real estate wholesaling under attack
oak lawn illinois · Member since 2022 · 16 posts · 21 votes
real estate wholesaling under attack
Most Popular Reply
Investor · Austin TX · Member since 2016 · 1k+ posts · 2k+ votes
4y@Rudy Ferrara This isnt new. This was passed in Illinois at least 3 years ago but it might be closer to 5. You can still double close and you can still wholetail. This is what happens when you listen to youtube gurus that are just trying to get link clicks and not actually educate people with accurate information. There is a difference between wholesaling and assignments. Wholesaling is a strategy just like fix and flip or buy and hold. Assignments are the method, just like hiring contractors or doing the work yourself on a flip or getting a property manager or managing yourself on a rental. These are all methods that accomplish the same objective. Wholesaling is NOT illegal ANYWHERE. Assignments are the method that has come under the most scrutiny and been regulated in a lot of places. There are other methods of wholesaling. You can either complain about changes that you have no control over (unless you want to run for some kind of political office in your state) or you can adapt, adjust and keep making money. I know which one I would choose...
I am in an incredibly hot market, I recognize the value of being able to close on a property and then resell it at a higher price. I bought a house last year from a seller that was being transferred for work and needed a substantial leaseback. By the time he had moved out (after 60 days) the value of the property increased. I put the house on the market and sold it for 100k more than what I paid for it. There is no way I couldve gotten that same number off market. I found a lender with a loan product to help wholesalers buy and resell their deals. Game changer. So maybe do a little bit more research before you go all chicken little ‘the sky is falling’
96 Replies
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Owen Dashner:
@Jesse LeBlanc there are several states that have included language in legislation that specifically outlaw marketing a property before owning it (i.e. you cannot double close via transactional funding because you wouldn't have an end buyer without having marketed the property before owning it).
Title companies will be taking direction on this stuff from the underwriters, who will be taking direction from the real estate commission in the respective state. Gonna be tough to get around this in many states.
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Owen Dashner:
@Jesse LeBlanc there are several states that have included language in legislation that specifically outlaw marketing a property before owning it (i.e. you cannot double close via transactional funding because you wouldn't have an end buyer without having marketed the property before owning it).
Title companies will be taking direction on this stuff from the underwriters, who will be taking direction from the real estate commission in the respective state. Gonna be tough to get around this in many states.
Oregon this is true.. One of my clients here was working on a deal they had in contract and put a for sale sign in the yard before they closed.
the neighbor wanted it got peeved and filed complaint with the DRE and my client got wrung up cost him about 10k and a cease and desist. so now we close everything first before we put up a fore sale sign. But you know reality is this will never really stop.. just like speeding or other traffic violations.. UNLESS the states really come down hard on those who violate the laws.
- Investor · Atlanta, GA · Member since 2016 · 627 posts · 374 votes4y
Quote from @Owen Dashner:
@Jesse LeBlanc there are several states that have included language in legislation that specifically outlaw marketing a property before owning it (i.e. you cannot double close via transactional funding because you wouldn't have an end buyer without having marketed the property before owning it).
Title companies will be taking direction on this stuff from the underwriters, who will be taking direction from the real estate commission in the respective state. Gonna be tough to get around this in many states.
Incorrect. You can talk to a seller who is interested in selling their property. You can then talk with your buyer and show them a property that you don’t have under contract yet. They give you a price they would buy it for. You then go to seller and get it under contract Lower than your buyer said they’d buy it for.
Now you double close.
DONE. - China, ME · Member since 2014 · 3k+ posts · 4k+ votes4y
Unlicensed wholesalers just suck. They suck equity out of a property that rightly belongs to the seller.
By design, they pay well below market value, meaning that the seller gets screwed. And before anybody wants to start with the "valuable service" garbage, there is absolutely NOTHING that a wholesaler can do that a Realtor can't - and that includes selling to an investor who will waive contingencies and do a 5-day cash closing.
The main differences between Realtors and wholesalers are:
1. The Realtor will expose the property to hundreds of thousands of buyers with a proper listing. How many buyers does a wholesaler have on their list? 10? 20? Let's be generous and say it's 100. That means the Realtor is thousands of times more likely to find the party who will pay the highest price.
The wholesaler is marketing only to those who need a good (below market value) deal. The Realtor will bring the buyer who is looking for a fixer-upper to call their own. You already know which will pay the seller more money.
2. Realtors are heavily regulated and are fiduciaries to their client. That means that the Realtor is required by law to put the client's interests first, not their own.
A legal or ethical violation by a Realtor can result in fines, license suspension or license revocation - not to mention lawsuits and termination by their broker. Unlicensed wholesalers are not subject to those same regulations, so there is no protection for the homeowner.
In fact, the need for that kind of protection is *exactly* the reason that real estate license laws are in place. They're there to protect the less educated public from predatory practices by shady operators like wholesalers.
Here's the irony. Wholesalers do almost exactly the same work as a Realtor. Marketing for leads, working to get listings, finding buyers, negotiating and bringing the deal to a close. If you're going to do all that work, why not just get licensed? You can do it above board instead of hiding in the shadows.
PS - as a former Realtor, I don't have a dog in this hunt. I just hate seeing homeowners getting screwed. For a good example of a serious screwing I prevented, take a look at this: https://www.biggerpockets.com/...
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Jesse LeBlanc:
Quote from @Owen Dashner:
@Jesse LeBlanc there are several states that have included language in legislation that specifically outlaw marketing a property before owning it (i.e. you cannot double close via transactional funding because you wouldn't have an end buyer without having marketed the property before owning it).
Title companies will be taking direction on this stuff from the underwriters, who will be taking direction from the real estate commission in the respective state. Gonna be tough to get around this in many states.
Incorrect. You can talk to a seller who is interested in selling their property. You can then talk with your buyer and show them a property that you don’t have under contract yet. They give you a price they would buy it for. You then go to seller and get it under contract Lower than your buyer said they’d buy it for.
Now you double close.
DONE.so to keep this raging debate going and not put transactional funders out of business.
how does what your describing IE bringing two parties together for compensation ( definition of real estate license) how does this differ?
or just a scheme to circumvent the licensure laws ??? would it not be best to just get rid of all these schemes and either buy the darn thing do some value add then sell .. or just get a friggen license list and sell..
and keep in mind RE commission are negotiable I see it all the time on the HUDS on deals I fund .. flat fee's that brokers charge for certain assets its not always a %.. I know when i used to sell RE if it was a tough to sell bombed out piece of crap I was not doing it for a standard fee I charged more but I was worth it I actually got it sold and its all disclosed no funny business of all these guys / gals trying to hide what they make.
- 4yRobert D DismukesPro MemberFlipper/Rehabber · Memphis, TN · Member since 2019 · 37 posts · 36 votes
@Rudy Ferrara I’m perfectly fine with that. I get at least 10 to 15 calls a day asking me if I’m interested in selling any of my houses. I have to answer the phone a lot of times because it shows up as a normal number. But the time that it cost me to stop what I’m doing an answer a phone is ridiculous. I hope they ban wholesaling altogether.
I even get wholesale calls that ask for the person I sold the house to just because my name and number was associated before with that house. And examples of that for a house I sold to a guy four years ago and I just got a phone call about a week and a half asking for him using my number.
