Wholesaler Misrepresented himself

Wholesaler Misrepresented himself

Real Estate Agent · Davenport, FL · Member since 2015 · 45 posts · 6 votes

I am in the midst of dealing with a wholesaler that has left a bad taste in my mouth for the wholesaling business, and am wondering if this is common practice.

A little background:  So, I'm trying to sell my house and move to Central Florida for a job opportunity for my husband. The plan is for us to began a real estate business, with me focusing on it fulltime, and him eventually joining me once we are successful enough to afford it.  

The key to doing all of this is selling my home. It is an inherited home that needs updating.  We initially were selling it to a family friend so that it could stay within the family in a way, but that didn't work.  At this point, we are just interested in selling it quickly, and willing to leave a substantial amount of money on the table to do so, if necessary.  I had started filling out some of the "we buy houses" forms online to see if any investors would make it worthwhile for us.  I got several hits, and chose to go with someone who established themselves as a cash buyer who could close within 2 weeks.  I informed him of the comps in the area, and my knowledge of the property, and we haggled a price that my husband and I felt comfortable with.  I researched him a bit, seeing that he was a flipper and wholesaler.  At the time I was not too familiar with how wholesaling worked, and he had never mentioned wholesaling.  We signed an offer, sight unseen, with a 7 day inspection period.  He said he would be scheduling an inspector the next day.  The next day, he said he would schedule the inspector for early in the week because he wanted to come with him and was stuck in Broward (we are in Miami).  The following day(Saturday), he said his partner was in the area and wanted to take a look at the property. We obliged. On Monday(labor day), I asked when I should expect him and the inspector. He told me he would let me know Tuesday morning.  Tuesday morning, he asked if the inspector could come by at 7pm. I said yes and asked if he was coming also. He informed me he would not be.  Later in the day, he told me another "partner" was in the area and would like to visit the property. Again, we obliged, but I started to become more suspicious. I had already did some digging into his social media presence to see if he had listed our property with his wholesales over the weekend, and found nothing.  The next partner showed up at 5:30pm, and had another woman with her.  We chatted, and they took pictures, and left.  At 7pm, there was a knock on the door, and I assumed it to be the inspector, but it was someone different, someone who I had not been informed to expect.  I asked him if he was "blank", the inspector. He was not. He was another "partner", and mentioned "xyz" wasn't going to make it, but didn't "xyz" tell me that he was coming? No, also, I have no idea who that is. I spoke with "insert cash buyer name". "Oh, yeah. "Xyz" and "cash buyer" work in the same office." We go ahead and let this person view the property, and I check in with "cash buyer" to straighten if and when inspector is coming and who this guy was. He apologizes for his slip up, and not notifying me of the other "partner", says he will check in with the inspector and get back to me.  Inspector shows up. Now, I'm expecting and prepared for a full official home inspection.  This guy looks around the property for less than 10 minutes. He does no more than any of the "partners" do and leaves.  At this point, I'm very nervous about the whole situation, so I start digging again, and find that he has listed the property with his wholesales.  I do a bit of research on wholesaling and find out that there is a practice of putting a property under contract by identifying yourself as a cash buyer, trying to flip it to an end buyer, and then using the inspection period to back out if you can't flip it to an end buyer.  I confront the "cash buyer" with the knowledge that he has listed my property as a wholesale property.  I ask him if he intends to terminate the contract if he can't flip it to an end buyer. I don't want the property tied up unnecessarily as I am looking to move quickly.  His exact response: "Yes I either close on the property myself first or flip to an end buyer. I will know by the end of today so no worries about dragging it any further.  I knew your situation from the beginning that's why I kept the inspection to seven days only.  It's normally 15 days."  I wait until the end day and ask him what the plan is. He says that he has two cash buyers that would like to view the property tomorrow, and then will decide from there.(At least he us finally honest about who these people are)  I ask him if this means he intends to terminate the contract if he can't find an end buyer? His response: "Please give me till tomorrow afternoon I am doing absolutely everything I can to make this work. I know how important it is to you and your family"

I'm wondering if there is any recourse I have at this point.  I will wait and see what he says tomorrow, and maybe we will get lucky, and one of these investors will want the property. However, I don't have faith in that. The deal I made with him is great for an investor.  The money he has tacked on to wholesale it, makes it a little too expensive for an investment opportunity, I feel.  The whole situation has taught me some big lessons, and I'm trying hard to keep my cool.  Is this how it always works? 

