Wholesale to the 3rd, 4th, 5th Power!

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Wholesale to the 3rd, 4th, 5th Power!

Marty True
Rental Property Investor · Miami Beach, FL · Member since 2015 · 227 posts · 106 votes

As a "cash buyer" I am (or was) on many wholesalers' buyers lists. There is a fairly recent trend where real estate agents/brokers are getting on the "re-wholesale" bandwagon and basically adding on an additional $5k-$30k to the original wholesaler's contract+assignment price.

So a $100k property (which already includes the contracted wholesaler's fee) comes in on one list as $106k and then on another list as $114k and yet another list for $120k (or more). And because they are licensed real estate agents/brokers, they can legally advertise these off-market deals and basically put as much on top of the "connection" that they got it from, as they want.

This basically is making wholesalers worth a lot less when it comes to ranking where our deal flow comes from. If wholesalers are going to "get into bed" with so many other wholesalers and/or real estate agents and the property gets tagged with 2, 3 or 4 levels of "fees" then why waste time with wholesalers as a viable source of "good deals"?

I literally got a deal this morning, from a wholesaler, for $90k on a house. Then about 3 hours later, I got the same property emailed to me, by a real estate broker (that also wholesales) for $105k.

I'm sorry but as a licensed real estate agent/broker, unless you are somehow adding value to the deal, how are you putting a $15k fee on a deal that you will do absolutely nothing for??

I believe this is contributing heavily to why it is so hard to find good or great deals here in Florida and specifically in South Florida.

I'd love to hear everyone's thoughts and opinions on this...

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James Green
Wholesaler · Waldorf, MD · Member since 2015 · 459 posts · 245 votes
9y

@Marty True, I agree with @Pratik P. just simply ask if they are direct to the seller. I myself don't do daisy chains because as you've discovered you will find people daisy chaining properties and adding absolutely ridiculous fees on top of the original price, which no longer makes the property a wholesale deal. There are times that I do ask for a "finders/bird dog fee" if a buyer of mine buys a property that I've sent to them that I don't have under contract. I always get permission from the original wholesaler, this way it keeps the original price of the property.

@John Thedford you read Marty's post & could only focus in on those "unlicensed broker's" that steal all the equity, when it was plainly stated that it was the LICENSED BROKERS that were marking up deals they don't have under contract. You may be able to post properties to over 800 websites, but I can post properties to over 800 buyers that actually chose to opt-in to my buyer's list via my one & only lonely website. Plus if I wanted to I could post my deals on other sites such as Craigslist, Facebook, Zillow, etc....

I know you have a beef with wholesalers in FL & possibly wholesalers in general, but all of us aren't out there ripping off & lying to sellers.

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

    The unlicensed brokers trying to piggy back additional fees are breaking the law (no surprise there) and definitely don't add value. Agents can legally advertise the properties and probably have the ability to give the property 100x the exposure than most unlicensed brokers. Our company's listings propagate out to over 800 websites. What unlicensed broker can match that or even come close? As to putting $15K on a deal for doing nothing--that is what most unlicensed brokers do. From what I see, most unlicensed brokers strip thousands of equity from unknowing sellers that never have a clue. I saw some whiner complain about agents being a "cartel" and having a monopoly. Of course, anyone can join the "cartel" if they care to get the required education, etc. 

    1Reply
  • Marty True
    OP
    Rental Property Investor · Miami Beach, FL · Member since 2015 · 227 posts · 106 votes
    9y

    Thanks @John Thedford while I appreciate your devotion to pointing out how wholesaling (in the trending structure) is illegal and everyone should get a real estate license, I'm not sure your reply addressed my point at all - in that agents/brokers (the licensed ones) are adding fees on top of fees, in a "daisy chain" sort of way, that essentially pushes the "wholesale" deals to near ARV, leaving no "meat on the bone" for those of us that actually do add value through improvements, etc.

    1Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    9y

    If you are buying, rehabbing and flipping, you are way ahead of the pack. People that market consistently often find good deals. You could always get licensed and pay yourself a commission to get some of the fees back. The deals you refer to: are they locked up by agents? Are you required to submit offers through them or?