- 4yPeter TverdovBusiness MemberDeveloper · New Brunswick, NJ · Member since 2015 · 1k+ posts · 2k+ votes
Good. Wholesalers job is to steal equity from owners who do not know the true value of their house. They pretend to be a good guy/girl because they can "pay cash" when in reality, they're quickly flipping the contract to someone else and sometimes completely screwing the end user in the process. I get into this argument all the time. It's illegal. If it was okay, wholesalers wouldn't always try to tip toe around the issue of fiduciary responsibility.
There is a reason they created a real estate license years ago.
- Rental Property Investor · Beavercreek OH · Member since 2018 · 422 posts · 970 votes4y
Quote from @Joe Splitrock:
@Rudy Ferrara you are twisting this into something it is not. There is no conspiracy against wholesalers and they represent such a small percentage of transactions that they are not even competition for realtors. And nobody is going to ban together to "save the wholesalers", haha.
Real estate licensing is controlled by the state for the protection of its citizens. We wouldn't need any licensing or laws if we could trust people to do the right thing. We can't. Real estate licensing requires you take classroom training which includes legal and ethical components. This is to protect the consumer from predatory action of uneducated and unlicensed individuals. There is also a consequence if you don't follow the law, your license can be revoked.
Following your logic, we shouldn't need a license to drive a car or practice medicine. I am sorry, but having talked to hundreds of wholesalers on BP over the years, I have found a high percentage know nothing about the law and worse they don't care! Many have no money or experience. Some don't want to "trouble themselves" with taking a $500 real estate class and having to pass a test. It is not a few bad apples, it is a profession that attracts bad apples. This is directly due to the low barrier of entry. All it takes to be a wholesaler is to declare "I am a wholesaler". Download a contract off a website and knock on a door. That is literally it. That is where the risk is.
There are plenty of legit wholesalers who have their license. There are others who do actual buy and selling of real estate by taking title. It doesn't even take cash, just finding a partner willing to finance you. If you can't convince someone to finance your operation, you probably have financial or credibility issues.
Joe,
Not defending wholesalers, but. . . I completely disagree with you regarding licensing laws. Sure, doctors, lawyers and engineers/architects and the like should be licensed because their expertise is technical and a laymen is typically not in a position to judge their efficacy. For most other licenses, they are simply there to reduce competition to those already entrenched.
With all due respect, I believe it's naïve to believe our government gives a darn about protecting us. Politicians care about the money from big donors and lobbyists. Hence licenses for everything to eliminate or discourage new competitors.
40 years ago, when I was in my 20's, virtually 80 percent of occupations required no licensure. Now, 1000's of hours of education to cut hair. Used car salesmen's license (in addition to the actual dealers). Pawn shop license, license to buy gold, license to sell cigarettes, license to sell beer. Restaurant license, license to run a gym, licenses ad infinitum ad nauseum. I sent some guys to buy 5 small lilac plants for my yard and I was asked for my nurseryman's license. HELP?
Throw on continuing education requirements for real estate agents and barbers and the like and you really have to start asking yourself two questions. Are we really a free people and are we really a capitalistic society? My answer: Not like we used to be. Can't even let your kid run a lemonade stand without wondering if they are going to get busted for no license/permit.
Respectfully,
Gary
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Gary L Wallman:
Quote from @Joe Splitrock:
@Rudy Ferrara you are twisting this into something it is not. There is no conspiracy against wholesalers and they represent such a small percentage of transactions that they are not even competition for realtors. And nobody is going to ban together to "save the wholesalers", haha.
Real estate licensing is controlled by the state for the protection of its citizens. We wouldn't need any licensing or laws if we could trust people to do the right thing. We can't. Real estate licensing requires you take classroom training which includes legal and ethical components. This is to protect the consumer from predatory action of uneducated and unlicensed individuals. There is also a consequence if you don't follow the law, your license can be revoked.
Following your logic, we shouldn't need a license to drive a car or practice medicine. I am sorry, but having talked to hundreds of wholesalers on BP over the years, I have found a high percentage know nothing about the law and worse they don't care! Many have no money or experience. Some don't want to "trouble themselves" with taking a $500 real estate class and having to pass a test. It is not a few bad apples, it is a profession that attracts bad apples. This is directly due to the low barrier of entry. All it takes to be a wholesaler is to declare "I am a wholesaler". Download a contract off a website and knock on a door. That is literally it. That is where the risk is.
There are plenty of legit wholesalers who have their license. There are others who do actual buy and selling of real estate by taking title. It doesn't even take cash, just finding a partner willing to finance you. If you can't convince someone to finance your operation, you probably have financial or credibility issues.
Joe,
Not defending wholesalers, but. . . I completely disagree with you regarding licensing laws. Sure, doctors, lawyers and engineers/architects and the like should be licensed because their expertise is technical and a laymen is typically not in a position to judge their efficacy. For most other licenses, they are simply there to reduce competition to those already entrenched.
With all due respect, I believe it's naïve to believe our government gives a darn about protecting us. Politicians care about the money from big donors and lobbyists. Hence licenses for everything to eliminate or discourage new competitors.
40 years ago, when I was in my 20's, virtually 80 percent of occupations required no licensure. Now, 1000's of hours of education to cut hair. Used car salesmen's license (in addition to the actual dealers). Pawn shop license, license to buy gold, license to sell cigarettes, license to sell beer. Restaurant license, license to run a gym, licenses ad infinitum ad nauseum. I sent some guys to buy 5 small lilac plants for my yard and I was asked for my nurseryman's license. HELP?
Throw on continuing education requirements for real estate agents and barbers and the like and you really have to start asking yourself two questions. Are we really a free people and are we really a capitalistic society? My answer: Not like we used to be. Can't even let your kid run a lemonade stand without wondering if they are going to get busted for no license/permit.
Respectfully,
Gary
I used to be able to do HML in Oregon with no license.. you still can in all but 12 states.. but for us in those 12 states we need NMLS registration and state license and yearly CE. of course your conventional mortgage lenders need license in every state.. I guess we either do the licenses thing or we go to full blown Caveat Emptor.
- Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes4y
Quote from @Eric Ashby:
@Rudy Ferrara
Everyone but wholesalers want wholesalers out of the picture completely. I get dozens of unwanted spam texts and calls from them daily and there is no way to stop it. What an entitled bunch of jerks who feel the need to waste my time in a manner which is illegal.
Also, The marketing manner of those is eerily similar to unscrupulous individuals looking to scam vulnerable people out of their money… I wonder why they seem so similar. At least traditional scammers don’t try to pretend they are offering a service.
I’m not the only one who feels this way.
Ditto! Wish Indiana would pass the same laws and my phone would stop buzzing a dozen times a day from people without two nickels to rub together wanting to "buy" one of my rentals. Wholesalers only have a bit more sympathy from me than time share salesmen.....
- Rental Property Investor · Beavercreek OH · Member since 2018 · 422 posts · 970 votes4y
Quote from @Jay Hinrichs:
Quote from @Gary L Wallman:
Quote from @Joe Splitrock:
@Rudy Ferrara you are twisting this into something it is not. There is no conspiracy against wholesalers and they represent such a small percentage of transactions that they are not even competition for realtors. And nobody is going to ban together to "save the wholesalers", haha.
