Can a " Wholesaler" be a crook with a contract?
Investor · Jacksonville, FL · Member since 2015 · 504 posts · 217 votes
Should a wholesaler be considered shady if they are buying cheap off of mls and then doing a mark up to sell to another investor? What is reputable course of action for a wholesaler to earn and maintain trust of investor colleagues? I feel like a wholesaler who has done the leg work to acquire an off market property at a deep discount should make a decent amount of money for the time spent , but I have a problem with them paying Penny's on the dollar for an off market property and then trying to sell tt for near market value..
Any thoughts on the subject?
The only thing that should matter to you is - is it a great deal for you? How much the wholesaler makes is irrelevant. If someone has negotiated a great deal on a listed property and your price is still a great deal for you, why do you care where the deal came from?
What if someone inherits a property for free. Should they be limited on how much they make on it? Let's say it is worth $500K but they got it for free. Are you saying they should only make a "reasonable" profit of $5000 or $10,000 or some other random number you come up with, because they got it for free?
Why Should it be any different for a wholesaler?
PS to answer the question in the subject line, absolutely a wholesaler can be a crook. Many are, arguably most are. Although my belief the bigger problem is newbies that have been led down the rosy path by Gurus and have unrealistic expectations. They also don't know how to really evaluate a deal.
I do occasionally wholesale properties. I will also buy properties from other wholesalers. If a wholesaler offers me a property that I discover is already listed on the MLS (And, believe me, that's the first thing I check.), not only will I not buy that deal, I will never do business with that wholesaler. That's only one of many reasons I will not deal with Net Worth or New Western here in Dallas.
Locking up a property that's already listed on the MLS and then marking it up $500 to sell is not earning anything. It's ridiculous. Whether it's shady or now, I'm not sure, but it sure is sleazy.
Also, wholesalers who get a deal at a deep discount and then try to "wholesale" it at near the ARV are one reason wholesalers get a bad name. If you are wholesaling, you have to get an even better deal, so you can add your wholesale fee on top AND STILL give your investor buyer a deal with real meat on the bone. Period.
Also, wholesalers who get a deal at a deep discount and then try to "wholesale" it at near the ARV are one reason wholesalers get a bad name. If you are wholesaling, you have to get an even better deal, so you can add your wholesale fee on top AND STILL give your investor buyer a deal with real meat on the bone. Period.
So wait? That ain't wholesaling? DCMMMMMMM I better tell all these out of state guys that call me wanting to sell a property for retail is not wholesaling.....*read my sarcasm*
LOL...yeah...the concept of leaving "meat on the bone" seems to escape some wholesalers, then they wonder why they can't find buyers for their deals. Go figure!
The only thing that should matter to you is - is it a great deal for you? How much the wholesaler makes is irrelevant. If someone has negotiated a great deal on a listed property and your price is still a great deal for you, why do you care where the deal came from?
What if someone inherits a property for free. Should they be limited on how much they make on it? Let's say it is worth $500K but they got it for free. Are you saying they should only make a "reasonable" profit of $5000 or $10,000 or some other random number you come up with, because they got it for free?
Why Should it be any different for a wholesaler?
PS to answer the question in the subject line, absolutely a wholesaler can be a crook. Many are, arguably most are. Although my belief the bigger problem is newbies that have been led down the rosy path by Gurus and have unrealistic expectations. They also don't know how to really evaluate a deal.
What if someone inherits a property for free. Should they be limited on how much they make on it? Let's say it is worth $500K but they got it for free. Are you saying they should only make a "reasonable" profit of $5000 or $10,000 or some other random number you come up with, because they got it for free?
That seller should list with a Realtor to get them fair market price not a wholesaler who will take 50c on the dollar then market it up and try get maximum dollar for themselves
Let the market decide what is fair and has value and what doesn't. That's what a free market does.
If someone finds value in what the wholesaler has to offer and is willing to pay the price for it, what do you care? Are you jealous because that wholesaler thought of it, and you didn't? Or found the deal and you didn't? Why are you begrudging the person a profit?