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Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
11y

"Wholesaler misrepresented himself."

"Water turned out to be wet."

See this reply in the discussion

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  • Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
    11y

    Also, if you continue to try to sell it yourself (which I advise against) get proof of funds/financing. Real money in a real bank account, or a pre-approval (not pre-qualification) from a bank you have heard of. And get a real earnest money deposit. The EMD alone will scare of most wholesalers; most don't have two nickles to rub together.

  • Real Estate Agent · Davenport, FL · Member since 2015 · 45 posts · 6 votes
    11y
    Originally posted by @Richard C.:
    Originally posted by @Nikki Harmon:
    Originally posted by @Brent Coombs:

    @Nikki Harmon, I tend to agree with @Ken T. when he said "he obviously didn't get a good price for your home if he had to have 6 people come look at it", but not about the part where he said "so yay for you", that is, if you were accurate with us about giving him a sizeable discount because of your need(?) to sell quickly. It is looking like you were/are trying to have your cake and eat it too - quick sale, for next to no discount!? Maybe it's just that you and he have different definitions when it comes to "acceptable" discount, delay, profit margin, condition, number of follow-up conversations, blah blah...

     Maybe we do.  Maybe my pricing is wrong, as I'm inexperienced, but as an experienced professional looking for good deals for himself and his (now that I know he is offering it up to them, which I didn't before when we entered into the contract) investors, wouldn't he have been expected to do his research and make an offer than he could deliver on?  

     You're assuming he actually is an experienced professional, based on his online presence.   It is very likely that is faked.  Most wholesalers making sight-unseen offers, and with no real buyer lined up (hence the parade through your house) don't know anything at all about real estate. 

    You should list with a broker.  You can still get a quick sale if you price right, you will probably get enough more by listing it to cover the commission, and you will have an actual experienced professional protecting your interests.

    You don't want to do business with people claiming that there is nothing wrong with lying to sellers unless it is specifically against the law.

     I know now that it is fake, and this has been a big lesson.  I've been doing a lot of research now about the wholesaling business, and the good, the bad, and the ugly.  

    My father is a realtor, and the intention was to list with him the Monday following, but to just test out the waters and see what came up.  Unfortunately a "too good to be true" offer came up, and my husband, and I, both ready to be done and out of Miami, probably let emotion cloud our judgement a bit.  It is definitely not something that will happen again, but I'm kind of glad it did in a tiny, TINY way.  It has opened my eyes to something while not much is at stake, rather than later, when I have more at stake, and business dealings to handle.

  • Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
    11y

    Please don't think I am bashing you.  You did well in this.  Sniffing out dirtbags is a valuable skill that often requires painful experience to develop.

  • Investor · Philadelphia, PA · Member since 2010 · 739 posts · 372 votes
    11y
    Originally posted by @Nikki Harmon:
    Originally posted by @Chris Purcell:

    He/she was just trying to get a contract on your house, mark it up, and flip to one of his investors without telling you.

    Were you being lied to?  Probably

    Were you being scammed?  No.  If you got what you wanted for your house, why do you care?

     I didn't get anything for my house.  He could not deliver on the contract he signed, which was a guaranteed cash closing by 9/21.  If I hadn't have confronted him about what he was doing, he would have dragged it out even longer.

     Well it's apparent he was going to get a contract on it from you, and pitch it to his end buyers.  He didn't stop you from selling the house, you didn't have a buyer yourself anyways

    If you're so worried about it collect a non refundable deposit next time

  • Real Estate Agent · Davenport, FL · Member since 2015 · 45 posts · 6 votes
    11y
    Originally posted by @Chris Purcell:
    Originally posted by @Nikki Harmon:
    Originally posted by @Chris Purcell:

    He/she was just trying to get a contract on your house, mark it up, and flip to one of his investors without telling you.

    Were you being lied to?  Probably

    Were you being scammed?  No.  If you got what you wanted for your house, why do you care?