    0Reply
  • Marty True
    OP
    Rental Property Investor · Miami Beach, FL · Member since 2015 · 227 posts · 106 votes
    9y

    No the deals I'm referring to are not locked up by agents, they are locked up by wholesalers. The agents are getting on the wholesalers' "cash buyers lists" so that they can add an additional $5k-$20k to it and resend to their own cash buyers list. So the lists, as I mentioned in my OP, are daisy chained with fees on top of fees on top of fees and there's no way of knowing who the original wholesaler is that actually locked up the deal.

    And no, I am not required to submit offers through them, but sometimes I don't know who the person is that actually has it under contract so if I want the property, I have to offer through the agent.

    0Reply
  • Pratik P.
    Flipper/Rehabber · Sacramento, CA · Member since 2016 · 807 posts · 815 votes
    9y

    @John Thedford

    I always laugh at some of the posts you make! You do realize that the best way to add value to a deal is to find the deal itself right?? How exactly do you piggy back a deal that YOU found? And you say they do "nothing". Do you understand that marketing requires money with no guarantee of a deal?

    @Marty True To actually answer your question:

    As a wholesaler, I don't do daisy chains with my deals. Like you've experienced, it makes absolutely no sense. The only way I would work with another wholesaler is to co-wholesale the whole deal and agree on a price which we'll sell it for. So every buyer will see it for the same price.

    I would suggest that you always ask the person bringing you the deal if they themselves have it under contract. That will clear up any doubt if you're dealing with the right person. 

    3Reply
  • Marty True
    OP
    Rental Property Investor · Miami Beach, FL · Member since 2015 · 227 posts · 106 votes
    9y

    @Pratik P. thanks for your reply and that's pretty much what I have done at this point. I have unsubscribed from all the lists where I know the agents/companies were simply re-marketing other people's deals and adding unwarranted fees. I am only accepting deals from a couple wholesalers that I know are the actual contract holder.

    0Reply
  • James Green
    Wholesaler · Waldorf, MD · Member since 2015 · 459 posts · 245 votes
    9y

    @Marty True, I agree with @Pratik P. just simply ask if they are direct to the seller. I myself don't do daisy chains because as you've discovered you will find people daisy chaining properties and adding absolutely ridiculous fees on top of the original price, which no longer makes the property a wholesale deal. There are times that I do ask for a "finders/bird dog fee" if a buyer of mine buys a property that I've sent to them that I don't have under contract. I always get permission from the original wholesaler, this way it keeps the original price of the property.

    @John Thedford you read Marty's post & could only focus in on those "unlicensed broker's" that steal all the equity, when it was plainly stated that it was the LICENSED BROKERS that were marking up deals they don't have under contract. You may be able to post properties to over 800 websites, but I can post properties to over 800 buyers that actually chose to opt-in to my buyer's list via my one & only lonely website. Plus if I wanted to I could post my deals on other sites such as Craigslist, Facebook, Zillow, etc....

    I know you have a beef with wholesalers in FL & possibly wholesalers in general, but all of us aren't out there ripping off & lying to sellers.

    4Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    9y

    @Pratik P.

    You might note that my previous post stated that people that market consistently find good deals. Marketing is a cost of doing business that same as having an office, borrowing money, etc and there is never a guarantee of success. 

    @James Green
    If agents are marketing the properties legally why not? Personally I am not in favor of that. I guess the lure of that is huge fees as compared to what could be made brokering a listed property. I talked to some people today and there are probably more laws coming down the pipeline to deal with agents that want to play the assignment game. As far as posting deals on other sites that may be legal in your state, but doing so in Florida may result in a finding of brokering without a license unless you are a licensee. It appears more states are dealing with the problem of people acting as brokers without a license. I am watching a few cases now..and some are BP members. 

    0Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    9y

    @James Green

    Getting a fee as you describe (someone buys a deal that you don't hold the contract on but you get a fee) is not legal in Florida. This is why so many people choose to act as unlicensed brokers. They can break most of the rules and never be held accountable. 