I have actively wholesaled for over 10 years. I have rehabbers that come to me repeatedly for properties. They want to keep their crews busy so they turn and earn, not spend time hunting for deals. As long as my price works for them, they are delighted to do business.
1 - Think with an abundance mentality.
2- Find good deals, regardless of the source, and build a "book" of rehabbers who will buy them from you.
Then, you won't have to worry about what other people are doing.
What if someone inherits a property for free. Should they be limited on how much they make on it? Let's say it is worth $500K but they got it for free. Are you saying they should only make a "reasonable" profit of $5000 or $10,000 or some other random number you come up with, because they got it for free?
That seller should list with a Realtor to get them fair market price not a wholesaler who will take 50c on the dollar then market it up and try get maximum dollar for themselves
So I guess you agree with me, Whether an owner or wholesaler, they are entitled to what the market will pay. That is regardless of what their basis is.
Your title and post are misleading. Just because someone is selling a listed property doesn't equate to being a crook. I don't think it's a good wholesaling strategy yet one a lot of newbies try or at least ask questions about but I believe that's because they don't know how to find off market properties. IMO, the key to being a good wholesaler is finding OFF MARKET properties. Once they find an off market property- their exit strategy is whatever they want. Some properties I wholesale at huge discounts to local investors. Some properties get some lipstick slapped on and sold at 65% retail to owner occupants who are buying cash. Some properties I keep to rent. It just depends on the condition, location, and price.
Your title and post are misleading. Just because someone is selling a listed property doesn't equate to being a crook. I don't think it's a good wholesaling strategy yet one a lot of newbies try or at least ask questions about but I believe that's because they don't know how to find off market properties. IMO, the key to being a good wholesaler is finding OFF MARKET properties. Once they find an off market property- their exit strategy is whatever they want. Some properties I wholesale at huge discounts to local investors. Some properties get some lipstick slapped on and sold at 65% retail to owner occupants who are buying cash. Some properties I keep to rent. It just depends on the condition, location, and price.
I dont think it is right, nor holds integrity for a so called wholesaler to swindle an unbeknownst property owner into selling for pennies on the dollar, only to turn around and sell to a so called investor at or near market value. Where is the integrity in that type of deal? and remarketing from mls is not a very kosher honest deal, in my opinion.
Your title and post are misleading. Just because someone is selling a listed property doesn't equate to being a crook. I don't think it's a good wholesaling strategy yet one a lot of newbies try or at least ask questions about but I believe that's because they don't know how to find off market properties. IMO, the key to being a good wholesaler is finding OFF MARKET properties. Once they find an off market property- their exit strategy is whatever they want. Some properties I wholesale at huge discounts to local investors. Some properties get some lipstick slapped on and sold at 65% retail to owner occupants who are buying cash. Some properties I keep to rent. It just depends on the condition, location, and price.
I dont think it is right, nor holds integrity for a so called wholesaler to swindle an unbeknownst property owner into selling for pennies on the dollar, only to turn around and sell to a so called investor at or near market value. Where is the integrity in that type of deal? and remarketing from mls is not a very kosher honest deal, in my opinion.
Wow, your response is dripping w dislike for wholesalers and filled w faulty assumptions. I'll only address the numbers part of it and with that, I'm not sure how you are coming to your conclusion. If I buy a house at 40% ARV, add 10% in rehab, and sell at 65% to an owner occupant what's the big deal. It's been some time since I've had a math class but 65% ARV is well below market value. The only time I'm selling at market value is when I do a full rehab.
Keep in mind, the seller is selling a property for a discounted cash price based on the condition of the house, it's market value, and their need to sell quickly. I just suggested to a seller today to list w a realtor because his house is too nice for the price I can pay as an investor and his urgency to sell quickly is minimal.
If you're an investor and you're paying retail for properties because it makes you feel better- go for it.
Can a wholesaler be a cook with a contract?