     I didn't get anything for my house.  He could not deliver on the contract he signed, which was a guaranteed cash closing by 9/21.  If I hadn't have confronted him about what he was doing, he would have dragged it out even longer.

     Well it's apparent he was going to get a contract on it from you, and pitch it to his end buyers.  He didn't stop you from selling the house, you didn't have a buyer yourself anyways

    If you're so worried about it collect a non refundable deposit next time

     For the record, I canceled several appointments based on signing a contract with him, because he represented himself as a cash buyer.

  • Real Estate Transaction Engineer · Jacksonville, FL · Member since 2014 · 271 posts · 74 votes
    11y

    He lied and caused you stress, delay in the sale of your house, and some safety factors. He should be reported with as little cost to you. He has probably operated like this before and it won't be his last.

    Does every wholesaler behave like this? Is what "they" do illegal? The answer to these questions is NO! Don't believe the brokers and agents and haters who say so. There are legal ways that a wholesaler can operate, in an ethical fashion, and still complete a win-win-win-transaction. I believe they are few and far between.

    You, as the seller, should have asked him what the "assignment: means, if you didn't understand it. Lesson learned. He said he was a cash buyer. No need for assignment clause.

    Should that put a bad taste in your mouth towards all wholesalers? I think it should arm you with what to spot as legit and falsehood. Maybe next time faced with someone exhibiting the same behaviors or signs gives you great power to call them on it. Lots of great advice on how to prevent most shady wholesalers (and other unscrupulous cash buyers) from the get go. Ask for EMD and ask for Proof of funds. Even then, I've seen some real good bogus letters with all the official, trademarked and copy-written logos and what-not and wasn't worth the paper it was printed on.

    Even so, There are some legit deals that are being made everyday between a wholesaler and a seller where both are happy with the result. Now, whether or not they buy it or have a cash buyer buy it makes no difference as the desired result was achieved. If it doesn't sell, that could be due to a number of reasons. None of which matters to a seller. They just want it sold for the agreed price and the agreed time.

    I, as an aspiring wholesaler, will operate legally, ethically, honestly, and be as transparent about how I operate to both the seller and the buyer. However, before I start business, there are some things I'm doing to make sure I for one, can do what I say (If I state I will buy the house, I better damn well have the means to do that). Have a team of professionals, an avenue for funding, a list of buyers that I know are looking for certain properties (even if I don't, if the deal screams "good deal" that should entice the buyers to step up), etc. I'm "investing" a decent chunk of money up-front to be the best wholesaler I can be. 

    Actually, seeing it from the buyer side (fix and flip), I had very limited true deals when receiving from wholesalers, which is what gave the bright idea to be a wholesaler myself. If I can find and negotiate the deals I want, that's better for me and cuts out the middle man. If I come across and actually negotiate on deals that are still good, but I don't want to buy them (like a full rehab or just a particular market or area or just doesn't fit my criteria), then I will pass them along to other investors. I may even assign a few if there is some money I can take off the top. Is there anything wrong with this?

  • Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    11y

    @Nikki Harmonyou state he is bringing "buyers" to view the property. This IS brokering without a license. In the State of Florida, that is a felony. Feel free to give this jerk a pass if you wish, but personally I would not. Call the state first thing in the morning, tell them what is happening, and ask for help. Here is the line: If he is advertising and showing THE CONTRACT ONLY, that is legal. When he starts showing the house, he is brokering WITHOUT  A LICENSE. I didn't used to turn these people in, but have changed my attitude and now I do. They ARE victimizing homeowners and you are one of the poster children of their illegal activities. I have turned in two of these people so far, and both of them now appear on the state website as being under investigation. These people can bash all they want, but, if someone is committing a felony, tough luck. If not, the state can certainly have a finding of no probable cause or insufficient evidence. Go to www.myfloridalicense.com and click on "unlicensed activity". You can also look to see if this person you are dealing with shows up on the state website. It sounds like they should! PLEASE post their name here.

