Well that was a new one. Totally amateur hand made sign so I thought I had a good lead on a FSBO. Turned out to be a wholesaler trying to tack $10,000 onto a house that has been listed for $15,000 too much for the last 6-8 months. Tied to play it off as just coming on the market and sure to not last long. Oh brother. I was pretty sure it was a guru seminar graduate when I called the number and the recording said if I was calling about the house please leave my name and number. Then I when he calls back he asks what city I am looking in. Sheesh.

@Paul Ewing  why would you think he is a Guru graduate.. this person could have easily been a BP reader... heck you get so many posts on BP   Hey I got a lead what do I do ?  LOL  no matter were these folks come from they all do the same thing.. no matter who trains them a guru or bp they all do the same thing.. not rocket science here with this wholesaling homes... I think it gets comical though.. and for every one like yourself who knows the score there are many that don't and they will end up buying this gem !!

But then again whats stopping you from going direct to the owner... Make a back up offer if this person closes fine.. if they don't you swoop in. thats what I would do.

@Jay Hinrichs and Paul, until I started out reading bp, I had no clue that wholesalers existed. If I am reading it correct, this wholesaler added 66% to the sale price instead of a realtors 3%. Maybe you two could shed light on why as an investor I should even bother with a wholesaler if I knew the address. I could go direct with the owner or have a realtor do it. Also is it legal or ethical to talk with a wholesaler to inquire about an address then bypass them once you realise how much of a markup they want? I am trying to wrap my head around why you would want to wholesale when a buyer doesn't need you. Thanks for any words education as again I am new to this community.  

@Brian Ky  thats the issue  wholesalers have no rules or ethics or morals they they have to follow. its up to the individual.. some wholesalers i am sure are very ehtical and moral individuals.. others I have no doubt are financial sociopaths.. IE its all about them and they could careless about anyone else they only want as much as they can get for themselves.

You owe no wholesaler any loyalty or anything like that.. A wholesaler needs a binding contract with a seller so you can't go around them... and of course if you do go around them they are not going to bring you anymore deals.. so its common sense and logic in that regard.. however if the wholesaler appears to be a novice and and can only close if you close then you can set them up if you wish.

go into contract with the wholesaler you will then get to find out who the owner is when you get the title work.. wait until the close date do not close wholesaler probably is out of contract ... contact seller either prior or just after and go direct...

wholesalers if they are going to protect their position need to have the funds to close so buyers don't go around them if they don't they will get burned over time.

I know when I flipped some subdivisions in my day. and these were larger type transactions 500k plus.. we had our cash ready.. as the builder who was buying them would go around us in a heart beat.  

I like the Butch Cassdy line form the Movie   ( Knife fight there are no rules in a Knife fight) then butch kicks him in the you know what s   LOL

In the Timber business we called these folks Timber pimps... 

@Brian Ky

As an investor, you can use wholesalers to find properties for you.  This can save you time, and allow you to invest in a larger market aria.  If you are investing in a lot of properties, then a wholesaler may be worth the cost.  If you are investing in one or two properties a year, then the cost is not really worth it and you can find the properties yourself.

As a wholesaler, when done right, they find a property and take some type of control over the property.  This is usually a contract between them and the homeowner that allows them to assign the contract.  They then sell you as the investor control over the contract for a fee.  This gives the wholesaler protection form others bypassing them as suggested.

I hope this answers your question

I definitely see the use of the wholesaler as a force multiplier for your rei team, but at the rate Paul is describing I feel tempted to buy the property direct from the owner just to teach the wholesaler a lesson. Don't get me wrong, I believe realtors earn their commission and so should wholesalers, if they are fair in their finders fee. 

Originally posted by @Jay Hinrichs :

@Paul Ewing  

But then again whats stopping you from going direct to the owner... Make a back up offer if this person closes fine.. if they don't you swoop in. thats what I would do.

Like I said, the owner has it about $15k over priced. I actually wanted that house at one point but it got snatched up from HUD during the OO period and never made it to the investor stage. Then it got rehabbed and ended up on the market about six months later. It is a few houses down from two my parents have and about five miles form me.

Originally posted by @Jay Hinrichs :

@Brian Ky   

go into contract with the wholesaler you will then get to find out who the owner is when you get the title work.. wait until the close date do not close wholesaler probably is out of contract ... contact seller either prior or just after and go direct... 

I do not recommend this option if you are attempting to "get around" a wholesaler. Most intelligent wholesalers have an assignment contract which requires a deposit from the buyer. So you would be sacrificing funds if you were to not close. Also, this practice of "getting around" the wholesaler does not sound ethical or moral. So you become no better than the wholesaler you are bashing in that sense.