Sure, why not?
Even if the highly regulated world of real estate, if you become a Broker or Realtor, you only get paid if you successfully bring a deal to the closing table. You may spend a lot of blood, sweat and tears getting there and the transaction still doesn't close.
To answer your other question, is it fair that someone buys a property for $5 and sells it for $5k? Of course that doesn't seem fair... but life isn't fair.
it's amusing you guys are morally indignant that the wholesaler is ostensibly ripping off the investor . If anyone is getting screwed it's the poor dupe who sells off market to the wholesaler not the investor
TRUE! as well.
Wow!
To answer the original question, of course a wholesaler can me a crook with a contract, but I don't see how their acquisition source matters.
Most real estate investors have full time jobs and aren't able to go see a property at the drop of a hat during the work day. So the service that the wholesaler is providing on MLS deals is a fixed price for the house (no highest & best), a full set of comps to justify ARV, a rehab budget, contractor referrals, etc., etc., etc. If a house comes on the MLS at 10am and the seller has clearly listed it below what it should be worth as-is, and I go run and get ANOTHER discount on top of that and then sell it to you at a price that you're happy with, what's the problem? You could've been in multiples or never even had a chance because someone else snagged it first.
Some folks get wrapped up in who's making how much on each deal. Others say they don't care how much the wholesaler makes until they find out the guy is making "too much." Most don't care and just want deals.
Sentiments like this are why I started this post: https://www.biggerpockets.com/forums/311/topics/274123-should-we-use-a-different-term-for-professional-wholesalers
Why not educate the initial first seller on the full potential profitability of their property? I am just saying, if there aren't any regulations, eventually there may be, because of scammer wholesalers taking advantage of originals sellers lack of knowledge on some subjects.
Your title and post are misleading. Just because someone is selling a listed property doesn't equate to being a crook. I don't think it's a good wholesaling strategy yet one a lot of newbies try or at least ask questions about but I believe that's because they don't know how to find off market properties. IMO, the key to being a good wholesaler is finding OFF MARKET properties. Once they find an off market property- their exit strategy is whatever they want. Some properties I wholesale at huge discounts to local investors. Some properties get some lipstick slapped on and sold at 65% retail to owner occupants who are buying cash. Some properties I keep to rent. It just depends on the condition, location, and price.
I dont think it is right, nor holds integrity for a so called wholesaler to swindle an unbeknownst property owner into selling for pennies on the dollar, only to turn around and sell to a so called investor at or near market value. Where is the integrity in that type of deal? and remarketing from mls is not a very kosher honest deal, in my opinion.
My title and post posed legitimate questions and scenarios I have seen in real life, As investors we are taught to build relationsips and negotiate sometimes that involves percentages on a completed flip. Why exclude the original seller?Why not legitimately offer the original seller equal percentages on a flip and bring them along with you on the deal?
Why not educate the initial first seller on the full potential profitability of their property? I am just saying, if there aren't any regulations, eventually there may be, because of scammer wholesalers taking advantage of originals sellers lack of knowledge on some subjects.
When you purchased land for $10K and sold it for $50K, did you educate the seller on the full potential profitability of their property? I'm assuming not since they still sold it to you. I don't know what your problem is but your talk and walk are different.
You clearly have it against wholesalers and don't understand the value they bring to both sellers and buyers. Are there bad and unethical wholesalers? Yes- just like there are bad and unethical realtors, lawyers, contractors, pastors, bankers, etc.
Why not educate the initial first seller on the full potential profitability of their property? I am just saying, if there aren't any regulations, eventually there may be, because of scammer wholesalers taking advantage of originals sellers lack of knowledge on some subjects.
When you purchased land for $10K and sold it for $50K, did you educate the seller on the full potential profitability of their property? I'm assuming not since they still sold it to you. I don't know what your problem is but your talk and walk are different.
You clearly have it against wholesalers and don't understand the value they bring to both sellers and buyers. Are there bad and unethical wholesalers? Yes- just like there are bad and unethical realtors, lawyers, contractors, pastors, bankers, etc.
