real estate wholesaling under attack
oak lawn illinois · Member since 2022 · 16 posts · 21 votes
real estate wholesaling under attack
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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
- Chicago · Member since 2018 · 216 posts · 165 votes4y
I think wholesalers are leeches who take advantage of ignorant sellers and these leeches should be put out of business by regulation. Go ahead and prove me wrong.
I get so many calls from people trying to buy my buildings. And when I ask what they are offering they offer me 2/3 of what I recently paid for the building. Are they morons? Do they think I'm a moron?
- Chicago · Member since 2018 · 216 posts · 165 votes4y
Quote from @Steve Vaughan:
........
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.
Your beef should be with the stupid buyer not the greedy realtor. Who is dumb enough to pay $8K for a cut and paste agreement? A lawyer would have charged less than $800. I used a realtor to close an off market deal and he charged $1,500 as a flat fee and split that 50/50 buyer/seller. Seller's lawyer wanted to rip him off drafting the sales contract.
- New to Real Estate · Winter Garden, FL · Member since 2013 · 4 posts · 0 votes4y
@Michael P. THIS! I've also wondered/worried about this scenario when contemplating what a wholesale deal would look like realistically..
- Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes4yI know this doesn't solve the problem and it won't go away anytime soon but here are:
Quote from @Tina Wicks:
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.
Tips for reducing annoying phone calls:
1. Have two numbers
a. One number for friends and relatives and doctor, lawyer, CPA, PM, etc
b. Another number used for filling out forms, used for "throw away" purposes - for my second number
I use the phone number to retrieve calls for my cell phone carrier. The caller never reaches me.
2. When you get a Text you don't want, don't ignore it. Send the word "Stop" back as a text. Most systems are set up to prevent your number from being texted to if the phone sends "Stop" back
Any other word or conversation or lack of response guarantees future texts from that number
3. My iPhone has a "Block this caller" feature which I use regularly
4. My home phone number is forwarded to my iPhone where I use the "Block this caller" regularly
5. I don't feel obligated to pick up the phone everytime it rings. The phone is there for my convenience not some insurance or window replacement solicitor's convenience.
6. I'm told you can set up a Google phone number that you can use and it blocks known spammers. I don't use social media so I'm not sure about that one.
7. One trick I've used is to take the call, let them start the conversation, tell them to wait a minute that I need to put them on hold, place them on hold and forget about them.
8. And I have everyone important listed as a contact on my phone, so if a call comes in that isn't a contact, I can let it go to voice mail and screen if I want to call them back.
For those of you actually doing real estate and want to be sure to not miss a business call, you can do what I do for that, as well. This is a little more advanced for you if you do a lot of advertising and transactions.
9. I have a second iPhone, who said your phone has to be the newest latest and greatest? I bought a couple of older models a. one for my outgoing selling properties b. one for my incoming buying properties. When a call comes in I know to take the call since it's from my advertising.
I wouldn't expect someone just starting out or that has only a couple of rentals to use that method but it works in the appropriate situation. - New to Real Estate · Winter Garden, FL · Member since 2013 · 4 posts · 0 votes4y
Quote from @Michael P.:
I like wholesalers they point me in the direction of good deal then I just call the real owner directly and lock it up at a lower price.
Quote from @Rod Crawford:
- Rental Property Investor · Perry Hall, MD · Member since 2016 · 588 posts · 600 votes4y
Quote from @Account Closed:
I know this doesn't solve the problem and it won't go away anytime soon but here are:Quote from @Tina Wicks:
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.
Tips for reducing annoying phone calls:
1. Have two numbers
a. One number for friends and relatives and doctor, lawyer, CPA, PM, etc
b. Another number used for filling out forms, used for "throw away" purposes - for my second number
I use the phone number to retrieve calls for my cell phone carrier. The caller never reaches me.
2. When you get a Text you don't want, don't ignore it. Send the word "Stop" back as a text. Most systems are set up to prevent your number from being texted to if the phone sends "Stop" back
Any other word or conversation or lack of response guarantees future texts from that number
3. My iPhone has a "Block this caller" feature which I use regularly
4. My home phone number is forwarded to my iPhone where I use the "Block this caller" regularly
5. I don't feel obligated to pick up the phone everytime it rings. The phone is there for my convenience not some insurance or window replacement solicitor's convenience.