  • Rental Property Investor · Jupiter, FL · Member since 2015 · 36 posts · 7 votes
    11y

    @Nikki Harmon

    For him to be able to wholesale your property he would have had to put in the contract the right to assign the contract to another buyer. Just look out for that next time so that the contract can exclusively be between you and the potential buyer, unless you wish otherwise.

  • Developer · Astoria, NY · Member since 2015 · 88 posts · 12 votes
    11y
    Originally posted by @Richard C.:
    Originally posted by @Ken T.:

    @Nikki Harmon 100 percent agreed, some of the comments here are a bit crazy tho @John Thedford!  

    That is why complaints are important, and why I have decided to file a formal complaint against any and every wholesaler who contacts me.  They will get a C&D, and then they will never get a license and pollute the legitimate industry.

     HUH??? a formal complaint against ANY wholesaler.  WOW! okay well it's not an illegal activity so have fun.  Did you not learn not to judge every book by its cover, unfortunately for you this makes you look bad.  you should always know what you're complaining about before you start complaining. 

  • Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
    11y
    Originally posted by @Ken T.:
    Originally posted by @Ken T.:

    @Nikki Harmon 100 percent agreed, some of the comments here are a bit crazy tho @John Thedford!  

    That is why complaints are important, and why I have decided to file a formal complaint against any and every wholesaler who contacts me.  They will get a C&D, and then they will never get a license and pollute the legitimate industry.

     HUH??? a formal complaint against ANY wholesaler.  WOW! okay well it's not an illegal activity so have fun.  Did you not learn not to judge every book by its cover, unfortunately for you this makes you look bad.  you should always know what you're complaining about before you start complaining. 

     Brokering without a license is illegal in every state. And even if they are investigated and let off with a warning to be sure they behave, they will now be on the real estate commissions radar. Nothing disinfects like sunlight.

    BTW, I have a house in CT. Owned in an LLC. Undoubtedly shows up on many of the lists wholesalers buy. And I know how to report brokering without a license in Connecticut as well as anywhere else.

    If one finds that his business model requires intentionally misleading people, perhaps one ought to find a new business model.

  • Wholesaler · Needham, MA · Member since 2015 · 24 posts · 5 votes
    11y

    as far as wholesaling goes, he is doing things by the books. But instead of saying "inspection" he should have told you he is waiting for partners approval. 

  • Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    11y
    Originally posted by @Ken T.:
    Originally posted by @Richard C.:
    Originally posted by @Ken T.:

    @Nikki Harmon 100 percent agreed, some of the comments here are a bit crazy tho @John Thedford!  

    That is why complaints are important, and why I have decided to file a formal complaint against any and every wholesaler who contacts me.  They will get a C&D, and then they will never get a license and pollute the legitimate industry.

     HUH??? a formal complaint against ANY wholesaler.  WOW! okay well it's not an illegal activity so have fun.  Did you not learn not to judge every book by its cover, unfortunately for you this makes you look bad.  you should always know what you're complaining about before you start complaining. 

    You state it is "not an illegal activity". It is an illegal activity if they fine you or issue a cease and desist. It IS an illegal activity if the actions are in violation of state law. Your or my opinion may not matter...but the state boards do! I checked on one "wholesaler" this morning.  Their name not only appears on the state website for unlicensed complaints, there is a finding of "legally sufficient".  There are other names that appear with "legally insufficient" as the finding. Apparently, on  one "wholesaler" i looked up this morning, there is prima facie  evidence that their activity IS illegal. If something is illegal, I don't know how anyone except those with disregard for the laws can defend the action.

  • Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    11y
    Originally posted by @Ken T.:

    @Nikki Harmon "the point of his job is that he has quick access to investors that I may not. He is basicly marketing my property for me to his investors, saving me my own time and money in marketing. Obviously, he deserves to be compensated for his services, and it would be disrespectful of me to attempt to go around him"

    Great point! I wish everyone thought the way you did :)  it can be a struggle though! but i'd rather be upfront and lose a deal then lye and get no deal.  If only more people in this world thought like that. 

    @Brent Coombs I know my investors won't buy unless there is 55-80,000 profit to be made.   it may sound like a lot (and it is) but the average seller would go crazy if they knew there was almost 100,000 profit after the sale.