Well put, @Jaleel Muss the wholesaler is working just like all the other guys, why should he/she be vilified just because they picked a different aspect of REI to get involved in.

Originally I looked at them in a negative light until I found myself in a deal that I didn't want to be in and I was trying to get out of the deal as fast as I could. I was shopping the deal to anyone that would take the deal off my hands, now I'm the wholesaler.

@Marc Carlson It wasn't until I realized what benefits they can offer on an REI team did I begin to view the skill differently, good point.

So, are we calling wholesalers the used car sales men of REI or are we just elites because we may have a great access to capital than they do. Not trying to get too philosophical here, but I've had plenty of ppl try to up sell me on all kinds of stuff, including RE agents on crap deals just so they can be done with a problem property.

@Paul Ewing Interesting. I don't think I've ever seen an FSBO with a handwritten sign. All the FSBOs around here either buy one of those "House For Sale" signs from Home Depot or they sign up with one of the FSBO websites that provide signs.

We have a lot here from small time landlords to people selling a field or their parents old house. Many people will try the FSBO route for a few months before going to a real estate agent. I called on another one today and it was a tax sale flipper. Sign was up for less than a week and I am second in line on it. $18k cash but about $15-20k in repairs needed.

@Jaleel Muss  My point and I was being a little blunt was just that.. if a wholesaler knows what they are doing they will have good contracts.. but they always risk a buyer not closing then going around them.. Nothing stops a person from doing that... and its not immoral or unethical at all its just business.. If you want to be in the RE business then you should be prepared to perform or you lose the deal real simple in my mind.

The point is wholesalers other than the contract they have with a seller have no other standing in the transaction and if they don't close and their contract expires anyone can go direct to the seller.

Obviously if one plans on doing business with a wholesaler this would be a one and done type thing. but then again many bandit signs or wholesalers are basically one an done type of business folks... 

In the commercial world broker or buyers and sellers would go around a wholesaler as a matter of course.. If they figure some one with no ability to close wiggled into a deal they would have no compunction calling and owner and explaining exactly whats going on who they are and when this wholesaler fails to close they will buy it.

Just business really  On little one off houses like this I can see that people don't really care .. 

Originally posted by @Jay Hinrichs:

You owe no wholesaler any loyalty or anything like that.. A wholesaler needs a binding contract with a seller so you can't go around them... and of course if you do go around them they are not going to bring you anymore deals.. so its common sense and logic in that regard.. however if the wholesaler appears to be a novice and and can only close if you close then you can set them up if you wish.

go into contract with the wholesaler you will then get to find out who the owner is when you get the title work.. wait until the close date do not close wholesaler probably is out of contract ... contact seller either prior or just after and go direct...

 Sorry Jay, but I have to disagree with you on this. It's not just business when you tie up a wholesaler's property with a contract to buy, but secretly trying to screw them into losing the deal so you can steal it out from under them. Maybe some people operate this way, but I guarantee you no wholesaler who hears about it will ever do business with you again. 

This business is based fundamentally on trust. There are all kinds of ways to screw people, especially if you're only thinking short term. But I think those who are able to build successful businesses more often than not stick with the "my word is my bond" philosophy. I know I do. 

@Jay Hinrichs

You've got tons more REI experience than I do Jay, and I'm pretty surprised you think this way. If I were a buyer and thought a wholesaler was doing a piss poor job and way overpricing their deals, even if I knew I could get around them and was tempted to, I'd still view doing that as unethical. Better to simply walk away from the deal, or if desired, make a backup offer to the seller IF the wholesaler's deal falls through.

I've had buyers that one of my partners found off of Craigslist who immediately tried to screw us and go around us trying to tell the seller that "it's just business" and "this is how the real estate business is". 

That's not true. That's just an unethical way to do business IMHO and I don't stand for that. 

Originally posted by @Paul Ewing :

Originally posted by @Jay Hinrichs:

@Paul Ewing  

But then again whats stopping you from going direct to the owner... Make a back up offer if this person closes fine.. if they don't you swoop in. thats what I would do.

Like I said, the owner has it about $15k over priced. I actually wanted that house at one point but it got snatched up from HUD during the OO period and never made it to the investor stage. Then it got rehabbed and ended up on the market about six months later. It is a few houses down from two my parents have and about five miles form me.

 Since you have interest in the house and a price you are willing to pay, why not make that offer the wholesaler(or even slightly lower)?  If he can get the house for you great.  If the wholesaler's contract expires, an offer directly to the owner may look stronger since the you will be able to cut out the middleman at that point.

It also matters what percentages you are talking about with this property.  If the value should be 50K, then both the owner and wholesaler are way off on reasonable expectations of their proceeds from the deal.  If the owner is 5 to 10% high, that may be just padding to pay an agent if he has to go that route.  