6. I'm told you can set up a Google phone number that you can use and it blocks known spammers. I don't use social media so I'm not sure about that one.
7. One trick I've used is to take the call, let them start the conversation, tell them to wait a minute that I need to put them on hold, place them on hold and forget about them.
8. And I have everyone important listed as a contact on my phone, so if a call comes in that isn't a contact, I can let it go to voice mail and screen if I want to call them back.
For those of you actually doing real estate and want to be sure to not miss a business call, you can do what I do for that, as well. This is a little more advanced for you if you do a lot of advertising and transactions.
9. I have a second iPhone, who said your phone has to be the newest latest and greatest? I bought a couple of older models a. one for my outgoing selling properties b. one for my incoming buying properties. When a call comes in I know to take the call since it's from my advertising.
I wouldn't expect someone just starting out or that has only a couple of rentals to use that method but it works in the appropriate situation.I'm aware you already bought a few older phones for this purpose but check out openphone.co. Fantastic alternative to google voice. Cheap and easy to get multiple phone numbers and you can even share them with team members. All app-based, no hardware.
- Rental Property Investor · Perry Hall, MD · Member since 2016 · 588 posts · 600 votes4y
There are agents that don't provide enough value to justify their fees. There are wholesalers who are forthright with homeowners about what they're doing and actually do solve problems for them. There are also agents that are worth every penny of their fee and there are wholesalers who obfuscate their intentions and take advantage of people who are ignorant about their home's true value.
I'd say don't waste energy getting upset about generalizations but this is the internet.
- Residential Real Estate Broker · Sedona, AZ · Member since 2017 · 754 posts · 504 votes4y
Wow. A pretty hot topic, here. As a seasoned and highly investment specialized realtor, I do not agree with thoughtless comments that paint the picture of over-paid realtors and under-earned realtor commissions. However, like every profession on the planet, you will have many bad apples, and a smaller percentage of the absolute best- the top performers. Clearly, you should work with the best and do your best to avoid the many bad apples out there. The bad apples ARE 100% over paid. There is a lot of noise, and it can be difficult to filter this out.
My buying STR investor clients are getting 15-35%+ cash on cash (27% average in 2021), with 25%+ appreciation. My seller clients are averaging 21% above FSBO sales numbers with comparable homes and 9% more than comparable MLS listings with other local realtors. Is that worth the 3% that I earn, and the 6% total commission (My 3% + the other realtor's 3%)? A tremendous amount of busy work and protecting our clients is occurring before and after close of escrow, as well. In fact, after COE, I no longer get paid, but continue to support my clients so their cash on cash is pushed as high as possible. I perform STR cash flow audits at no charge, any time my clients ask. As an example of protecting my clients, I'm helping a recent widow to move her husband's properties and financing into her name. There is no compensation for this, but I am her family's realtor and she needs help, and I'm happy to give it- she is crushed and overwhelmed and I've got her back.
There are a lot of bad realtors out there. Part-timers and many full-timers as well, that spin their wheels and don't have the experience, training or courage to best serve their clients. It's really a shame and sometimes it causes distrust from some investors toward all realtors. When a potential client talks with me like I am a salesperson, I wish them well and I either refer them to another realtor, or just give them another couple of realtors' names.
I'm in this business to serve my clients. Not only does this not end when I get paid, but I serve my clients at the highest level. I protect them legally, financially, and something that is crucially important to most of my clients, I save them valuable time and energy, as they know they can trust my advice and knowledge of the local and state real estate markets, and I stay in "the know" of changes that will impact real estate investing in the near future.
Lastly, as far as wholesalers go- there are probably some absolutely amazing wholesalers out there. It's hard to imagine a wholesaler that protects the "customer" or even thinks of the "customer" as a protected "client". It's difficult to compare. It's just very different. Wholesalers are realtors are not interchangeable.
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Chad McMahan:
Wow. A pretty hot topic, here. As a seasoned and highly investment specialized realtor, I do not agree with thoughtless comments that paint the picture of over-paid realtors and under-earned realtor commissions. However, like every profession on the planet, you will have many bad apples, and a smaller percentage of the absolute best- the top performers. Clearly, you should work with the best and do your best to avoid the many bad apples out there. The bad apples ARE 100% over paid. There is a lot of noise, and it can be difficult to filter this out.
