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

    @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".

     I agree with John.

    Marty, if it's such an issue with all these in betweeners tacking  fees, why don't you try marketing and finding your own deals...

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

    @John Thedford & @Ralph C. My company does do marketing and we do find other deals. This thread is not about other forms of getting deals, this thread is specifically about the wholesale daisy chaining issue that is happening.

    I never said that without wholesale deals, I am dead in the water as an investor - I am simply contributing to the power of BiggerPockets for this specific issue.

    0Reply
  • Lee S.
    Northern, CA · Member since 2014 · 674 posts · 444 votes
    9y

    It's a new guru tactic for wholesalers to send the properties out to agents and tell them to tack on their commission if they bring a buyer.  I've tried contacting every wholesaler I can in my area, all seem to talk a big game but none has even presented me with a single property yet.  I'm licensed and doing my own marketing for flips and holds etc.

    0Reply
  • Mindy JensenPro Member
    BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
    9y

    I agree with @Andrew Johnson that being on everyone's list would help you find the original or closest to the original person who has it under contract.

    As for the daisy chain, I think it would be far easier to just take a property, slap a markup on it, and pass it along than find your own deals. I don't think the original wholesaler intends for it to be daisy chained. I've had several wholesalers contact me to ask me to remove a listing in the Marketplace because they did not give permission for it to be daisy chained or marketed by that particular person.

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  • Jay Harding
    Wholesaler · Portland, OR · Member since 2016 · 42 posts · 28 votes
    9y

    I got news for you Mr @John Thedford  when you say this you are unwise in making such a "BLANKET" statement: "The unlicensed brokers trying to piggy back additional fees are breaking the law (no surprise there) and definitely don't add value."  And quite honestly I find it offensive.  

    In Oregon where I wholesale the only way I would be breaking the law was if I dishonestly represented myself as a licensed real estate broker/professional and I can assure you that not only do I not do this, I make all of my sellers sign a document stating that I am only representing myself as a REI and that I have never been a licensed realtor in this state or any other state.

    Cheers, 

    0Reply
  • Chinmay J.
    Investor · Northern, VA · Member since 2016 · 1k+ posts · 904 votes
    9y
    Originally posted by @Marty True:

    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...

    Hell with the wholesalers is what I say. Directly work with the sellers, or maybe only deal with wholesellers who have direct contract with the sellers and are not 4-5 down in the daisy chain.

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

    @Lee S. thanks for your input here! I completely assumed that this was a guru method but now that you've confirmed that they are in fact, using this exact method in their "teachings" is validation.

    @Mindy Jensen thanks for jumping in here! Being on everyone's list is not necessarily going to correct this because how can you know who "everyone" is? I get what you and @Andrew Johnson are saying and what I am trying to do is to get off the lists of the "wholesale companies" who are basically agents doubling as re-wholesalers. Then I am trying to get on as many director wholesaler lists as I can so that I am (hopefully) getting mostly direct wholesale deals.

    The concept of "co-wholesaling" is also very okay but it has to be done properly and ethically... wholesalers shouldn't just add fees on top of fees - the assignment fee that is set for the property should be split between the contract holding wholesaler and the (level 1) co-wholesaler that actually brings a buyer to the deal.

    Basically this whole issue is about 1 thing... GREED!

    1Reply
  • Matthew Olszak
    Real Estate Broker · Chicago, IL · Member since 2015 · 1k+ posts · 2k+ votes
    9y

    @Marty True I had the exact same thing you experienced happen to me the other day. I received an email early in the morning about a property @ $55k, then in the evening received an email from someone licensed for the same property with a re-written sales sheet with their logo on it for $10k more. That email also had a note for me to add in whatever fee I charge to bring my buyer.

    Next time you find a property you are interested in and this happens, spin the situation back on them and send an email blast out to all of the wholesalers who's lists you are a part of asking for who can get you the best deal on this property and see who comes in lowest. The real wholesaler who has it under contract might not even have originally marketed it you and this could get them to reach out.

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

    @Matthew Olszak Ha! I love this!! See this is why I love posting in BP, not just to vent but to get perspectives and other creative solutions to our issues... Bravo Matthew! I'm totally going to try this!

    0Reply
  • Lee S.
    Northern, CA · Member since 2014 · 674 posts · 444 votes
    9y

    In the end however what is "right" is subjective, disregarding legalities of course.  This is how capitalism works, supply and demand.

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

    @Jay Harding

    Are you assigning or flipping? 