Originally posted by @Jay Hinrichs :

@Jaleel Muss  My point and I was being a little blunt was just that.. if a wholesaler knows what they are doing they will have good contracts.. but they always risk a buyer not closing then going around them.. Nothing stops a person from doing that... and its not immoral or unethical at all its just business.. If you want to be in the RE business then you should be prepared to perform or you lose the deal real simple in my mind.

 Most wholesalers will never come across someone being so dishonest and unethical. But in case it's ever an issue, make the closing date on the assignment before the closing date on the contract. For example, you have a 30 day close on the contract and flip the property on day 3, put a 10 day closing for your buyer. This way if they fail to close for any reason, you have another 17 days to resell the property. Obviously you keep the persons $3k-$5k deposit and end up making more on the deal. 

I've wholesaled hundreds of properties and never had anyone try and go behind my back, much less not close in order to go behind my back. Good wholesalers can be extremely valuable to investors by providing them great deals. It doesn't matter if you're working with a good wholesaler or not, trying to screw someone over by purposely failing to close to better your position is just plain wrong.  

@Jacob Michaels  Oh the joys of the internet... I was not advocating people run out and run their business this way.. I was simply pointing out that wholesalers are unlicensed folks and there is no ethics or moral code that they subscribe to other than what their personal beliefs are.. 

Just like is it moral and ethical when unlicensed wholesalers talk some little old lady into selling their home for far less than what it would bring on the open market.. are wholesalers proud of themselves when they do this.. of course they are their whole business model is based on taking equity away from a seller for whatever reason. Be it the seller is an idiot  or old and does not know better, is a shut in, is a hoarder ,,, just does not care..  So I kind of see your statement as the pot calling the kettle black.. 

But like you said I have a lot of years in the game.. I don't generally deal with wholesalers on a personal level the folks I fund do though everyday I see them on the HUDS  3k here 5k there.. probably pay more indirect wholesale fee's than most at least 50 transaction a year will have some wholesaler fee on them. 

And there is nothing wrong with making a back up offer.. its done everyday in Real Estate.

Again my point is and my only real point is wholesalers should be in a position to close a deal and not loose it.. if their whole business model is based on never having any money in the transaction other than a few dollars. then the wholesaler is at risk of losing a deal.

I know reality and logic play into this..And if your only way to get inventory for your business is to deal with wholesalers then you don't want to bit off your nose. that goes without saying... But as you move up in the RE world and out of the realm of flipping SFR's you will experience very different players.. and beleive me the big boys will look at your REAL ability to close... and again why I say one should always be able to close to protect your investment.

Account Closed  there is nothing dishonest about approaching a seller whose property is not listed and then submitting a back up offer... Of course if you do this the wholesaler will shun you .. and you will only do it once.

And i suspect you probably have the ability to actually close on a transaction so that protects you. 

Whats your take on the state of florida cracking down on wholesalers who are acting as RE brokers without a license.. has that changed your business model? as a major player It would be interesting to get your perspective on where this trend is going.

being that I buy a lot of property in many states and all for cash.. I get yellow letter green letters all manner of direct mail from wholesalers be it   Hey I see you just bought I have more... to hey you want to sell.. but mainly do you want to buy more.. I simply forward those to my clients and let them deal with them..

As stated most of my guys buy at sometime through a wholesaler .

my point on this particular one was that this OP is in some little town in Texas I think and this is a one off deal and to make a back up offer in my mind would be fine... 

If you operate within the system, you get the protections of the system.  Operate outside the system (as by brokering without a license) and you do not get the protections of the system.

Wholesaling is, fundamentally, taking advantage of the weak position of a seller to get a below market price.  Why is an end buyer taking advantage of the weak position of the wholesaler any different?

Turnabout is fair play.

You want the protections of the industry?  Participate in it.

Originally posted by @Jay Hinrichs :

@Braden C.  there is nothing dishonest about approaching a seller whose property is not listed and then submitting a back up offer... Of course if you do this the wholesaler will shun you .. and you will only do it once.

And i suspect you probably have the ability to actually close on a transaction so that protects you. 

Whats your take on the state of florida cracking down on wholesalers who are acting as RE brokers without a license.. has that changed your business model? as a major player It would be interesting to get your perspective on where this trend is going.

being that I buy a lot of property in many states and all for cash.. I get yellow letter green letters all manner of direct mail from wholesalers be it   Hey I see you just bought I have more... to hey you want to sell.. but mainly do you want to buy more.. I simply forward those to my clients and let them deal with them..