    0Reply
  • Marty True
    OP
    Rental Property Investor · Miami Beach, FL · Member since 2015 · 227 posts · 106 votes
    9y

    @John Thedford you mentioned that your company's listings propagates out to over 800 websites... which ones because I've never gotten a single deal lead from your listings. I'm in aggressive acquisition mode so if there's 800 websites that are relevant to great investor deals in South Florida that I am missing, PLEASE point me to the light!!

    0Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    9y

    NextHome franchise listings propagate out to over 800 websites. These include the usual ones such as zillow, trulia, etc. My personal focus is on personal acquisitions for long term buy and holds. Between doing HML, managing rentals, and another business I stay busy without chasing listings or sales. You may have seen me post often about being a buy and hold investor. That is the key to long term wealth building IMO. I have some flipper friends that stay VERY busy doing them and am considering changing gears somewhat. One local has at least a dozen in process at a time and I am sure is making at least 500K a year. Seems like every time we talk he is buying another one! So, he is probably making a ton of money BUT...if he quits, the income stops. So, I guess I did it backwards in that respect. I have long term stable income but without a lot of work involved. I am now seriously looking at NNN commercial deals as my potential next step. My other business is internet based where I am not tied down and I am one of the top guys in the business in that industry.

    As to the 800 sites, some of that info may be available on the NextHome website. I don't keep up with that but do know our listings get extreme exposure. I believe you will be better off with your own marketing if you are flipping. The guy I mentioned above buys a LOT of deals....and I am sure there are lots of investors that would be jealous if they knew his results. BTW--he doesn't do ANY mailout marketing. 

    0Reply
  • Andrew Johnson
    Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
    9y
    Marty True I don't know much about the world of South Florida but wouldn't the pragmatic approach to be in everyone's list? By definition the lowest price is the closest (discernible) way to the deal. If enough people adopted the strategy it would take the value out of the layered mark-ups. Then again the whole premise of entering into a purchase contract with no intention of actually buying the property seems wrong on its face. But, hey, one guy's opinion.
    0Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    9y

    BTW @Marty True

    My buddy that buys all these houses just put one under contract that was in the MLS. He states the agent under priced it by thousands of dollars. Not surprising--and I see agents over price properties all the time as well. Not sure which is worse:)

    0Reply
  • Marty True
    OP
    Rental Property Investor · Miami Beach, FL · Member since 2015 · 227 posts · 106 votes
    9y

    @Andrew Johnson thanks for the input - I understand the logic of being on every list and then going with the one that is lowest but that simply isn't the most efficient use of my time. It would take more time than I can put into cross-referencing all the lists to see where the lower one lives.

    @John Thedford don't get me started on agents and their insanely inaccurate listing info. In addition to your unlicensed brokers crusade, could you start a campaign for the "unlicensed assistants" that are putting these listings in the MLS with a gross amount of errors?

    I scheduled a viewing of a townhouse this past weekend only to find that the homeowner had been blasted with thousands of offers because the listing agent made a $200k error in the asking price. What a waste of my time and my realtor's time (on a beautiful Miami Beach Saturday).

    1Reply
  • Adam Schooley
    Real Estate Agent · Fort Lauderdale, FL · Member since 2015 · 175 posts · 79 votes
    9y

    @Marty True I agree with you.  I'm on several wholesalers lists also and see the same properties over and over again.  Sometimes they're priced the same sometimes they're priced higher.  I do see on several wholesalers emails that they state for the agents to add their commission to the price.  I'm assuming they have very slim margins and thats why they do that.  If an agent has a cash buyer and the price still works for their cash buyer with the commission added in, I would think it's a win win.  It always comes down to what the buyer is willing to pay and if the numbers work.  I'm a buy and hold investor myself and I always want the best deal possible.  If a wholesaler or an agent brought me a deal and added $5-$10k on the price and it fit my criteria I would buy the property regardless.  Would I want the deal for $5-$10k less then what I paid? Of course I would but I might have never known the deal existed in the first place without the wholesaler or agent sending it my way.  