    @Nikki Harmon, when you said "but as an experienced professional looking for good deals for himself and his ... investors, wouldn't he have been expected to do his research and make an offer than he could deliver on?", I agree that he probably should have stuck to his very original Offer (ie. the same amount that you were offered later by the last of his so-called cash Buyers). At least then you could have sent him packing if you were not THAT motivated. 

    To all you wannabe Wholesalers out there, don't be putting in ANY Offers unless you have sourced the funds necessary to close! Also, It's OK for the Seller to be emotionally involved, but not you as a Wholesaler. He made that rookie mistake too.

    Ken T., you said "the average seller would go crazy if they knew there was almost 100,000 profit after the sale", but why don't they care if it is ONLY $55-80,000?...

  • Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    11y

    @Nikki Harmonyou state he is "basically marketing" the property for you. Do you understand, that is what agents do when they list a property. That is illegal without a license. No ifs, ands, buts, whatever...ILLEGAL. Many of these fraudsters and their supporters will defend these actions. They talk it up and claim they are "professionals" and other bunk. Professional what? Crooks? The next time you are approached by ANYONE wanting to buy your house (this one or one in the future) make sure you get proof of funds, a 3 day inspection period, and a non-assignable contract. That is enough to keep the fast talking frauds out of the picture.  Call the state today and file a complaint. Unless people stand up against these people, they will continue to victimize others. www.myfloridalicense.com.

  • Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
    11y
    Originally posted by @Account Closed:

    as far as wholesaling goes, he is doing things by the books. But instead of saying "inspection" he should have told you he is waiting for partners approval. 

     Not unless he has a business partnership registered with the state. Prospective customers are not partners.

  • Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
    11y

    @Nikki Harmon

    Sorry that you were put in this situation. Unfortunately there is a huge industry of clueless unlicensed folks running around doing this kind of stuff.

    As a licensed Broker I can tell you with a certainty that what these people are doing is unlicensed brokerage activity. It's unfortunate that there are so many people, many here on BP that have no idea what they are talking about. The good news is that there are a lot here on BP who do know what they are talking about and are giving you some good advice.

    Thankfully we have people like @Jay Hinrichs, @Richard C., & @John Thedford who try and spread the word to the uneducated so that more people become educated about this unlicensed and unregulated industry.

    I would recommend you sell this house with a real estate agent. There is a misconception that real estate agents don't work with or know investors. Or that "wholesalers" are the only ones that can move properties quickly for cash. This notion is the furthest thing from the truth. If you find yourself an agent that has an investor network and use the MLS to sell this thing at an incredibly aggressive price it will sell in mere days. The reach of the MLS and an investor agent is 100x further than any clueless unlicensed agent.

    Good luck to you.

  • Developer · Astoria, NY · Member since 2015 · 88 posts · 12 votes
    11y
    Originally posted by @Richard C.:
    Originally posted by @Ken T.:
    Originally posted by @Richard C.:
    Originally posted by @Ken T.:

    @Nikki Harmon 100 percent agreed, some of the comments here are a bit crazy tho @John Thedford!  

     Brokering without a license is illegal in every state. And even if they are investigated and let off with a warning to be sure they behave, they will now be on the real estate commissions radar. Nothing disinfects like sunlight.

    BTW, I have a house in CT. Owned in an LLC. Undoubtedly shows up on many of the lists wholesalers buy. And I know how to report brokering without a license in Connecticut as well as anywhere else.

    If one finds that his business model requires intentionally misleading people, perhaps one ought to find a new business model.

    what are you even saying? many wholesalers have a license, me included!  i agree bad apples should be reported but every single person that contacts you, ha!!!

  • Developer · Astoria, NY · Member since 2015 · 88 posts · 12 votes
    11y
    Originally posted by @John Thedford:
    Originally posted by @Ken T.:
    Originally posted by @Richard C.:
    Originally posted by @Ken T.:

    @Nikki Harmon 100 percent agreed, some of the comments here are a bit crazy tho @John Thedford!  

    That is why complaints are important, and why I have decided to file a formal complaint against any and every wholesaler who contacts me.  They will get a C&D, and then they will never get a license and pollute the legitimate industry.