Real estate licensing is controlled by the state for the protection of its citizens. We wouldn't need any licensing or laws if we could trust people to do the right thing. We can't. Real estate licensing requires you take classroom training which includes legal and ethical components. This is to protect the consumer from predatory action of uneducated and unlicensed individuals. There is also a consequence if you don't follow the law, your license can be revoked.
Following your logic, we shouldn't need a license to drive a car or practice medicine. I am sorry, but having talked to hundreds of wholesalers on BP over the years, I have found a high percentage know nothing about the law and worse they don't care! Many have no money or experience. Some don't want to "trouble themselves" with taking a $500 real estate class and having to pass a test. It is not a few bad apples, it is a profession that attracts bad apples. This is directly due to the low barrier of entry. All it takes to be a wholesaler is to declare "I am a wholesaler". Download a contract off a website and knock on a door. That is literally it. That is where the risk is.
There are plenty of legit wholesalers who have their license. There are others who do actual buy and selling of real estate by taking title. It doesn't even take cash, just finding a partner willing to finance you. If you can't convince someone to finance your operation, you probably have financial or credibility issues.
Joe,
Not defending wholesalers, but. . . I completely disagree with you regarding licensing laws. Sure, doctors, lawyers and engineers/architects and the like should be licensed because their expertise is technical and a laymen is typically not in a position to judge their efficacy. For most other licenses, they are simply there to reduce competition to those already entrenched.
With all due respect, I believe it's naïve to believe our government gives a darn about protecting us. Politicians care about the money from big donors and lobbyists. Hence licenses for everything to eliminate or discourage new competitors.
40 years ago, when I was in my 20's, virtually 80 percent of occupations required no licensure. Now, 1000's of hours of education to cut hair. Used car salesmen's license (in addition to the actual dealers). Pawn shop license, license to buy gold, license to sell cigarettes, license to sell beer. Restaurant license, license to run a gym, licenses ad infinitum ad nauseum. I sent some guys to buy 5 small lilac plants for my yard and I was asked for my nurseryman's license. HELP?
Throw on continuing education requirements for real estate agents and barbers and the like and you really have to start asking yourself two questions. Are we really a free people and are we really a capitalistic society? My answer: Not like we used to be. Can't even let your kid run a lemonade stand without wondering if they are going to get busted for no license/permit.
Respectfully,
Gary
I used to be able to do HML in Oregon with no license.. you still can in all but 12 states.. but for us in those 12 states we need NMLS registration and state license and yearly CE. of course your conventional mortgage lenders need license in every state.. I guess we either do the licenses thing or we go to full blown Caveat Emptor.
Jay,
My vote: Full blown caveat emptor. The potential to lose a few bucks to scammers is, IMO, far outweighed by the costs added to EVERYTHING by these licenses and regulations.
The vast majority of people in business want to stay in business, so they deliver a fair product at a fair price. The few that don't get rooted out PDQ.
Imagine how much your costs would go down and how much savings you could pass on to your customer without all the ridiculous fees and permits in the Pacific Northwest.
I just watched "Million Dollar Listing Los Angeles" episode where a guy bought a lot on a bluff overlooking the ocean (far above the sea) to build a house for his kids to grow up in. 15 years later he was selling it never having moved in. It seems it took over 10 years and hundreds of thousands of dollars just to get the required permits. 4 or 5 more years to complete. Selling it because his kids are already grown.
These types of situations are flat out untenable. What a shame to completely undermine our capatalist system with all this nonsense. It's no wonder we, as a nation, can never get anything accomplished in a reasonable time and cost.
Gary
- 4yJoe S.Pro MemberInvestor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
Quote from @Gary L Wallman:
Quote from @Jay Hinrichs:
Quote from @Gary L Wallman:
Quote from @Joe Splitrock:
@Rudy Ferrara you are twisting this into something it is not. There is no conspiracy against wholesalers and they represent such a small percentage of transactions that they are not even competition for realtors. And nobody is going to ban together to "save the wholesalers", haha.
Real estate licensing is controlled by the state for the protection of its citizens. We wouldn't need any licensing or laws if we could trust people to do the right thing. We can't. Real estate licensing requires you take classroom training which includes legal and ethical components. This is to protect the consumer from predatory action of uneducated and unlicensed individuals. There is also a consequence if you don't follow the law, your license can be revoked.
Following your logic, we shouldn't need a license to drive a car or practice medicine. I am sorry, but having talked to hundreds of wholesalers on BP over the years, I have found a high percentage know nothing about the law and worse they don't care! Many have no money or experience. Some don't want to "trouble themselves" with taking a $500 real estate class and having to pass a test. It is not a few bad apples, it is a profession that attracts bad apples. This is directly due to the low barrier of entry. All it takes to be a wholesaler is to declare "I am a wholesaler". Download a contract off a website and knock on a door. That is literally it. That is where the risk is.
There are plenty of legit wholesalers who have their license. There are others who do actual buy and selling of real estate by taking title. It doesn't even take cash, just finding a partner willing to finance you. If you can't convince someone to finance your operation, you probably have financial or credibility issues.
Joe,
Not defending wholesalers, but. . . I completely disagree with you regarding licensing laws. Sure, doctors, lawyers and engineers/architects and the like should be licensed because their expertise is technical and a laymen is typically not in a position to judge their efficacy. For most other licenses, they are simply there to reduce competition to those already entrenched.
With all due respect, I believe it's naïve to believe our government gives a darn about protecting us. Politicians care about the money from big donors and lobbyists. Hence licenses for everything to eliminate or discourage new competitors.
40 years ago, when I was in my 20's, virtually 80 percent of occupations required no licensure. Now, 1000's of hours of education to cut hair. Used car salesmen's license (in addition to the actual dealers). Pawn shop license, license to buy gold, license to sell cigarettes, license to sell beer. Restaurant license, license to run a gym, licenses ad infinitum ad nauseum. I sent some guys to buy 5 small lilac plants for my yard and I was asked for my nurseryman's license. HELP?
Throw on continuing education requirements for real estate agents and barbers and the like and you really have to start asking yourself two questions. Are we really a free people and are we really a capitalistic society? My answer: Not like we used to be. Can't even let your kid run a lemonade stand without wondering if they are going to get busted for no license/permit.
Respectfully,
Gary
I used to be able to do HML in Oregon with no license.. you still can in all but 12 states.. but for us in those 12 states we need NMLS registration and state license and yearly CE. of course your conventional mortgage lenders need license in every state.. I guess we either do the licenses thing or we go to full blown Caveat Emptor.
Jay,
My vote: Full blown caveat emptor. The potential to lose a few bucks to scammers is, IMO, far outweighed by the costs added to EVERYTHING by these licenses and regulations.
The vast majority of people in business want to stay in business, so they deliver a fair product at a fair price. The few that don't get rooted out PDQ.
Imagine how much your costs would go down and how much savings you could pass on to your customer without all the ridiculous fees and permits in the Pacific Northwest.
I just watched "Million Dollar Listing Los Angeles" episode where a guy bought a lot on a bluff overlooking the ocean (far above the sea) to build a house for his kids to grow up in. 15 years later he was selling it never having moved in. It seems it took over 10 years and hundreds of thousands of dollars just to get the required permits. 4 or 5 more years to complete. Selling it because his kids are already grown.
