Do you prefer wholesaling or listing?

21 Replies

I see a lot of brokers are good and doing great at what they do. However there are alot of real estate brokers that still say wholesaling is better and there bread and butter. But there are others who say listing properties is alot better and you have more opportunities.  What is your take on this and why?

My personal belief is to never wholesale unless:

I don't have the money to rehab the property properly.

I don't want to deal with the hassle of a huge rehab

Most people wholesale because they don't have the money or know how to rehab. Rehabs are more profitable if you know what you are doing. Whilesaling is less risk since you never really buy it.

I think what @Kortez Walker is asking is as a licensed broker who also wholesales properties what is the preference... getting the deal under contract and flipping the contract or assigning it. OR.. Listing the deal on the MLS and making a commission.

@Kortez Walker , I don't see this as an "either or" question. If you are a Broker who is also acting as principal in a deal - you STILL have to list it!

@Brent Coombs You are not required to list a property as a "broker." You might be using the definition of "broker" differently than us in this case (perhaps you're talking about the managing broker in the firm, not simply an agent), but even then, there shouldn't be any reason for a broker, if wholesaling, to have to list a property. 

@Alain Perez-Majul , if your Broker friends are MAKING MORE MONEY as Wholesalers than as Brokers (after finding their own deals), then in my books they are denying the Seller as much money as THEY should have made - which surely MUST be forbidden because of their fiduciary duty!

Well,  I'm new to Bp and real estate as a whole,  however… in doing my research I have figured that doing wholesale is the way to go.  This is simply because it seems to be the easiest way to get into real estate with the least liability. 

@Terrence P. , welcome to BP. Be sure to look up a lot of previous threads about Wholesaling. Here is a particularly juicy one:- 

http://www.biggerpockets.com/forums/48/topics/2284...

Of course, YOU won't be thinking of getting any property under Contract, then backing out of that Contract on any flimsy excuse if you can't find a REAL Buyer who will pay more, will you? See you around the Forum. Cheers...

Originally posted by @Brent Coombs :

@Alain Perez-Majul , if your Broker friends are MAKING MORE MONEY as Wholesalers than as Brokers (after finding their own deals), then in my books they are denying the Seller as much money as THEY should have made - which surely MUST be forbidden because of their fiduciary duty!

I think that would only be true if they have executed a listing contract with the seller.  If the broker has done that I assume they have already determined what avenue is more profitable and decided to go forward with the listing.  If I broker finds a property and presents himself as a buyer (wholesaler) there is no fiduciary responsibility.

Originally posted by @Brent Coombs :

@Alain Perez-Majul, if your Broker friends are MAKING MORE MONEY as Wholesalers than as Brokers (after finding their own deals), then in my books they are denying the Seller as much money as THEY should have made - which surely MUST be forbidden because of their fiduciary duty!

FIrst of all, that is completely unrelated to your first comment, where you mentioned that as a licensed wholesaler, for some reason you are under the obligation to list a property when wholesaling it from a seller. That is not true. Not only that, there are different ways to wholesale; you could buy the property outright and sell it to another investor, or you could assign the contract. So in the case of me purchasing a property outright, even if I'm licensed, wouldn't I have the fiduciary duty to myself as the buyer, much like an buyer's agent would to their client in a regular real estate transaction?

And like @Sam Erickson said, I'm not looking to list their property, nor do I have a listing contract with the seller. As long as I DISCLOSE I am licensed, as an investor, I can negotiate with a seller and buy a property with no problem. 

@Alain Perez-Majul , I knew my comments would draw out some informed responses. I was being deliberately black and white, when I knew there were grey areas.

My counter-question would be then: of what benefit is it whatsoever for a Wholesaler to be Licensed? Is it ONLY so they can pull out their Certificate when the Ethics Board comes calling? Is it also so they can "legally" show people around properties that they don't own, but just have a piece of paper that says they or someone else intends to buy it one day? 

And all the while, because they have disclosed to the Seller that they do have this magical License (even though it is irrelevant to their intentions) so that the Seller is ENCOURAGED TO BELIEVE that their interest will be looked after, the (irrelevantly) Licensed Wholesaler can make whatever better-than-commission proceeds they can "get away with"?

A slippery slope, my friend...

@Brent Coombs  

Some obvious advantages would be access to the MLS and not having to pay someone else fees for listing a property (if you were to). Or what if you simple ARE and agent, and want to wholesale as well?

Regardless of all that, however, we're ultimately not taking a listing contract or representing a buyer as an agent, essentially eliminating fiduciary duties. 

Moreover, you have it all backwards. Disclosing that you have a license is not to make you seem more legitimate or so that "the Seller is ENCOURAGED TO BELIEVE that their interests will be looked after"; on the contrary, disclosing can negative for the wholesaler since the seller might become distrusting of them since they are seen to have more real estate knowledge. 

As long as you disclose that you are licensed, are not working for them, and they understand you are buying at a discount for business reasons, there is no slippery slope. 

However, always keep in mind that working ethically and morally should always supersede any legal obligations! But when it comes to wholesaling with a license, there is no issue as long as you go about it properly.

Good discussion, appreciate the dialogue!

@Alain Perez-Majul , yes, well I am on the side of those Sellers to whom "disclosing can be negative for the wholesaler since the seller might become distrusting of them since they are seen to have more real estate knowledge" (than they are actually disclosing). Cheers...

@Brent Coombs Which is completely fair; to each their own. Doesn't make it any less legal, however :P

By that logic, you would almost want to work MORE with a licensed wholesaler since he/she would have to tread lightly.