    2Reply
  • Marty True
    OP
    Rental Property Investor · Miami Beach, FL · Member since 2015 · 227 posts · 106 votes
    9y

    @Adam Schooley thanks for the perspective. I agree with you that if the numbers ultimately work, then I am okay with the deal having a couple different fees on it however my recent experience, which is the reason for this post, is that these wholesale deals aren't getting to me and other cash buyers as actual "wholesale" by the time the multiple layer of fees are placed on them.

    In regards to your observance of "agents add your commission" and "they have very slim margins" - well, I have point out here that if (we) let the "they have very slim margins" excuse be okay, then the wholesalers are going to continue to take the lowest hanging fruit because they know that they can just feed it to their massive list of [agents] that will move the properties for them. This is just enabling the wrong way to properly and legally wholesale real estate.

    If wholesalers are limited to selling to their list of actual cash buyers, they are going to work a little harder to get the deep discounted off-market deals and then they can still make a nice fee while being able to move the asset into an investor with some meat left on the bone.

    I don't want to beat this to death but this has been my experience with using wholesalers as a source for deal flow and I mainly wanted to see if others were experiencing the same.

    0Reply
  • James Green
    Wholesaler · Waldorf, MD · Member since 2015 · 459 posts · 245 votes
    9y

    @John Thedford, when I post I don't put the actual address. I may put a neighborhood (if its a popular well known one), a block # (xxx block of main st). If a buyer is interested they have to talk with me and produce a POF that I can verify. When I ask for the POF, that weeds out about 50% of my "buyers". No POF, no address.

    0Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    9y

    @James Green

    That is how most unlicensed brokers operate because they are skirting laws. Our listings that propagate out of 800+ websites have an address. There are thousands of agents that can sell any listing legally. Buyers may be cash buyers or financed. The flipper I referred to above writes cash offers but then utilizes hard money on many deals if needed. And as I stated above, you mention getting paid even if you don't "own" the contract which is illegal in FL plus I am sure many other states.  This is why most unlicensed brokers have to operate as they do. There is no oversight of these unlicensed operators. It doesn't matter what you refer to yourself as you are brokering real estate.

    @Marty True

    There are many people claiming 30%-50% discounts that really have little if any profit at all. Their representations are false either intentionally or unintentionally. I chuckle at the disclaimers on their websites concerning their representations. I know of one local company that is licensed and blasts out lots of deals. I regularly see them lower prices when the properties don't sell. 

    0Reply
  • Carlos Coppin Jr
    Wholesaler · Plantation, FL · Member since 2014 · 194 posts · 121 votes
    9y

    LOL I just love to see @John Thedford get all charged up about wholesalers.  I get a good laugh every time.

    1Reply
  • Clifford Roe
    Seminole, FL · Member since 2016 · 3 posts · 5 votes
    9y

    Each deal should stand on its own regardless of who is selling it. If a mark-up doesn't destroy the deal the question of what you could have gotten it for is mute. I'm licensed and create wholesale deals. Are you not going to buy from me because I'm the one that got the deal? I am required by law to disclose that I'm licensed. In my experience most of the unlicensed wholesalers have no clue what they are doing or what a property is worth; the same can be said for many licensed agents. I buy and flip, do 50/50 and make hard money loans. Each deal is based on its profit potential, not where it came from. 

    4Reply
  • Ralph C.
    Real Estate investor professional · Suwanee, GA · Member since 2016 · 233 posts · 81 votes
    9y
    Originally posted by @Clifford Roe:

    Each deal should stand on its own regardless of who is selling it. If a mark-up doesn't destroy the deal the question of what you could have gotten it for is mute. I'm licensed and create wholesale deals. Are you not going to buy from me because I'm the one that got the deal? I am required by law to disclose that I'm licensed. In my experience most of the unlicensed wholesalers have no clue what they are doing or what a property is worth; the same can be said for many licensed agents. I buy and flip, do 50/50 and make hard money loans. Each deal is based on its profit potential, not where it came from. 

    I concur. 