These types of situations are flat out untenable. What a shame to completely undermine our capatalist system with all this nonsense. It's no wonder we, as a nation, can never get anything accomplished in a reasonable time and cost.
Gary
You made some good points Gary. My wife’s been cutting my hair for years now and she never got a barber license or went to barber school. The reason why she started cutting it is because a number of years ago she had to do so much Trimming after I just got back from the barber shop.
- Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes4yYour comment: "the seller who is in a desperate situation for whatever reason. Who perhaps can't make mortgage payments, came down with covid"
Quote from @Rudy Ferrara:
Your "bridge" mr jones is called transactional selling which i'm learning about. As for assignments it's earned a bad reputation from unethical and real estate illiterate predators who care less about the people selling a house or wanting to buy one from an intermediate wholesaler using an assignment than they are in getting a seller to sign a contract and sit back until closing to collect a check without any care for helping the seller who is in a desperate situation for whatever reason. Who perhaps can't make mortgage payments, came down with covid or as my first seller was simply tired of the headache of travelling back and forth to his properties he couldn't maintain and another tired of destructive tenants. He/she may have a family they're trying to provide for while looking to move into another property while closing on their current property, etc. This is a real service an ethical/knowledgable caring wholesaler provides people far from the predator image some give it.
Just curious, when you put someone under contract and you can't close for whatever reason and the seller loses their home, what does your conversation with the seller sound like?
Did you realize you can be criminally prosecuted by the attorney general's office at that point? It's called fraud & undue inducement for financial incentives. Basically, it means you deprived the seller from selling to a willing and ABLE buyer by tying up their property.
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Gary L Wallman:
Quote from @Jay Hinrichs:
Quote from @Gary L Wallman:
Quote from @Joe Splitrock:
@Rudy Ferrara you are twisting this into something it is not. There is no conspiracy against wholesalers and they represent such a small percentage of transactions that they are not even competition for realtors. And nobody is going to ban together to "save the wholesalers", haha.
Real estate licensing is controlled by the state for the protection of its citizens. We wouldn't need any licensing or laws if we could trust people to do the right thing. We can't. Real estate licensing requires you take classroom training which includes legal and ethical components. This is to protect the consumer from predatory action of uneducated and unlicensed individuals. There is also a consequence if you don't follow the law, your license can be revoked.
Following your logic, we shouldn't need a license to drive a car or practice medicine. I am sorry, but having talked to hundreds of wholesalers on BP over the years, I have found a high percentage know nothing about the law and worse they don't care! Many have no money or experience. Some don't want to "trouble themselves" with taking a $500 real estate class and having to pass a test. It is not a few bad apples, it is a profession that attracts bad apples. This is directly due to the low barrier of entry. All it takes to be a wholesaler is to declare "I am a wholesaler". Download a contract off a website and knock on a door. That is literally it. That is where the risk is.
There are plenty of legit wholesalers who have their license. There are others who do actual buy and selling of real estate by taking title. It doesn't even take cash, just finding a partner willing to finance you. If you can't convince someone to finance your operation, you probably have financial or credibility issues.
Joe,
Not defending wholesalers, but. . . I completely disagree with you regarding licensing laws. Sure, doctors, lawyers and engineers/architects and the like should be licensed because their expertise is technical and a laymen is typically not in a position to judge their efficacy. For most other licenses, they are simply there to reduce competition to those already entrenched.
With all due respect, I believe it's naïve to believe our government gives a darn about protecting us. Politicians care about the money from big donors and lobbyists. Hence licenses for everything to eliminate or discourage new competitors.
40 years ago, when I was in my 20's, virtually 80 percent of occupations required no licensure. Now, 1000's of hours of education to cut hair. Used car salesmen's license (in addition to the actual dealers). Pawn shop license, license to buy gold, license to sell cigarettes, license to sell beer. Restaurant license, license to run a gym, licenses ad infinitum ad nauseum. I sent some guys to buy 5 small lilac plants for my yard and I was asked for my nurseryman's license. HELP?
Throw on continuing education requirements for real estate agents and barbers and the like and you really have to start asking yourself two questions. Are we really a free people and are we really a capitalistic society? My answer: Not like we used to be. Can't even let your kid run a lemonade stand without wondering if they are going to get busted for no license/permit.
Respectfully,
Gary
I used to be able to do HML in Oregon with no license.. you still can in all but 12 states.. but for us in those 12 states we need NMLS registration and state license and yearly CE. of course your conventional mortgage lenders need license in every state.. I guess we either do the licenses thing or we go to full blown Caveat Emptor.
Jay,
My vote: Full blown caveat emptor. The potential to lose a few bucks to scammers is, IMO, far outweighed by the costs added to EVERYTHING by these licenses and regulations.
The vast majority of people in business want to stay in business, so they deliver a fair product at a fair price. The few that don't get rooted out PDQ.
Imagine how much your costs would go down and how much savings you could pass on to your customer without all the ridiculous fees and permits in the Pacific Northwest.
I just watched "Million Dollar Listing Los Angeles" episode where a guy bought a lot on a bluff overlooking the ocean (far above the sea) to build a house for his kids to grow up in. 15 years later he was selling it never having moved in. It seems it took over 10 years and hundreds of thousands of dollars just to get the required permits. 4 or 5 more years to complete. Selling it because his kids are already grown.
These types of situations are flat out untenable. What a shame to completely undermine our capatalist system with all this nonsense. It's no wonder we, as a nation, can never get anything accomplished in a reasonable time and cost.
Gary
I just watched "Million Dollar Listing Los Angeles" episode where a guy bought a lot on a bluff overlooking the ocean (far above the sea) to build a house for his kids to grow up in. 15 years later he was selling it never having moved in. It seems it took over 10 years and hundreds of thousands of dollars just to get the required permits. 4 or 5 more years to complete. Selling it because his kids are already grown.
So very common in CA.. having lived in the Napa valley for years there are projects I have followed that have gone decades new developer drops a million cant get it done politically moves on another comes in..
I had one in Oregon 60 acres BIG timber neighbors up in arms I am going to put 40 lots in.. they want no trees cut and howled like crazy at public meetings etc the very definition of NIMBY . I worked out some deed restrictions for the trees to provide a nice buffer between my lots and theirs but then they starting hammering we had to many lots ( even though we were within the code) planning commission bowed to the public cut my lots by 20% my seller would not lower price and we walked I LOST 80k on that one ( all the engineering i had to do up front)
Seller was a well known doctor in town he was not happy what the neighbors did and since the property was in the county and this is Oregon.. He proceeded to CLEAR CUT and left Zero buffers then came back a few years later and did the development himself.. so the NIMBY neighbors once the battle with me but lost the war.. not that it did me any goood.. but thats west coast developments CA. the coastal commission is really really tough. - Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes4y
Quote from @Charlie MacPherson:
Unlicensed wholesalers just suck. They suck equity out of a property that rightly belongs to the seller.
By design, they pay well below market value, meaning that the seller gets screwed. And before anybody wants to start with the "valuable service" garbage, there is absolutely NOTHING that a wholesaler can do that a Realtor can't - and that includes selling to an investor who will waive contingencies and do a 5-day cash closing.