Moreover, once could argue that there are more experienced unlicensed wholesalers than licensed ones, and it's experience that you fear (fear of getting taken advantage of) when you hear "licensed."

@Alain Perez-Majul , when you said "even if I'm licensed, wouldn't I have the fiduciary duty to myself as the buyer, much like an buyer's agent would to their client in a regular real estate transaction?", the answer is "NO", because as the Licensed Wholesaler, your "duty" would be directly towards your end-Buyer, not yourself.

So yes, I agree with you when you said "By that logic, you (the Seller AND your end-Buyer) would almost want to work MORE with a licensed wholesaler since he/she would have to tread lightly" - since Licensed Wholesalers are OBLIGED to receive no more out of the total transaction than what would be a normal Agents commission (otherwise it can be argued that they are KNOWINGLY stealing from the Seller).

So getting back to the OP's premise of some Licensed Wholesalers making MORE than if they were listing - why should that be possible?...

@Brent Coombs The seller isn't your client, and you've disclosed you're licensed. I suppose we'll just agree to disagree.

Why shouldn't it be possible? It's a business, and the wholesaler is providing a service. The seller called the wholesaler for a reason- if they wanted to list, they would've called a real estate agent.

@Alain Perez-Majul , as a LICENSED Wholesaler, if the Seller isn't your client, your end-Buyer is! And if you are getting a better-than-commission fee out of it, you are robbing BOTH the Seller and your end-Buyer. If so, turn your License in. [Caveat: Alright, keep your License, IF you tell the Seller and end-Buyer in writing of your goal to make better-than-commission fees out of it]. Cheers...

Updated about 3 years ago

Or OK, keep your License if you keep within the parameters of your Seller and End-Buyer being at least as well off after closing as if the property was listed. Cheers...

Originally posted by @Brent Coombs :

@Terrence P. , welcome to BP. Be sure to look up a lot of previous threads about Wholesaling. Here is a particularly juicy one:- 

http://www.biggerpockets.com/forums/48/topics/2284...

Of course, YOU won't be thinking of getting any property under Contract, then backing out of that Contract on any flimsy excuse if you can't find a REAL Buyer who will pay more, will you? See you around the Forum. Cheers...

That thread is wholesaler bashing with good posts here and there. I've kept out of it for that reason alone. But Being a wholesaler isn't real estate investing. @Terrence P. You're comment is wayyy off base. You want easiest avenue, with extra income, partner up on a Rehab. Learn to manage one by working on one. That's the easiest way to do it. But Wholesaling is another Job. It takes KNOWLEDGE, money, marketing, negotiating, and system structure. You can get lucky with one deal, or maybe a few, but it won't last. Knowledge for the most part is the hardest part of wholesaling. You need to learn every aspect of the deal. How to estimate repair costs, ARV, how to negotiate to create deals, how to sell buyers on your deal is a deal. How to qualify buyers, how to qualify sellers. How to keep buyers and sellers from going dark. How to keep a great deal from turning good, how to avoid daisy chains, how to negotiate terms, sub2, how to handle a foreclosure, how to keep yourself from cying as you read this. It's a painful road, and not many "Good" wholesalers will care to teach you, why? You're competition.

That's why the attrition rate is 95% in the first month alone...

Sorry, for the delayed response.  I really wanted to do some research before I just replied,  and it appears that you are correct. It seems like I am going to have to study up on how to get into rehabbing and selling homes. Unfortunately, options involving little or no money down are far and few between. I look forward to further studies on the matter, even though it will push back my time table for getting started. I just really need to do this RE thing right,  the first time.  Thank you for your post... I thought I was on the right track. 

I list properties and buy properties. I am under contract to close on one next week. I told the seller I would list it for x or purchase it for y. They agreed to "Y" which is 35K less than I wanted to list it for. I don't agree with most "wholesalers" because the few I have encountered are acting in bad faith, illegally brokering without a license, get properties under contract using deceit, and often victimize the homeowner. In reality, is there REALLY such a thing as a "licensed wholesaler" or rather a licensed agent brokering contracts? If you want to start making money here is my advice: get an education, find a partner if funding is an issue, and approach your dealings in an honest, fair, and legal manner. That will take you much farther and build goodwill with those you have dealings with.

gs in an honest, fair, and legal manner. That will take you much farther and build goodwill with those you have dealings with.

John, 
I just wanted to thank you for this post as it was very helpful. In terms of addressing the heart of the matter,  I really do believe in being transparent when it comes to real estate because I honestly do want to make a positive impact in my area, and in general. I believe that as long as BP is still around, an education won't be a issue, but the important thing for me will be finding the right partner, just to make sure things are handle in the proper manner. Thanks so much,  and i agree with you…  The last thing a person needs is their credibility damaged because they did things the wrong way. 
Originally posted by @Brent Coombs :

@Terrence P., welcome to BP. Be sure to look up a lot of previous threads about Wholesaling. Here is a particularly juicy one:- 

http://www.biggerpockets.com/forums/48/topics/2284...

Of course, YOU won't be thinking of getting any property under Contract, then backing out of that Contract on any flimsy excuse if you can't find a REAL Buyer who will pay more, will you? See you around the Forum. Cheers...

Hey Brent, 

Thanks for the post,  sorry for the delay as I really have been getting into BP.  I don't believe in backing down from a deal. Truth be told,  as I tend to operate with complete transparency there won't be a need to use excuses. I consider the education Im getting on here a privilege and a blessing,  and I intend to take it seriously. Awesome post though…  see you around.  Cheers. 

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