Adrien Schebott,
Your facts are inaccurate, I bought a commercial lot for 17 k and held it 9 years before I sold it for 55 k owner financed. I was just 23 and it was my 2 nd land purchase as investment. I was 31 when I sold it. However prior to that I bought 5 acre for 10 k and after resurveying them all Into 5-1 acre lots we sold them for $7500 & 8 k each owner financed. That was my first land purchase as mere investment and my husband at the time called the shots on the pricing which was fair considering we owner financed and spent the money to divide.We never called ourselves wholesalers and was not even sure what next step to take with the 5 acres. As it was our first land deal in the 80s before all the advantages of internet.
It depends, if a seller lists on the MLS and no retail buyers are offering because they are over priced then a wholesaler comes in uses his skill in negotiating to get the price down to where an investor will buy it and makes $5k for the time then yes sounds fair to me.
Now if same wholesaler ties it up with a promise to buy but then can't preform and cancels getting their EM back then yes I think it's wrong. The seller should be compensated for the time the home was tied up, just like the same wholesaler would require hard earnest money from the investor day one.
Just my thoughts.
My experience from wholesalers who are crooks are the following.
Wholesaler puts the house under contract with very little knowledge of the area, yes you in CA, TX and other states listen up.
You tell the seller who is in distress I can sell this in 30-60days, you give it an an attempt at marketing the contract, put in in CL. You say to the seller you will put $200 in EM, which you never send the seller, so you have no skin in the game at all, you never intended to buy the property. YOU OUTRIGHT LIED TO THE SELLER.
Also you don't know the area, you advertise the property which you have not seen or walked for the at the full retail price or a percentage of the zillow estimate. Then you wonder why you can't sell it and then call me to spilt the commission. Thats the crooks I see wholesaling. Telling sellers they will buy the property and NEVER DO and hang home owners out to dry...
Can a wholesaler be a cook with a contract?
Sure, why not?
Even if the highly regulated world of real estate, if you become a Broker or Realtor, you only get paid if you successfully bring a deal to the closing table. You may spend a lot of blood, sweat and tears getting there and the transaction still doesn't close.
To answer your other question, is it fair that someone buys a property for $5 and sells it for $5k? Of course that doesn't seem fair... but life isn't fair.
Are there no regulations or credentials required for wholesalers?
Is it accurate to say that realtors and brokers work very hard to bring deals to the table that still may not get closed bit yet wholesalens still get paid from conservative to rediculously large amoiunts of equity with less work than a realtor or broker? Can a Wholesaler Trump the need for realtors? ,I mean are wholesalers competition to realtors?
Should a wholesaler be considered shady if they are buying cheap off of mls and then doing a mark up to sell to another investor? What is reputable course of action for a wholesaler to earn and maintain trust of investor colleagues? I feel like a wholesaler who has done the leg work to acquire an off market property at a deep discount should make a decent amount of money for the time spent , but I have a problem with them paying Penny's on the dollar for an off market property and then trying to sell tt for near market value..
Any thoughts on the subject?
Carolyn, nothing wrong with wholesalers, I think this is a very active word in the REI community today, they seem to be popping up like mushrooms. Some are licensed, some are some rogue individuals, some are farming others deals.... I cannot wrap my head around it to much lately, get solicited by a wholesaler once a week, I do not mind, in-fact I look at every home if it is near my criteria. It depends how the deal is structured, anyone practicing this method should be licensed and should abide by the Division of Real estate rule. Last week I had (4) "wholesalers" - unrelated to one another offer me the same property all at different prices. Weird and doe snot look legit. In this referenced case the actual broker did not even know, the property was being sold by any of the wholesalers ...... If you the you can get a deal and the deal i structured by the rules, go for it. Otherwise, just complete your due diligence like anything else.
Can a wholesaler be a cook with a contract?
Sure, why not?
