more to the owner would still make a great payday.
Reasonable contractor fee, 20-25% of costs, plus 10% a small job, maybe 30%. That is:
50x.30= 15 profit, plus 5 for material override = 20K profit.
Sale transaction, 6 to 10% = (at 240) is 24K
390-selling costs estimated a 19,500 is net 370K.
Less what you're really worth, 44K, the owner should be in the ball park of 326, say 300K.
Going at 70% of market is around 210, not 175!
That's not something to brag about, that's predatory dealing, if those estimated values were correct. It should have brought more off the MLS than 240.
And this is the mentality of most wholesalers I see here, the newbies look at this and think that's the way you make money, no, that's the way you steal money!
Wait until you get Aunt Edna's house and find out later that her nephew is an attorney or a CPA, or appraiser, or contractor up state or a number of other more astute business types, this is how you get your pants sued off! Over valuing your acceptable and reasonable contributions in a transaction becomes predatory dealing. It's not business nor is it investing, it's screwing the public.
Then, cognitive bias will kick in, justifying this as a great investor deal and saying the wholesaler solved the problem of the owner and they are just so pleased! The reason they might be pleased is because they were misled or uninformed.
I doubt the owner just replied to a yellow letter, an offer was made in a contract by mail and accepted, I'd have to think there was some interaction between the buyer and seller, which was the opportunity to deal in good faith.
So, the issue is that wholesalers lack basic RE knowledge and business ethics of accepted norms in the industry (and, BTW, wholesaling is not an industry). It's that 40% I mentioned.
I'm not picking on John, really, just that like most wholesalers, they are thinking more like a shoe salesman than dealing in real estate, it's not the same thing. In the courts you will find that owner's equity is sacred :)
- 11yDana WhickerPro MemberInvestor · Fernandina Beach, FL · Member since 2014 · 557 posts · 374 votes
Originally posted by @Account Closed:
This brings up a bigger issue than a carte blanche ban on Wholesaling discussions. It's been upheld that wholesaling is the easiest way to get into it with little-to-no money. Therefore the most people who want to get into REI go to wholesaling. Unfortunately this absolutely swarms the forums with posts like, "How do I start Wholesaling" "How do I get into REI." I did a search for posts using the term "start wholesaling" and narrwoed it down to the last month. There were 980 hits. Bear in mind, BP search function only searches titles. Now perhaps they arent all the same question, but I gurantee over 2/3 are. If it is half, thats over 20 a day.
All methods of starting in REI have this same issue "How do I start.." and the answer is: read the damned PDF and ***search*** in the forums for answers at least 5 times before posting. If we dont want BP to turn into another garbage forum with **** post after **** post, then something has to be done to rangle in these questions that have incredibly easy answers. Either immediate deletion by the Mods, or somekind of search only for the first 5 days.
Dave brings up a great point about repetitive inquiries. Most of the first page of recent posts are questions that could and should be answered with "Search Feature!"
A lot of forums use stickys with FAQs. The mods could make a sticky and require reading it before posting.
Or a sub-forum where all repetitive questions go that doesn't clutter up "Recent Forum Posts". If you ask "How do I get into wholesaling?" for example, your post gets dumped into a subforum and it is doesn't count toward recent posts. People can monitor that subforum if they want.
Just a couple suggestions.
- 11yJohn HornerPro MemberFlipper/Rehabber · Columbus, OH · Member since 2013 · 1k+ posts · 655 votes
Originally posted by @Bill Gulley:
"You totally just changed my opinion about wholesaling by insulting me and my character." - Said no one ever
- Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes11y
I think many wholesalers are like the rouge mortgage brokers in the 90s and 2000-2007 before the crash. Or stockbrokers from the movies "Boiler Room", "Wall Street" or "Wolf of Wall Street" .
If there is no enforcement, it is ok.
IMO, Enforcement is coming....
Might take a while...but I predict it will come sooner or later. See Ohio and FL.
Re: California...Quote...
"individuals accused of (real estate brokering) unlicensed activity may receive a “Notice to Appear” that requires an appearance in criminal court. Commissioner Bell plans to accomplish these objectives by prioritizing the Bureau’s enforcement efforts. He also wants to make the Bureau’s activities more transparent."