     HUH??? a formal complaint against ANY wholesaler.  WOW! okay well it's not an illegal activity so have fun.  Did you not learn not to judge every book by its cover, unfortunately for you this makes you look bad.  you should always know what you're complaining about before you start complaining. 

    You state it is "not an illegal activity". It is an illegal activity if they fine you or issue a cease and desist. It IS an illegal activity if the actions are in violation of state law. Your or my opinion may not matter...but the state boards do! I checked on one "wholesaler" this morning.  Their name not only appears on the state website for unlicensed complaints, there is a finding of "legally sufficient".  There are other names that appear with "legally insufficient" as the finding. Apparently, on  one "wholesaler" i looked up this morning, there is prima facie  evidence that their activity IS illegal. If something is illegal, I don't know how anyone except those with disregard for the laws can defend the action.

    it's not illegal if you ARE LICENSED, my whole point!

    listen, i'm just saying that not everyone is a bad apple and you can't go around making generalizations about every person, it's bad character.  

  • Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
    11y
    Originally posted by @Ken T.:

    it's not illegal if you ARE LICENSED, my whole point!

    listen, i'm just saying that not everyone is a bad apple and you can't go around making generalizations about every person, it's bad character.  

     Not every person.  Every person engaged in questionable behavior.  The regulators can figure out whether that person falls within some exception, like holding a license.  That's not my job.

  • Jeff TumbarelloPro Member
    Real Estate Broker · Fort Myers, FL · Member since 2008 · 1k+ posts · 323 votes
    11y

    Since this is in Fl, lets see what the law is.

    http://www.leg.state.fl.us/Statutes/index.cfm?App_...

    475.01 Definitions.—

    (1) As used in this part:

    (a) “Broker” means a person who, for another, and for a compensation or valuable consideration directly or indirectly paid or promised, expressly or impliedly, or with an intent to collect or receive a compensation or valuable consideration therefor, appraises, auctions, sells, exchanges, buys, rents, or offers, attempts or agrees to appraise, auction, or negotiate the sale, exchange, purchase, or rental of business enterprises or business opportunities or any real property or any interest in or concerning the same, including mineral rights or leases, or who advertises or holds out to the public by any oral or printed solicitation or representation that she or he is engaged in the business of appraising, auctioning, buying, selling, exchanging, leasing, or renting business enterprises or business opportunities or real property of others or interests therein, including mineral rights, or who takes any part in the procuring of sellers, purchasers, lessors, or lessees of business enterprises or business opportunities or the real property of another, or leases, or interest therein, including mineral rights, or who directs or assists in the procuring of prospects or in the negotiation or closing of any transaction which does, or is calculated to, result in a sale, exchange, or leasing thereof, and who receives, expects, or is promised any compensation or valuable consideration, directly or indirectly therefor; and all persons who advertise rental property information or lists. Keyword real property of others Here is the Fl definition of real property

    (i) “Real property” or “real estate” means any interest or estate in land and any interest in business enterprises or business opportunities, including any assignment, leasehold, subleasehold, or mineral right; however, the term does not include any cemetery lot or right of burial in any cemetery; nor does the term include the renting of a mobile home lot or recreational vehicle lot in a mobile home park or travel park.

    Exemptions.—This part does not apply to:

    (2) Any individual, corporation, partnership, trust, joint venture, or other entity which sells, exchanges, or leases its own real property; however, this exemption shall not be available if and to the extent that an agent, employee, or independent contractor paid a commission or other compensation strictly on a transactional basis is employed to make sales, exchanges, or leases to or with customers in the ordinary course of an owner’s business of selling, exchanging, or leasing real property to the public.

    Right now the DBPR is about charge a local wholesaler with a few felonies, choose the words you us wisely.

    Hope this help

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Ken T.  your not a wholesaler your a licensed agent selling property.. 