The main differences between Realtors and wholesalers are:
1. The Realtor will expose the property to hundreds of thousands of buyers with a proper listing. How many buyers does a wholesaler have on their list? 10? 20? Let's be generous and say it's 100. That means the Realtor is thousands of times more likely to find the party who will pay the highest price.
The wholesaler is marketing only to those who need a good (below market value) deal. The Realtor will bring the buyer who is looking for a fixer-upper to call their own. You already know which will pay the seller more money.
2. Realtors are heavily regulated and are fiduciaries to their client. That means that the Realtor is required by law to put the client's interests first, not their own.
A legal or ethical violation by a Realtor can result in fines, license suspension or license revocation - not to mention lawsuits and termination by their broker. Unlicensed wholesalers are not subject to those same regulations, so there is no protection for the homeowner.
In fact, the need for that kind of protection is *exactly* the reason that real estate license laws are in place. They're there to protect the less educated public from predatory practices by shady operators like wholesalers.
Here's the irony. Wholesalers do almost exactly the same work as a Realtor. Marketing for leads, working to get listings, finding buyers, negotiating and bringing the deal to a close. If you're going to do all that work, why not just get licensed? You can do it above board instead of hiding in the shadows.
PS - as a former Realtor, I don't have a dog in this hunt. I just hate seeing homeowners getting screwed. For a good example of a serious screwing I prevented, take a look at this: https://www.biggerpockets.com/...
The problem with your analysis is at least three fold
1. Realtors as well as wholesalers don't work for free. In most instances realtors Charge 5% or 6%. So, on a $400,000 house that's about $20k to $24k which comes out of the seller's pocket. Are you trying to tell me the realtor earned that by simply listing in the MLS? And many realtors never qualify the buyer to be sure they have money and a loan to close. Ever see the notation "sale failed"?
2. Realtors won't list a property that is not ready for the MLS. Some sellers are not inclined nor do they have the resources to repair their property. Wholesalers are looking for those situations.
3. Fully one third of the properties listed on the MLS Don't Sell in normal markets, according to NAR. That's not an impressive statistic for realtors and their sales skills. But, realtors are not taught how to sell, they are taught how to keep their broker from getting sued.
In hot markets, like the present, a monkey playing a violin can sell a house getting multiple offers. Or, the seller simply can pay $700 to list and use an attorney to close for $1,000.
By the way, I am neither a realtor nor a wholesaler. I just look at the facts and let it go at that.
- 4yOwen DashnerPro MemberLender · Omaha, NE · Member since 2008 · 1k+ posts · 1k+ votes
@Jesse LeBlanc I am correct for the state of Nebraska. I have talked to the Real Estate Commission and I am partner of a title company. Title companies here are going to take direction from underwriters and are going to be very leery of double closings from unlicensed folks. Too much risk of lawsuit from the original seller.
- Investor · Atlanta, GA · Member since 2016 · 627 posts · 374 votes4y
Quote from @Owen Dashner:
@Jesse LeBlanc I am correct for the state of Nebraska. I have talked to the Real Estate Commission and I am partner of a title company. Title companies here are going to take direction from underwriters and are going to be very leery of double closings from unlicensed folks. Too much risk of lawsuit from the original seller.
That doesn't make it illegal or stop it from happening @Owen Dashner. That just comes down to the closing companies SOP. Buyer could just choose to work with another closing company. I have quite a few folks closing deals out there, NP. HOWEVER, I am not at all denying that if I was a Title company or Closing Attorney that I too would would prefer to CYA and be safe over a few extra deals and a few extra thousand $, sometimes it's not worth the risk and then having a claim on my E&O. No Bueno
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Account Closed:
Quote from @Charlie MacPherson:
Unlicensed wholesalers just suck. They suck equity out of a property that rightly belongs to the seller.
By design, they pay well below market value, meaning that the seller gets screwed. And before anybody wants to start with the "valuable service" garbage, there is absolutely NOTHING that a wholesaler can do that a Realtor can't - and that includes selling to an investor who will waive contingencies and do a 5-day cash closing.
The main differences between Realtors and wholesalers are:
1. The Realtor will expose the property to hundreds of thousands of buyers with a proper listing. How many buyers does a wholesaler have on their list? 10? 20? Let's be generous and say it's 100. That means the Realtor is thousands of times more likely to find the party who will pay the highest price.
The wholesaler is marketing only to those who need a good (below market value) deal. The Realtor will bring the buyer who is looking for a fixer-upper to call their own. You already know which will pay the seller more money.
2. Realtors are heavily regulated and are fiduciaries to their client. That means that the Realtor is required by law to put the client's interests first, not their own.
A legal or ethical violation by a Realtor can result in fines, license suspension or license revocation - not to mention lawsuits and termination by their broker. Unlicensed wholesalers are not subject to those same regulations, so there is no protection for the homeowner.
In fact, the need for that kind of protection is *exactly* the reason that real estate license laws are in place. They're there to protect the less educated public from predatory practices by shady operators like wholesalers.
Here's the irony. Wholesalers do almost exactly the same work as a Realtor. Marketing for leads, working to get listings, finding buyers, negotiating and bringing the deal to a close. If you're going to do all that work, why not just get licensed? You can do it above board instead of hiding in the shadows.
PS - as a former Realtor, I don't have a dog in this hunt. I just hate seeing homeowners getting screwed. For a good example of a serious screwing I prevented, take a look at this: https://www.biggerpockets.com/...
The problem with your analysis is at least three fold
1. Realtors as well as wholesalers don't work for free. In most instances realtors Charge 5% or 6%. So, on a $400,000 house that's about $20k to $24k which comes out of the seller's pocket. Are you trying to tell me the realtor earned that by simply listing in the MLS? And many realtors never qualify the buyer to be sure they have money and a loan to close. Ever see the notation "sale failed"?
2. Realtors won't list a property that is not ready for the MLS. Some sellers are not inclined nor do they have the resources to repair their property. Wholesalers are looking for those situations.
3. Fully one third of the properties listed on the MLS Don't Sell in normal markets, according to NAR. That's not an impressive statistic for realtors and their sales skills. But, realtors are not taught how to sell, they are taught how to keep their broker from getting sued.
In hot markets, like the present, a monkey playing a violin can sell a house getting multiple offers. Or, the seller simply can pay $700 to list and use an attorney to close for $1,000.
By the way, I am neither a realtor nor a wholesaler. I just look at the facts and let it go at that.
Mike I am going to counter your counter LOL
1. realtors or most of them anyway first thing they want even before writing contract for a buyer is POF and pre qual letter. Its up to the lender to fully qualify. Majority of sale fails the vast majority are because of home inspections not financing.. I do quite a bit in this arena well over 100 transactions year if they are going to sale fail virtually all will be because of inspections and cant come to a meeting of the minds.. I just had one in Indy were they wanted new roof new sewer line and work done to the basement without raising the price at all it sale failed we are doing the work so now we can raise the price when we go back on market. those types of situations.. But there are bozo agents who don't know what U need to do to qualify a buyer up front.. We know My wife knows :)
2. there are many brokers who specialize in hud foreclosures and other OREO properties that are listed as is and or sell fixer uppers I have bought many many properties through these kinds of brokers and of course fund others who use wholesalers but realtors will and can take as is listings and sell them done every day
3. for listings that expire you have a few reasons main one though PRICE too high the owner simply wont list at a reasonable price and it never sells.. or the aforementioned repair inspection issues and this is a smaller one but it happens quite a bit in certain markets.. agent list property gets in contract title is run and seller cant deliver clear title deals fails listing expires..
