Wholesaling - seems a bit scammy

5 Replies

Am I missing something? 

This entire concept of wholesaling is a bit scammy to me; I'm frankly amazed that it seems to be as popular as it is. You're entering into a purchase agreement with someone, with no real intent to purchase. What happens if you can't find someone to pay more for the same contract that you signed? Do you just back out? Does the seller know when you're signing as a wholesaler, or do you just take one of the standard "outs" that everyone has in the early stages of a real-estate contract, with no advance notice provided to the seller?

Do I misunderstand the concept entirely?

Discuss.

I think the percentage of wholesalers that operate honestly is about 50%. 

The wholesalers it self needs to bring the value to the deal that they are trying to sell over whatever the amount may be. 

We take the time to due the due diligence on the deal. 

Visit the property and evaluate what it needs for what model the deal will fit in. 

Whether fix and flip or a buy and hold and even a tear down. 

We then schedule our full time contractor to come give a bid and verify the materials will be accurate as well. 

We have verified comps for the property and once we have the package then we attempt that wholesale and if we cannot sell it in two weeks then we keep it and flip it! 

Originally posted by @Russell Brazil :

It does not need to be scammy. You can operate honestly. However I imagine 99% of wholesalers do not operate honestly.

Does that mean the wholesaler is being honest about the fact that they are wholesaling? If you skip that step, I'd say you're already in "dishonest" territory. 

So, I'm struggling to see how even the 1% would keep it honest - what seller in their right mind would be ok with signing a contract they know is either: 

  • Going to be flipped for more money (which the seller would obviously just want for themselves, if they think there are others out there willing to pay more), OR 
  • That the buyer is just going to walk if he/she can't accomplish selling the contract.
Originally posted by @Account Closed :

I think the percentage of wholesalers that operate honestly is about 50%. 

The wholesalers it self needs to bring the value to the deal that they are trying to sell over whatever the amount may be. 

We take the time to due the due diligence on the deal. 

Visit the property and evaluate what it needs for what model the deal will fit in. 

Whether fix and flip or a buy and hold and even a tear down. 

We then schedule our full time contractor to come give a bid and verify the materials will be accurate as well. 

We have verified comps for the property and once we have the package then we attempt that wholesale and if we cannot sell it in two weeks then we keep it and flip it! 

That makes more sense - you're still buying it if you can't find another investor. So, you aren't backing out on the deal if you can't flip the contract. The value you bring to another investor is an already spec'd deal that they can make money on - just not as much as if they had made the original purchase at the price you signed the contract for.

Any other scenario I can't really see how it would be considered honest. 

If you also have a solid buyers list and you have the property under contract and you know you can get more as well. Some people near me know some buyers that buy about anything and they do well with getting things under contract and making 10/15k on the top. 

If you then have to break the contract they owner knew it could occur.