As stated most of my guys buy at sometime through a wholesaler .

my point on this particular one was that this OP is in some little town in Texas I think and this is a one off deal and to make a back up offer in my mind would be fine... 

 But that's not what you suggested, you suggested to sign a contract with the wholesaler and then purposely not close in order to work directly with the seller. Had you said that you would approach a seller with a backup offer, it wouldn't have been a problem at all, in my opinion. 

I have no issue with Florida cracking down, I have a brokers license and encourage it for anyone else involved with wholesaling. Contrary to your opinion of wholesalers who just try and steal from little old ladies, I actually provide a service to those who need it. 95% of the people I speak with are better off not selling to me, and I tell them this. One nice thing about having a brokers license is that I can offer sellers either a quick closing at a discount OR a longer closing and list their property for them.

Account Closed  there you go your a broker so you have a fiduciary and you have a code of ethics you must subscribe to... 

So what do you think is going to happen to all those who learn wholesaling on BP and have no licenses and are trying to flip houses in florida...?  do you think its isolated enforcement or a growing trend ?

What I was stating is that doing just that signing a contract and not closing is a method that could be deployed .... if it was a one off deal you really wanted it .. and you think the wholesaler is a schmuck and you don't care about a relationship.. I was not advocating that this be a business practice  LOL...

And once you move up from flipping houses into bigger commercial type transactions a wholesaler or middle person should EXPECT a buyer will go around them if they detect weakness in the middle man .... I know when I have personally done bigger deals with builders... if I did not have my cash into the account and close... they would have let my deal expire and gone around me in a heartbeat... just business

Originally posted by @Jay Hinrichs :

@Braden C.  there you go your a broker so you have a fiduciary and you have a code of ethics you must subscribe to... 

So what do you think is going to happen to all those who learn wholesaling on BP and have no licenses and are trying to flip houses in florida...?  do you think its isolated enforcement or a growing trend ?

What I was stating is that doing just that signing a contract and not closing is a method that could be deployed .... if it was a one off deal you really wanted it .. and you think the wholesaler is a schmuck and you don't care about a relationship.. I was not advocating that this be a business practice  LOL...

And once you move up from flipping houses into bigger commercial type transactions a wholesaler or middle person should EXPECT a buyer will go around them if they detect weakness in the middle man .... I know when I have personally done bigger deals with builders... if I did not have my cash into the account and close... they would have let my deal expire and gone around me in a heartbeat... just business

 I would guess a growing trend. As the market has improved many are either getting for the first time, or getting back, their RE license. Obviously this means more revenue for the state which allows them to have the resources to better enforce their laws. I've not seen any cases in Florida related to unlicensed enforcement on wholesalers, can you provide some links?

We just have a different opinion on going around someone, but you know what they say about opinions... :)

Account Closed  I have never gone around anyone.... and with the deals I fund  its such small dollars its not worth my time and or effort.

I have though been in the wholesaler shoes were I know darn well that the big 700 lbs gorilla would have been happy to see me not close on the lots I was flipping them.. We made over 500k on that one transaction... so yes he would have gone around me in a heartbeat.. do I think less of him   No he is a premier builder.. I just new I needed my cash into escrow to protect my profits

@Paul Ewing

What I find most annoying isn't the wholesaler, it's whoever was dishonest about buying it as an owner occupant. If they bought it from a government agency, they had to sign an affidavit that they would live in it for a year...An affidavit! How can people boldface lie on an affidavit? And at the same time undermine some family's chance to own a home at an affordable price? To me, this is where "investors" really get--and deserve--a bad name. When making money overrides ethics. I would be tempted to go straight to HUD. Or call the owner directly and remind them that there is a $10,000 fine for lying on that affidavit (depends on the wording of the affidavit), not to mention probation or jail; tell them you'll be happy to call HUD or FNMA or whoever originally sold it and let them know what's going on. You played by the rules and saw that property snatched out from under you by a dishonest person. That's what's wrong here.

I'm shocked to read this post and see what some people who have so much real estate experience and have a great business are ok with doing. Everyone should work together in this business and going around people is completely wrong. That wholesaler that marked up an overpriced house is most definitely a newbie or an idiot but maybe someone should try and help them. They are out there trying to find deals and there is a huge learning curve specially if you don't have someone to show you the right ways. As for how to prevent people from going around you, you need to have full disclosure with the seller and let them know what you plan on doing and then making sure the buyer does not have access to them and if they wait until you cancel then they will lose if the property is a deal because someone else will buy it and if they say they'll buy it and then wait until closing to get the owner's info and then not close just go down to the courthouse and file to put a cloud on title. They'll love trying to resell that house to someone else and they can't get clear title. It's the same as putting a construction lien on a house.