    0Reply
  • David Walls
    Investor · Chicago, IL · Member since 2014 · 81 posts · 35 votes
    9y

    I agree with @Pratik P. I don't daisy chain my deals. @Marty True I would say ask the person who brought you the deal to see a copy of the original purchase contract and you'd be able to see who has it under contract. 

    2Reply
  • Marty True
    OP
    Rental Property Investor · Miami Beach, FL · Member since 2015 · 227 posts · 106 votes
    9y

    @Clifford Roe the issue is not where the deal is coming from, the issue is that because of the daisy chaining from the original contract owner, through all the layers of agents' fees that get added - it is in fact, no longer a deal at all by the time it reaches us buyers.

    To elaborate the "daisy chain" affect - the agents are not just adding their fee onto the original contract holder's price. They are adding it on top of another "re-wholesaler" so as I previously mentioned, say the original wholesaler puts it out for $100k; then an agent/wholesaler company tags it with a $10k fee; then another wholesaler gets that company's "list" and they put another $10k on top of that... so now the $100k deal is coming to me for $120k with an ARV of $150k and it needs $15-20k in rehab... not really a "wholesale" deal at this point.

    Again, I could care less how many people are trying to get free money off a deal because they are licensed (ok maybe I care a little bit) - if the deal has some "meat on the bone" for us end investor/buyers to make money on (after rehab) then great! Everyone wins. 

    So as an agent that puts out a list of 20 wholesale properties (other people's deals), twice a week - how about putting $1k or $2k on the deal since you are putting out so many properties? Why try and put $5k-$15k on 40 properties a week, that you will never even touch? This is what kills these deals for us end buyers!

    I would just like to see wholesaling done properly and ethically so that it can be a more viable source for deal flow. These gurus are obviously becoming so believable that even the RE agents are jumping in the deep end...

    0Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    9y

    @Marty True

    Market and find your deals. Make offers and create deals. Agents that are adding on fees and blasting out "deals" probably don't have a single listing. Most unlicensed brokers don't know what they are doing. I just saw a house worth 400K put under contract by a fraud with $20 EMD and at almost 600K. Of course they walked LOL! I have turned in a dozen of these people and will continue to. The state investigator stated the "VICTIMS are often the elderly and people with a poor grasp of the english language".

    1Reply
  • Ralph C.
    Real Estate investor professional · Suwanee, GA · Member since 2016 · 233 posts · 81 votes
    9y
    Originally posted by @Marty True:

    @Clifford Roe the issue is not where the deal is coming from, the issue is that because of the daisy chaining from the original contract owner, through all the layers of agents' fees that get added - it is in fact, no longer a deal at all by the time it reaches us buyers.

    To elaborate the "daisy chain" affect - the agents are not just adding their fee onto the original contract holder's price. They are adding it on top of another "re-wholesaler" so as I previously mentioned, say the original wholesaler puts it out for $100k; then an agent/wholesaler company tags it with a $10k fee; then another wholesaler gets that company's "list" and they put another $10k on top of that... so now the $100k deal is coming to me for $120k with an ARV of $150k and it needs $15-20k in rehab... not really a "wholesale" deal at this point.

    Again, I could care less how many people are trying to get free money off a deal because they are licensed (ok maybe I care a little bit) - if the deal has some "meat on the bone" for us end investor/buyers to make money on (after rehab) then great! Everyone wins. 

    So as an agent that puts out a list of 20 wholesale properties (other people's deals), twice a week - how about putting $1k or $2k on the deal since you are putting out so many properties? Why try and put $5k-$15k on 40 properties a week, that you will never even touch? This is what kills these deals for us end buyers!

    I would just like to see wholesaling done properly and ethically so that it can be a more viable source for deal flow. These gurus are obviously becoming so believable that even the RE agents are jumping in the deep end...

     You ever tried negotiating a deal down from the wholesaler?

    Deals are negotiable and prices are not set in stone, from what I recall.

    I've received deals directly from wholesalers  that were really assigning it and I've countered with lower price and still get the deal done. 

    You're the cash buyer so you have a right to ask for original contract holder info cause either way you will find out at closing.

    Wether or not you actually get the deal and if they disclose it to you is another question. 

    1Reply
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