    0Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    9y

    Daisy chains in wholesaling is not new and us prevalent everywhere, unfortunately. Two things here, you want to get rid of the problem of the daisy chain guys who don't actually have it under contract (licensed or otherwise) and that is easy. Every time you see one that you determine is a daisy chain, block them from your email. Work only with the principles and those with the actual assignable contracts.

    Secondly you stated you got a deal from the original and then subsequent 2 other daisy chain  wholesalers therefore you know the original one with the contract. Although frustrating, simply delete the others and deal with the original one. 

    Ultimately there is no way to stop this but you can use process of elimination to cut down on getting the ones from all the morons (as I call them).

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Jay Harding  you should recheck the laws in Oregon.. they just changed.. it is now required to have a RE license to deal in equitable interest in real property.. IE advertising contracts for sale.

    This is brand new and I saw it on my CE this January...

    Of course I am sure this new law with be violated by most.. but its now out there.

    Only way to wholesale in Oregon legally these days is to take title then resell.. you cannot market a property you do not own..

    all it takes is one call to the state and you will get a cease and desist if this is indeed how you resell your deals..

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

    I turn them in as well. I'm not out to cheat people. I tell them what I can list and sell a property for and I tell them what I will pay them if they want to close in a week. When people daisy chain I ask them to remove my email from their distribution list. 

    1Reply
  • Jay Harding
    Wholesaler · Portland, OR · Member since 2016 · 42 posts · 28 votes
    9y

    @John Thedford only ASSIGNING. 

    @Jay Hinrichs Thank you for this info, I'll call my broker tomorrow. If it's illegal I'll be out of the game for sure! 

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Jay Harding  If your not an agent why would you call your broker.. ???  since you made it clear your not an agent or a broker.. you would NOT have a broker.. what does that mean.

    you need to call the real estate agents legal hot line.. your broker who ever that may be or what they may be may not be up to speed.. this just came up when I took my CE end of Jan.

    you can assign.. but you can't advertise.. like you did the deal you sent me a few months back that was clearly acting as an agent even though your not one.. as you stated above.

    can't have it both ways..

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  • Jay Harding
    Wholesaler · Portland, OR · Member since 2016 · 42 posts · 28 votes
    9y

    @Jay Hinrichs I have a friend who is a licensed agent in Oregon, is it against the law if I call him and verify what you said since I don't know you from Adam? He's probably been selling property here as long as you have and even if he hasn't done his CE yet he will certainly look into it for me. 

    What does the deal I sent you 10 months ago have to do with anything since you admitted it just changed? It was not illegal at the time obviously because you were interested in looking at the deal, DUH! 

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Jay Harding  well Jay you make post like your some major player in the market when in fact your a newbie who has done a deal or two . so why would any one listen to you and or take your advice

    that's the point of talking about the very first deal you ever got and you asked me to buy it.. but then you would not give the address and made up some cockamani story about how we would have to meet for drinks but you did not have any money to buy said drinks and that I would have to buy my own.. Totally laughable you as some expert to opine on these threads..  LOL..

    And since I have been a licensed broker for 4 decades in 3 states.. I do know a little about this stuff and one thing I can say for sure. is us agents Do NOT know all the rules. .unless your broker buddy just took the exact same CE class I did in January he or she probably does not know either

    ERGO I suggested you call the HOT LINE..

    I know you guys have to start some where but its comical that you all make post like your some player in the market place.

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

    @Jay Harding

    I asked because of the new reg referred to by Jay. Call yourself anything you want, regulation change or not, you are brokering real estate without a license. Word play doesn't change facts.

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

    @Clifford Roe

    When I recently talked to the state the investigators words were "the VICTIMS are the usually the elderly or people with a poor grasp of the english language". Educating the public is a good step towards stopping these frauds. I recently heard from one that I turned in. They called me stating that "wholesaling is legal" and then went on to state they have a JV AGREEMENT to market the property. They took poor advice promoting illegal activities:) We have a REIA in our area that is doing the same thing. I know a few people that dropped out of the group (some are agents, one is a broker) because of the shenanigans being promoted by these frauds. I turned in one guy that has properties all over his web page stating to call them for showing appointments. How bad does it get with these people? Apparently VERY bad when they listen to the guru garbage. That person is now under investigation and has hired an attorney to defend them. They are a BP member as well.