    Unless your personally tying property up and flipping it .. As long as you disclose your an agent and you should really be coming into title before you flip.. other wise you get into the net listing argument that is frowned on in some markets..  but nothing says you cannot negotiate commission rates... we know there is downward pressure in hot retail markets on commission rates.. but on bombed out hard to sell wholesale type deals to charge 10 to 20% commiSH or just a flat dollar fee is common.. I used to charge up to 25% commissions on really hard to sell land in my day... And its very common in the low end assets IE the stuff that sells for 5 to 10k for brokers to have a flat fee of 2 to 3k on those deals.  I personally have only flipped larger subdivision type plays were I got all the entitlements and sold to medium size regional builders or DR Horton... But I put my cash into escrow to close and got it back the same day.. Lets these guys go around you if you can't actually close.  

    but in some states I see many wholesalers.. Texas especially I just funded on in Dallas that some-wholesaler got into contract right off the MLS my guy bought it and paid this guy a few grand.. RE broker got paid etc.. thats not common but I have no doubt that if I had not close on the deal this wholesaler would not have been able to come up with 200k that day :) Like to hear from Texas RE brokers what they think of wholesalers tying up MLS listed properties and flipping them and getting paid a fee right on the hud just like a broker... To me I would think its not legal even in Texas.

  • Chris ClothierBusiness Member
    Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
    11y
    Originally posted by @Jay Hinrichs:

    @Ken T.  your not a wholesaler your a licensed agent selling property.. 

    Unless your personally tying property up and flipping it .. As long as you disclose your an agent and you should really be coming into title before you flip.. other wise you get into the net listing argument that is frowned on in some markets..  but nothing says you cannot negotiate commission rates... we know there is downward pressure in hot retail markets on commission rates.. but on bombed out hard to sell wholesale type deals to charge 10 to 20% commiSH or just a flat dollar fee is common.. I used to charge up to 25% commissions on really hard to sell land in my day... And its very common in the low end assets IE the stuff that sells for 5 to 10k for brokers to have a flat fee of 2 to 3k on those deals.  I personally have only flipped larger subdivision type plays were I got all the entitlements and sold to medium size regional builders or DR Horton... But I put my cash into escrow to close and got it back the same day.. Lets these guys go around you if you can't actually close.  

    but in some states I see many wholesalers.. Texas especially I just funded on in Dallas that some-wholesaler got into contract right off the MLS my guy bought it and paid this guy a few grand.. RE broker got paid etc.. thats not common but I have no doubt that if I had not close on the deal this wholesaler would not have been able to come up with 200k that day :) Like to hear from Texas RE brokers what they think of wholesalers tying up MLS listed properties and flipping them and getting paid a fee right on the hud just like a broker... To me I would think its not legal even in Texas.

    Jay,

    Not sure how common it is in Dallas, but it does happen. We buy from wholesalers every week. The price they offer works for us so we buy and then find out they make ridiculous mark-up. Thinking about that aspect beyond a few seconds is wasted time because we were happy with the price. When we find out it was on the MLS and they made a ridiculous mark-up AND closed with our money....that makes doing business twice a tough pill to swallow.

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Account Closed  it is kind of comical really how one justifies the wholesaling by using these silly terms... and of course we know that many folks that are un represented in a transaction just don't know any better... 

    I just sold one in KC were the builder developer came in and wanted to make a very opened ended deal... he said he was paying cash when I wanted POF he said no he is using a line of credit.. when I then said I want a letter from your bank proving you have the funds available on your line of credit.. then it came back that it would have to go through the entire loan process... so his first shot across the bow was he was a cash buyer and by the time I was done with him he needed to get a loan.. I told him OK I will give you a 5 day look for 5k then you give me another 5k non refundable for a total of 10k and of course he wanted to ty the property up with some measly 1k EM... he did pony up the 5k but backed out at the 5 day free look... I sold it 2 days later to a true cash buyer that closed in 10 days for actually about 8k more than this guy offered.

    So it really depends on the knowledge of your seller and of course in the urban core and low value assets many times your dealing with very unsophisticated sellers that a wholesaler can twist up tie up and totally abuse  to the wholesalers benefit. 

    What I do like is the auction companies now getting very picky at first i was miffed a little because we are a for real buyer.. But now I go along with the program. and we have been getting some really great deals because we have the REAL EM we have REAL pof and are a true cash buyer this I think separates us from those using a HML letter as well.

    I send in a Cashiers check made out to the seller for the entire purchase price... this puts my deals on top I am fairly certain... some of the asset managers do a double take ( IE I have to check with my boss have not seen this)  check with boss my offer is accepted. 