Even if the highly regulated world of real estate, if you become a Broker or Realtor, you only get paid if you successfully bring a deal to the closing table. You may spend a lot of blood, sweat and tears getting there and the transaction still doesn't close.
To answer your other question, is it fair that someone buys a property for $5 and sells it for $5k? Of course that doesn't seem fair... but life isn't fair.
Are there no regulations or credentials required for wholesalers?
Is it accurate to say that realtors and brokers work very hard to bring deals to the table that still may not get closed bit yet wholesalens still get paid from conservative to rediculously large amoiunts of equity with less work than a realtor or broker? Can a Wholesaler Trump the need for realtors? ,I mean are wholesalers competition to realtors?
As a REALTOR and wholesaler, I can promise you that I do more work wholesaling a deal than I do when I'm a REALTOR on a deal. As REALTORs, we say that we sell houses, but we really just market houses on the MLS and then try to help through the closing process. When I'm acting as a wholesaler, I'm a construction estimator, REALTOR, buyer, negotiator, closing agent, etc., etc., etc. Oh, and I actually go find a buyer and actively sell the house.
Can you explain what has you so upset about re-marketing an MLS deal? How about buying a house for pennies on the dollar? I'd bet dollars to donuts that you buy your houses as cheaply as possible and don't tell the seller the absolute maximum that the house is worth today.
Should a wholesaler be considered shady if they are buying cheap off of mls and then doing a mark up to sell to another investor? What is reputable course of action for a wholesaler to earn and maintain trust of investor colleagues? I feel like a wholesaler who has done the leg work to acquire an off market property at a deep discount should make a decent amount of money for the time spent , but I have a problem with them paying Penny's on the dollar for an off market property and then trying to sell tt for near market value..
Any thoughts on the subject?
Carolyn, nothing wrong with wholesalers, I think this is a very active word in the REI community today, they seem to be popping up like mushrooms. Some are licensed, some are some rogue individuals, some are farming others deals.... I cannot wrap my head around it to much lately, get solicited by a wholesaler once a week, I do not mind, in-fact I look at every home if it is near my criteria. It depends how the deal is structured, anyone practicing this method should be licensed and should abide by the Division of Real estate rule. Last week I had (4) "wholesalers" - unrelated to one another offer me the same property all at different prices. Weird and doe snot look legit. In this referenced case the actual broker did not even know, the property was being sold by any of the wholesalers ...... If you the you can get a deal and the deal i structured by the rules, go for it. Otherwise, just complete your due diligence like anything else.
I am not upseti simply asked some questions,
Wow!
To answer the original question, of course a wholesaler can me a crook with a contract, but I don't see how their acquisition source matters.
Most real estate investors have full time jobs and aren't able to go see a property at the drop of a hat during the work day. So the service that the wholesaler is providing on MLS deals is a fixed price for the house (no highest & best), a full set of comps to justify ARV, a rehab budget, contractor referrals, etc., etc., etc. If a house comes on the MLS at 10am and the seller has clearly listed it below what it should be worth as-is, and I go run and get ANOTHER discount on top of that and then sell it to you at a price that you're happy with, what's the problem? You could've been in multiples or never even had a chance because someone else snagged it first.
Some folks get wrapped up in who's making how much on each deal. Others say they don't care how much the wholesaler makes until they find out the guy is making "too much." Most don't care and just want deals.
Sentiments like this are why I started this post: https://www.biggerpockets.com/forums/311/topics/274123-should-we-use-a-different-term-for-professional-wholesalers
I agree. This is what you should be considering. While some wholesalers may be crooked and will try to wholesale other people's deals without having a contract, the legitimate wholesaler can get a good bargain on the MLS from a seller if the conditions are right. A good and legitimate wholesaler provides a discounted deal to the end buyer where they will make money off it. Your job as a wholesaler is to provide awesome deals. You get an awesome deal from the MLS at discount and offer that to investors BELOW MARKET. That's the point and the only way you should offer a wholesale deal. Wholetailing is a different story.