Bureau of Real Estate of California's Real Estate Commissioner Wayne Bellfrom
- Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes11y
@Karl Krentzel you continue to miss the point, though I appreciate your passionate response. So, blowing or earning money has nothing to do with anything whatsoever..though I agree there is significant importance to growing wealth. Here is the deal: you are currently in a mindset that will not contribute to investing in RE as a whole. Wholesalers need to eventually graduate to a higher investing purpose...you can only scheme for so long.
- Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes11y
@Brian Gibbons thanks for the perspective. You know, the National Association of Realtors is the largest professional organization in the country, with one of the most influential PAC's...I think the writing is on the wall. That said, agents working with non-investors are classically trained to perform work in a manner "consistent" with the industry. This is part of my argument; wholesaling only exists because the licensed/professional real estate industry has failed to fill a niche.
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes11y
Originally posted by @John Horner:
Originally posted by @Bill Gulley:
"You totally just changed my opinion about wholesaling by insulting me and my character." - Said no one ever
What I posted was certainly not done to insult you,
Sorry you take it that way, but it's hard to use that example without pointing out the valuation side of usual and customary which is the base line in real estate unlike most other industries, where price can be to whatever two parties are willing to accept.
I don't really follow what your post is and saying "Said no one ever" ?
It's very possible for someone to be honest, act with integrity, have good character and be misinformed and do something they may see as perfectly acceptable, so I'm not attacking on that front at all.
If this had been done in dealing in a lot full of used cars, I'd say great deal, but residential real estate is not a consumer good or a product moved along wholesaling distribution chains among dealers to an end consumer. It's simply that many in the business aren't aware of the role real estate plays in our economic system, the social impact, the protection of the public, that equity is usually the highest financial value many families have and why it is safeguarded as it is. Profit is great, usual and customary along the lines of general practice, go further and that can mean trouble. :)
- 11yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
Originally posted by @Brandon Sturgill:
@Karl Krentzel you continue to miss the point, though I appreciate your passionate response. So, blowing or earning money has nothing to do with anything whatsoever..though I agree there is significant importance to growing wealth. Here is the deal: you are currently in a mindset that will not contribute to investing in RE as a whole. Wholesalers need to eventually graduate to a higher investing purpose...you can only scheme for so long.
I think it's a mistake to lump all wholesalers together. You have made the point that when you look at RE Agents, they are not the same, I suggest you use those same eyes when looking at the concept of wholesaling. There are many ways, levels, and times when an investor (yes investor) might wholesale. I still wholesale. Here is one of the ways I do it:
1 - Analyze property for me, make offer, negotiate.
2 - Final agreement doesn't work for me for any number of reasons such as:
A - Rehab number came back too high
B - By the time the deal was finally made, my cash was used elsewhere
C - Partner voted "no"
D - Quick Cash from Wholesale deal is needed on another offer (better opportunity)
E - At the end of the day, the negotiated deal didn't work for me, but would for someone else on my "Buyers List".
F - ...and more3 - Wholesale deal to someone else
Notice that I have already analyzed and negotiated this deal for myself, so there is no extra work, and the deal offered as a wholesale deal is usually under the List Price...so I'm getting the end buyer a better deal than if they bought it and I'm not doing any extra work.
- 11yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Good points... but part of this is the effect of the business and who is deemed successful. the more you make on a deal the more your idolized on BP... when I see those post about how much folks made.. there is only congrats no one ever digs into the fact that someone may or may not have ripped equity from a homeowner who was not represented by council or RE broker or educated family member.. So with a social site that is full of those trying to crack into the business and want to go from starting to rich as quick as possible without pay the real dues or disregard to the laws of the land or fair play.. they see these types of profits as something to aspire to...
We are all in this business to make money that's for sure.. But to couch getting a screaming deal like John mentioned and then say its a valuable service.. well that makes me chuckle.... but to most on this sight John is a winner.. and good for him that's a great deal.. we don't know the details of course about who the seller was or what happened.. if it was your grandmother you as the grandson or son may be a little miffed to see your in heritance cut by leaving 75k on the table.. LOL
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