Bottom line there is nothing a wholesaler can do better than an experienced good agent can no way no how. Every agent that sells fixers has a waiting list of buyers ready and willing to pounce I am one of those lOL - China, ME · Member since 2014 · 3k+ posts · 4k+ votes4y
Quote from @Account Closed:
Quote from @Charlie MacPherson:
Unlicensed wholesalers just suck. They suck equity out of a property that rightly belongs to the seller.
By design, they pay well below market value, meaning that the seller gets screwed. And before anybody wants to start with the "valuable service" garbage, there is absolutely NOTHING that a wholesaler can do that a Realtor can't - and that includes selling to an investor who will waive contingencies and do a 5-day cash closing.
The main differences between Realtors and wholesalers are:
1. The Realtor will expose the property to hundreds of thousands of buyers with a proper listing. How many buyers does a wholesaler have on their list? 10? 20? Let's be generous and say it's 100. That means the Realtor is thousands of times more likely to find the party who will pay the highest price.
The wholesaler is marketing only to those who need a good (below market value) deal. The Realtor will bring the buyer who is looking for a fixer-upper to call their own. You already know which will pay the seller more money.
2. Realtors are heavily regulated and are fiduciaries to their client. That means that the Realtor is required by law to put the client's interests first, not their own.
A legal or ethical violation by a Realtor can result in fines, license suspension or license revocation - not to mention lawsuits and termination by their broker. Unlicensed wholesalers are not subject to those same regulations, so there is no protection for the homeowner.
In fact, the need for that kind of protection is *exactly* the reason that real estate license laws are in place. They're there to protect the less educated public from predatory practices by shady operators like wholesalers.
Here's the irony. Wholesalers do almost exactly the same work as a Realtor. Marketing for leads, working to get listings, finding buyers, negotiating and bringing the deal to a close. If you're going to do all that work, why not just get licensed? You can do it above board instead of hiding in the shadows.
PS - as a former Realtor, I don't have a dog in this hunt. I just hate seeing homeowners getting screwed. For a good example of a serious screwing I prevented, take a look at this: https://www.biggerpockets.com/...
The problem with your analysis is at least three fold
1. Realtors as well as wholesalers don't work for free. In most instances realtors Charge 5% or 6%. So, on a $400,000 house that's about $20k to $24k which comes out of the seller's pocket. Are you trying to tell me the realtor earned that by simply listing in the MLS? And many realtors never qualify the buyer to be sure they have money and a loan to close. Ever see the notation "sale failed"?
2. Realtors won't list a property that is not ready for the MLS. Some sellers are not inclined nor do they have the resources to repair their property. Wholesalers are looking for those situations.
3. Fully one third of the properties listed on the MLS Don't Sell in normal markets, according to NAR. That's not an impressive statistic for realtors and their sales skills. But, realtors are not taught how to sell, they are taught how to keep their broker from getting sued.
In hot markets, like the present, a monkey playing a violin can sell a house getting multiple offers. Or, the seller simply can pay $700 to list and use an attorney to close for $1,000.
By the way, I am neither a realtor nor a wholesaler. I just look at the facts and let it go at that.
I never claimed that Realtors work for free. That's a silly statement, but they do clearly disclose their fees in a written contract that the seller can enforce. That fee is often quite a bit less than the wholesaler's gouge.
Both states I was licensed in (and probably all others) also require a clear written disclosure of the relationship between the Realtor and client, and it's required at either the first face to face meeting (Massachusetts) or the first substantive discussion about real estate (Maine). Both define the difference between client and customer so there's absolutely no doubt as to what kind of representation that person is getting. Wholesalers have no such obligation.
By the way, I'm happy to hold up my 5% commission ($17,350) on that $347K house up against the $120K screwing that the wholesaler was trying to give my clients in the real life story I referenced above.
Stating that Realtors earn their fees simply by listing on MLS demonstrates a breathtaking lack of understanding of the Realtor's role and duties. The same holds true for claiming that FSBOs doing an MLS listing get the same outcome as listing with a Realtor.
Every study out there (admittedly most are by NAR) shows that represented sellers get about 16% more than by selling on their own. That's due in my opinion to superior marketing, better lead follow up, better open house scheduling, more availability to show properties at all hours and better negotiation skills.
If by #2 you're trying to say that Realtors won't list houses needing even extensive rehab, that's another gross misunderstanding of the real estate world. I have seen countless abandoned foreclosures that were literally uninhabitable listed on MLS - and I've toured them with rehabber clients. When I say uninhabitable, I mean stripped of all copper plumbing and wire, vandalized, holes in the roof, flooded basements, every surface of the house covered in mold, failed foundations caved in with the basement full of dirt, man-sized holes in the floor and some that were absolute tear-downs.
#3. I don't know where you're getting that from and it was never my experience. Maybe whatever you read was saying those homes don't sell on the first try? The biggest reason is normally that the property is over priced. There is a butt for every seat and when a property is priced correctly, it will sell. The proper price reflects location, age, condition and specifications (beds, baths, square feet), etc.
Most often, homes are overpriced because the seller is set on getting a certain amount. "My neighbor got $X for his house and mine's better, so I should get $Y. If you want the listing, that's my price."
If it's not insanely overpriced, I'd take the listing with the understanding that we'd go into price reductions at pre-arranged intervals. I always told my seller clients that it is my job to give them my best advice and then to follow their instructions. I've seen many times where the market had to educate the seller and when the price was finally reduced to the actual market value, we sold.
Next...Of course Realtors are trained on how not to get sued. So are surgeons, cops and corporate hiring managers. So what? But to say that Realtors are not trained in how to sell is just another gross misrepresentation. Weekly office meetings, seminars, continuing education, broker training, etc all offer exactly that kind of training. I can't tell you the number of hours I've spent in that kind of training, but it's many hundreds.
I hope that's at least enlightening. - Investor · Austin, TX · Member since 2019 · 229 posts · 229 votes4y
let me tell you how to fix this and still be able to wholesale.
1. Locate transactional funding.
2. Locate a deal.
3. Sign purchase agreement with seller.
4. Submit to title/RE attorney for title work.
5. Close on deal.
6. Sell deal to end buyer same/next day.
7. Pay back transactional funding.
8. Pocket the rest.
Congratulations, you've just completed an ABC transaction. Problem solved.
- Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes4y
Quote from @Jay Hinrichs:
Quote from @Account Closed:
Quote from @Charlie MacPherson:
Unlicensed wholesalers just suck. They suck equity out of a property that rightly belongs to the seller.
By design, they pay well below market value, meaning that the seller gets screwed. And before anybody wants to start with the "valuable service" garbage, there is absolutely NOTHING that a wholesaler can do that a Realtor can't - and that includes selling to an investor who will waive contingencies and do a 5-day cash closing.