    1Reply
  • Jay Harding
    Wholesaler · Portland, OR · Member since 2016 · 42 posts · 28 votes
    9y

    @John Thedford I went back and re-read your initial post that I found offensive where I called you unwise for lumping all brokers together & can easily admit that you were not necessarily referring to all wholesalers but rather wholesalers representing themselves as brokers, please forgive me for the misinterpretation? It should be known that I have never represented myself as a broker and as stated have always made it very clear to my sellers that I was not a licensed agent/broker, rather only an REI/Wholesaler.

    All that said what I have done in the past may not be legal anymore which will change my game plan for sure. I have lot's of research work on my plate before I do anything else in the REI race.

    0Reply
  • Jay Harding
    Wholesaler · Portland, OR · Member since 2016 · 42 posts · 28 votes
    9y

    @Jay Hinrichs If you read into my post that I was making myself out to be as you state "SOME MAJOR PLAYER" that's completely on you Jay, you should re-read the post, I did not like him lumping all brokers/wholesalers into the same lump., never did I even in the slightest way suggest I was an REI guru!

    In fact most of my responses in the last year or so on BP I make it clear I am new to the game. That said I did not get in the business blindly, rather a very successful REI guy I know has mentored me and even encouraged me for well over a year before I ever started and I did a lot of research before doing so including trying to make sure that it was legal to wholesale property.

    Secondly, if I did not give you the address of the property as you say then I did not have the property under contract yet, other wise I would have certainly shared it with you like I did 30 or so other investors in PDX including the firm who actually bought the contract via the assignment route. I must have been seeking your professional opinion on the deal is all I can figure I don't actually remember and to be honest like I said it's so irrelevant now and with this issue so who cares? 

    Thirdly, I thanked you originally for your insight to me on this thread about the legality of marketing property that I don't actually own and that I would call my broker. But instead of you looking at my honest gratitude you arrogantly tried to flip it on me like who am I not to trust you by calling someone I do know personally and trust, certainly you have/would do the same thing in similar situations, no? Perhaps I used the wrong terminology calling him a broker, is there a difference between a licensed real estate agent & a licensed real estate broker? 

    Lastly, never have I said you did not know what you were talking about that would be utterly foolish and disrespectful on my part. Why? Because I don't know you from Adam and I have no reason to not believe what you write, but again it would be unwise of me to not verify what you say for the very same reason which is I don't know you, right? Consider this, you yourself in this very thread have stated there are bad licensed agents in the business just like to their are bad people in every line of business. 

    You can have the last word on this if you so desire because I have more important work to do, namely figure out if I can still be in this game and if so what is the best, smartest way to do it and with what partners. 

    Honestly I wish you nothing but much more future success Jay.  

    3Reply
  • James Green
    Wholesaler · Waldorf, MD · Member since 2015 · 459 posts · 245 votes
    9y

    @Marty True, @Ralph C. has a great suggestion. If you come across a property in your inbox that you are slightly interested in, see if you can negotiate the price. Almost always a multilayered daisy-chain won't & can't negotiate the offer price, since that would mean eating into their own tacked on fee.

    If the wholesaler added on say 3K, what's the chance that they are going to be willing to negotiate? They aren't capable of getting a price reduction from the original property owners.

    Actually I'm in a similar situation right now. I have a so-called "buyer" that negotiated with us on a property. We wanted to get the deal done & they responded to us, so we came to an agreement. At the same time my partner was able to get a price reduction from the owner, who is an investor not some elderly lady that can barely speak English. I just found out that the "buyer" is actually a wholesaler. He negotiated us down, so that he could resell it. I only found out b/c I got an email from them but it was addressed to another person. The email was my "buyer" telling their buyer that they have this good deal (they marked it up $10K) and need to sell it & wanted to know if they were interested. I received the email because my "buyer" did a reply to a REI Meetup email post. They thought they were sending the email to one person, but it went to the whole meetup group, which consists of several thousand emails. I just laughed. They are due to close next week so I'm just waiting to see what happens. Also my assignment contract is non-assignable so they would have to do a double close. If they don't close they are out 3K EMD & we lose 1K EMD. But I am hustling for another buyer in the meantime.

    But my point is, I was able to reduce the offer price because we are direct to the seller.

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

    @James Green

    Guess you learned to make sure your "buyers" are REAL BUYERS LOL> What do you tell your sellers? That you are buyers? I recall a recent thread where one unlicensed broker was concerned about getting scammed by another unlicensed broker. Thanks for the laugh:)

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

    @John Thedford, LOL, they know we are wholesalers. They know we are assigning the contract to an end buyer. 

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