    Of course I don't put the full price in escrow.. I just use it to make no mistake that are funds are liquid.

    And I see some sales requiring 10% EM  I would like to see that even increased more personally so we separate those that can close from those that are players.

  • Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    11y
    Originally posted by @Richard C.:
    Originally posted by @Account Closed:

    as far as wholesaling goes, he is doing things by the books. But instead of saying "inspection" he should have told you he is waiting for partners approval. 

     Not unless he has a business partnership registered with the state. Prospective customers are not partners.

    Not going to argue law with a lawyer, but in some states a general partnership does not need to be registered. Limited partnerships, well that should require registration everywhere. 

  • Garland, TX · Member since 2013 · 20 posts · 14 votes
    11y

    @Jay Hinrichs,

    Yes Jay you are correct even I have wholesaled deals directly from the MLS here in Dallas and sold it to other buyers. I even had a realtor represent me including letting my buyers in to look at the properties. I've also had to pass on some after an option period and most realtors contracts have "options" periods that will let a buyer cancel a contract within so many days for whatever reason.

    I see there are a lot of realtors who have left some very negative content about wholesaling which leads me to believe they don't know a lot about wholesaling or their realtor education has limited their ability to comprehend how wholesaling actually works.

    I wonder they just googled this site ? or Have they not read Brandon's book here on 

    Biggerpockets: http://get.biggerpockets.com/nomoneydown/:

    1.) Wholesaling

    Wholesaling is the process of finding killer real estate deals, putting them under contract, and then selling that contract to another buyer (usually an investor.) Many house flippers rely on wholesalers to bring them good deals, and pay well for those deals. When wholesaling, the wholesaler typically does not ever actually own the property. Instead, they are selling the contract for a fee. As such, the wholesaler does not need to have a lot of money to do this. However, while the real estate gurus like to promote wholesaling as the end-all answer to no-money down investing, it does take some money for marketing in order to keep the funnel filled with deals.

    To learn more about wholesaling, check out How to Start Wholesaling: Getting Past The Education and Into the Field

    Disclaimer: I'm not an attorney

    Granted if you signed a contract with an wholesaler who put and/or assigns on the contract or the contract didn't restrict assigning then legally he could assign the contract to another buyer. The only way another investor would have bought this property is that would have to come and inspect the property. The contingency about inspection period is the same as Realtor/Broker option period which would allow the buyer to walk away but with a small fee. I never paid over $100 for a option fee.

    Realtor/ Broker can't guarantee a sale just like an wholesaler can't guarantee a sale. If what a lot of these realtor/brokers have stated that this investor should be reported for operating as broker without a license then all activities a true real estate investor does can be construed as operating as a broker without a license. Like marketing to motivated sellers, putting out bandit signs, direct mail, advertising online / craigslists, etc... If I'm correct this seller contacted the investor to come and buy their house & they signed an agreement that both parties agreed to and after 7 days the contingency period ended with no sale then this allowed in Texas because if you have an "option" to buy then the buyer can sale his position in the contract unless it's spelled out in the contract that it can not which you would see in bank owned properties sold through the MLS.

    Remember if a complaint is filed then both parties (buyer and seller) are responsible because they agreed to terms so be careful with that. Although, I do believe that it will be a waste of your time.

    Realtors / Brokers no sellers get upset even when they can't sell a property and some of them just list the property on the mls and hope someone will come and see it unlike this investor who sent several potential buyers over in the 7 days which leads me to believe several things that could of been wrong: the investor's price was too high, location, amount for repairs, or layout of the house, etc... Same stuff a realtor / broker would tell you if they couldn't sell your house.

    As an investor you won't be able to buy / sale every house you put under contract and the reason you have to protect yourself in the transaction with contingencies or don't do the deal. It does pay to be honest but you are not obligated to volunteer all your trade secrets to sellers. If they ask then by all means be honest but it's not wise to educate your sellers on all your business details of how you conduct business.

    However, a lot of sellers can easily google and find out the ins/outs of investing just like this seller who is getting ready to become and investor herself.  So just be prepared to give an honest answer.

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