The main differences between Realtors and wholesalers are:
1. The Realtor will expose the property to hundreds of thousands of buyers with a proper listing. How many buyers does a wholesaler have on their list? 10? 20? Let's be generous and say it's 100. That means the Realtor is thousands of times more likely to find the party who will pay the highest price.
The wholesaler is marketing only to those who need a good (below market value) deal. The Realtor will bring the buyer who is looking for a fixer-upper to call their own. You already know which will pay the seller more money.
2. Realtors are heavily regulated and are fiduciaries to their client. That means that the Realtor is required by law to put the client's interests first, not their own.
A legal or ethical violation by a Realtor can result in fines, license suspension or license revocation - not to mention lawsuits and termination by their broker. Unlicensed wholesalers are not subject to those same regulations, so there is no protection for the homeowner.
In fact, the need for that kind of protection is *exactly* the reason that real estate license laws are in place. They're there to protect the less educated public from predatory practices by shady operators like wholesalers.
Here's the irony. Wholesalers do almost exactly the same work as a Realtor. Marketing for leads, working to get listings, finding buyers, negotiating and bringing the deal to a close. If you're going to do all that work, why not just get licensed? You can do it above board instead of hiding in the shadows.
PS - as a former Realtor, I don't have a dog in this hunt. I just hate seeing homeowners getting screwed. For a good example of a serious screwing I prevented, take a look at this: https://www.biggerpockets.com/...
The problem with your analysis is at least three fold
1. Realtors as well as wholesalers don't work for free. In most instances realtors Charge 5% or 6%. So, on a $400,000 house that's about $20k to $24k which comes out of the seller's pocket. Are you trying to tell me the realtor earned that by simply listing in the MLS? And many realtors never qualify the buyer to be sure they have money and a loan to close. Ever see the notation "sale failed"?
2. Realtors won't list a property that is not ready for the MLS. Some sellers are not inclined nor do they have the resources to repair their property. Wholesalers are looking for those situations.
3. Fully one third of the properties listed on the MLS Don't Sell in normal markets, according to NAR. That's not an impressive statistic for realtors and their sales skills. But, realtors are not taught how to sell, they are taught how to keep their broker from getting sued.
In hot markets, like the present, a monkey playing a violin can sell a house getting multiple offers. Or, the seller simply can pay $700 to list and use an attorney to close for $1,000.
By the way, I am neither a realtor nor a wholesaler. I just look at the facts and let it go at that.
Mike I am going to counter your counter LOL
1. realtors or most of them anyway first thing they want even before writing contract for a buyer is POF and pre qual letter. Its up to the lender to fully qualify. Majority of sale fails the vast majority are because of home inspections not financing.. I do quite a bit in this arena well over 100 transactions year if they are going to sale fail virtually all will be because of inspections and cant come to a meeting of the minds.. I just had one in Indy were they wanted new roof new sewer line and work done to the basement without raising the price at all it sale failed we are doing the work so now we can raise the price when we go back on market. those types of situations.. But there are bozo agents who don't know what U need to do to qualify a buyer up front.. We know My wife knows :)
2. there are many brokers who specialize in hud foreclosures and other OREO properties that are listed as is and or sell fixer uppers I have bought many many properties through these kinds of brokers and of course fund others who use wholesalers but realtors will and can take as is listings and sell them done every day
3. for listings that expire you have a few reasons main one though PRICE too high the owner simply wont list at a reasonable price and it never sells.. or the aforementioned repair inspection issues and this is a smaller one but it happens quite a bit in certain markets.. agent list property gets in contract title is run and seller cant deliver clear title deals fails listing expires..
Bottom line there is nothing a wholesaler can do better than an experienced good agent can no way no how. Every agent that sells fixers has a waiting list of buyers ready and willing to pounce I am one of those lOLYour comment" "Bottom line there is nothing a wholesaler can do better than an experienced good agent"
I would mostly agree with that statement. (other than a wholesaler buys properties that aren't ready for the MLS and an agent has no other option than listing.) Most agents aren't selling enough properties to cover their expenses, let alone make a living.What percentage of the 77,000 agents in Arizona are "experienced good agents?" Lol, the old 80/20 rule. Probably 62,000 are agents in name only.
You and I have been at this a long time. What's the average lifecycle of a new agent? 6 months? A Year? It isn't the long term agents or wholesalers that bother me. It's all the new wannabes, both agents and wholesalers who aren't learning what the risks & laws are and are telling sellers they can solve the seller's problem.I am not an agent or wholesaler.
I do my own opens to sell my properties. I can assure you that a lot of agents can't provide a preapproval (not talking prequalify which is worthless) for their clients. I let them look and dream anyway.
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Account Closed:
Quote from @Jay Hinrichs:
Quote from @Account Closed:
Quote from @Charlie MacPherson:
Unlicensed wholesalers just suck. They suck equity out of a property that rightly belongs to the seller.
By design, they pay well below market value, meaning that the seller gets screwed. And before anybody wants to start with the "valuable service" garbage, there is absolutely NOTHING that a wholesaler can do that a Realtor can't - and that includes selling to an investor who will waive contingencies and do a 5-day cash closing.
The main differences between Realtors and wholesalers are:
1. The Realtor will expose the property to hundreds of thousands of buyers with a proper listing. How many buyers does a wholesaler have on their list? 10? 20? Let's be generous and say it's 100. That means the Realtor is thousands of times more likely to find the party who will pay the highest price.
The wholesaler is marketing only to those who need a good (below market value) deal. The Realtor will bring the buyer who is looking for a fixer-upper to call their own. You already know which will pay the seller more money.
2. Realtors are heavily regulated and are fiduciaries to their client. That means that the Realtor is required by law to put the client's interests first, not their own.
A legal or ethical violation by a Realtor can result in fines, license suspension or license revocation - not to mention lawsuits and termination by their broker. Unlicensed wholesalers are not subject to those same regulations, so there is no protection for the homeowner.
In fact, the need for that kind of protection is *exactly* the reason that real estate license laws are in place. They're there to protect the less educated public from predatory practices by shady operators like wholesalers.
Here's the irony. Wholesalers do almost exactly the same work as a Realtor. Marketing for leads, working to get listings, finding buyers, negotiating and bringing the deal to a close. If you're going to do all that work, why not just get licensed? You can do it above board instead of hiding in the shadows.
PS - as a former Realtor, I don't have a dog in this hunt. I just hate seeing homeowners getting screwed. For a good example of a serious screwing I prevented, take a look at this: https://www.biggerpockets.com/...
The problem with your analysis is at least three fold
1. Realtors as well as wholesalers don't work for free. In most instances realtors Charge 5% or 6%. So, on a $400,000 house that's about $20k to $24k which comes out of the seller's pocket. Are you trying to tell me the realtor earned that by simply listing in the MLS? And many realtors never qualify the buyer to be sure they have money and a loan to close. Ever see the notation "sale failed"?
2. Realtors won't list a property that is not ready for the MLS. Some sellers are not inclined nor do they have the resources to repair their property. Wholesalers are looking for those situations.
3. Fully one third of the properties listed on the MLS Don't Sell in normal markets, according to NAR. That's not an impressive statistic for realtors and their sales skills. But, realtors are not taught how to sell, they are taught how to keep their broker from getting sued.
In hot markets, like the present, a monkey playing a violin can sell a house getting multiple offers. Or, the seller simply can pay $700 to list and use an attorney to close for $1,000.
By the way, I am neither a realtor nor a wholesaler. I just look at the facts and let it go at that.
Mike I am going to counter your counter LOL
1. realtors or most of them anyway first thing they want even before writing contract for a buyer is POF and pre qual letter. Its up to the lender to fully qualify. Majority of sale fails the vast majority are because of home inspections not financing.. I do quite a bit in this arena well over 100 transactions year if they are going to sale fail virtually all will be because of inspections and cant come to a meeting of the minds.. I just had one in Indy were they wanted new roof new sewer line and work done to the basement without raising the price at all it sale failed we are doing the work so now we can raise the price when we go back on market. those types of situations.. But there are bozo agents who don't know what U need to do to qualify a buyer up front.. We know My wife knows :)
2. there are many brokers who specialize in hud foreclosures and other OREO properties that are listed as is and or sell fixer uppers I have bought many many properties through these kinds of brokers and of course fund others who use wholesalers but realtors will and can take as is listings and sell them done every day
3. for listings that expire you have a few reasons main one though PRICE too high the owner simply wont list at a reasonable price and it never sells.. or the aforementioned repair inspection issues and this is a smaller one but it happens quite a bit in certain markets.. agent list property gets in contract title is run and seller cant deliver clear title deals fails listing expires..
Bottom line there is nothing a wholesaler can do better than an experienced good agent can no way no how. Every agent that sells fixers has a waiting list of buyers ready and willing to pounce I am one of those lOLYour comment" "Bottom line there is nothing a wholesaler can do better than an experienced good agent"
I would mostly agree with that statement. (other than a wholesaler buys properties that aren't ready for the MLS and an agent has no other option than listing.) Most agents aren't selling enough properties to cover their expenses, let alone make a living.What percentage of the 77,000 agents in Arizona are "experienced good agents?" Lol, the old 80/20 rule. Probably 62,000 are agents in name only.
You and I have been at this a long time. What's the average lifecycle of a new agent? 6 months? A Year? It isn't the long term agents or wholesalers that bother me. It's all the new wannabes, both agents and wholesalers who aren't learning what the risks & laws are and are telling sellers they can solve the seller's problem.I am not an agent or wholesaler.
I do my own opens to sell my properties. I can assure you that a lot of agents can't provide a preapproval (not talking prequalify which is worthless) for their clients. I let them look and dream anyway.
I have owned 4 different brokerages over the years and had hundreds of agents come through my doors.. Its like any sales job you have top producer and you have those that just are not cut out for the industry lifestyle or sales etc etc. and this is for many reasons. wholesalers that are not buying property for their own account and doing value add like you and me.. their wash out rate I suspect is better than 95%. There are successful agents there are successful wholesale/assignors I deal with both every week.. The main difference is one is licensed and regulated the other is just a scheme to circumvent the License laws and the states are cracking down.. Texas has very specific carve out that they allow this activity.. its really state specific at this time. Ohio will go after non licensed wholesalers and so will Oregon ( someone though has to file a complaint against them with the DRE).
I understand were your going with the pre approval and prequal but the market moves so fast 95% of the buyers are not going to get a full pre approval (totally underwritten ) well into the transactions not up front. And the abuses in the HML pre qual letters is rampant very many HML will send a pre qual with never looking at the buyer all folks have to do is ask and or pay a small fee for it.. so pre qual from a HML means nothing to me.. U can get 5 million dollar ones from lima one and lending home..
Agents like wholesalers basically need 1 year of savings at least before they go full time without it if they dont hit the ground running they cant afford to stay in the bizz . And for sure 80/20 rule is very accurate my wife I am proud to say was Number One last year at More realty out of 783 agents in multiple markets :) But she wont work for investors does not need to.. Just the very few I might meet at BP and are nice people.. Most investors are very tough to work with..
This is another reason you have turn key brokers they have the patients to work with newbie investors. Nothing worse than a nervous over analyzing investor looking to buy a 50 to 150k rental prop some where in middle America..
This is why Commerical brokers who have some longevity do so darn well. They deal with sophisticated repeat buyers different kettle of fish as it relates to the buyer pool
As long as you have gurus and u tube pitching get rich with out any of your own money you will have this constant flow of unlicensed people coming into the business lets face there is not enough properties to go around for every one who wants into the get rich with no money schemes.. I know I get letters and robo calls every day from different people . Vegas BAltimore even here in Oregon I get robo called for my personal residence which is not really a target for wholesalers .
Lastly keep in mind 90% of realtors are dealing in the owner occ find a mom and pop a home to live in they are not working and trying to sell to investors thats a specialty niche and the ones that are good at it are very good and successful as well.. I know one broker here in Oregon all he sells and markets to is 2 to 4 units does very well.
Lastly I caught a guru commercial between U Tube articles i was watching and there was Guru interviewing Grant Cardone and they were pitching rental arbitrage . And there is Grant and i quote.. Let me get this straight you can do this with NO credit NO money NO experience just have to buy my course.. And of course I am sure Grant is getting a slice just like any other pitchman/women gets a slice for advertising Nike's or whatever or second labelling wine..
- Investor · Columbus, OH · Member since 2020 · 39 posts · 32 votes4y
I understand that Wholesaler's play a role and can provide a beneficial service to all involved. But I have to say, I'm tired of the 5 calls a day asking if I want to sell one of my houses. I'm tired of all of the texts asking if I want to sell one of my houses. I'm tired of them calling my relatives asking if they want to sell one of my houses. And I'm very tired of them calling my 86 year old mother in law asking her if she wants to sell one of my houses which then requires a conversation by my husband to explain to her what is happening.
This may not be a popular post on this topic, but it is how I feel.
Good luck to everyone in your investing journey.
- Investor · Corpus Christi, TX · Member since 2012 · 2k+ posts · 1k+ votes4y
More legislation is inevitable. When you have so many people claiming to be cash buyers when they don't have cash and or even access to cash, and then having these same people hide the fact that they have no intention of buying the property, it creates complaints to elected officials. Throw in the fact that anyone that can fog a mirror can claim to be a cash buyer, we must expect additional regulations. Requiring a license will not change someone's ethical challenges, it will only place a small hurdle in their path which may cause 50% of them to find their next get rich scheme. And that is not a bad thing in my book.
- Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes4y
In most cases I would rather transact with a small wholesaler than 90% of licensed wholesalers, I mean agents.
At least individual wholesalers don't have 'overhead' and splits to justify high arse costs for minimal value.
2 agents are right now costing a buyer of my rental house $33,000. One of my key principles is to aid first time buyers when I sell. A win-win, net of commissions or middlemen.
My mistake giving an assignable option to buy to an owner-occ first time buyer that happened to be licensed. She assigned it for $25k. It expires in 5 weeks. My option fee was $9k for a year, extendable for additional 6 months for $5k if needed. Value. A hand up in a tough market.
The buyer also has an agent who is costing her $8333 for drafting an offer already spelled out in the Option agreement. You'd think this agent could cut her a break. No risk of offer not being accepted. No time driving around or competing with other buyers. Nah. Charge the full 2.5%.
My rant about agents. Greed over empathy for a young first time buyer. What should have costed her $12k ballooned to $33k when agents got involved.
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