My buying STR investor clients are getting 15-35%+ cash on cash (27% average in 2021), with 25%+ appreciation. My seller clients are averaging 21% above FSBO sales numbers with comparable homes and 9% more than comparable MLS listings with other local realtors. Is that worth the 3% that I earn, and the 6% total commission (My 3% + the other realtor's 3%)? A tremendous amount of busy work and protecting our clients is occurring before and after close of escrow, as well. In fact, after COE, I no longer get paid, but continue to support my clients so their cash on cash is pushed as high as possible. I perform STR cash flow audits at no charge, any time my clients ask. As an example of protecting my clients, I'm helping a recent widow to move her husband's properties and financing into her name. There is no compensation for this, but I am her family's realtor and she needs help, and I'm happy to give it- she is crushed and overwhelmed and I've got her back.
There are a lot of bad realtors out there. Part-timers and many full-timers as well, that spin their wheels and don't have the experience, training or courage to best serve their clients. It's really a shame and sometimes it causes distrust from some investors toward all realtors. When a potential client talks with me like I am a salesperson, I wish them well and I either refer them to another realtor, or just give them another couple of realtors' names.
I'm in this business to serve my clients. Not only does this not end when I get paid, but I serve my clients at the highest level. I protect them legally, financially, and something that is crucially important to most of my clients, I save them valuable time and energy, as they know they can trust my advice and knowledge of the local and state real estate markets, and I stay in "the know" of changes that will impact real estate investing in the near future.
Lastly, as far as wholesalers go- there are probably some absolutely amazing wholesalers out there. It's hard to imagine a wholesaler that protects the "customer" or even thinks of the "customer" as a protected "client". It's difficult to compare. It's just very different. Wholesalers are realtors are not interchangeable.
main difference is your trying to maximize your sellers return or buyers ROI.. wholesalers are trying to maximize their return with no thought to the seller other than make a deal.. they do have the illusion of a savior and solving problems but shoot 95% of wholesalers have no clue how to really solve any technical problem.. they can learn over time.. but agents by and large that are beginners as well dont know what they dont know.. But they have A BROKER to fall back on solo wholesaler has no support other than the how to gurus.
- Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes4y
Quote from @Matthew Irish-Jones:
@Cody L. 48K !!!!! I will bring you deals on a silver platter for 3% LOL. They just need to be in WNY. That’s one heck of a bird dog fee.
I pay him a % of the deal. Under $1m it's 2%. $1m-2.5m it's 1.5%, and 2.5m+ it's 1%. The deal was $4.8m. So he got $48k.
It was a great deal. I refinanced it based on a 6.2m value. Got 75% LTV so my loan was about $4.65m. Meaning I'm only in a $6m+ property for about $200k. Property makes good cash flow so my ROI on my $200k of equity is enormous (esp if you consider the fact the $6.2m property should appreciate. Even if it goes up 2% a year, that's almost a 50% return on my money just from appreciation.
So yeah, I'll pay someone $50k all day long for those deals. - Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes4y
The wholesaling debate rages on and on and on. It is so funny how all the responders in this (and other threads) who are for wholesaling are wholesalers and they all blame BP for being "anti wholesaling", blame agents stating they don't want more competition, and blame NAR because they want to get more dues and keep their prominent position. Wholesalers in this thread have told us how to wholesale - just negotiate a contract with a seller, line up transactional funding, find your buyer to pay more than your contract, double close 1-2 days later and bam, your loaded. Funny thing is, in order to "get that buyer", you had to market it somehow and by marketing it, negotiating a contract with a seller, negotiate a purchase price with a buyer and collecting a fee for it constitutes brokering services in all 50 states. Doing so without a license IS brokering without a license. You can play around with the words or order of things all you want, it does not change the facts that wholesalers working in this manner are skirting the laws (or attempting to) and the assignment version of transacting a wholesale deal is even more so a violation of the laws. Wholesalers always state they can do what agents do and they do it better beauces agents will not list properties in bad condition. That is just BS. I have purchased from the MLS with a listing agent representing homes that were in such bad condition, they were not in a condition to be financed from lenders. Enough with the BS lies and stories, your arguments against getting licensed just do not hold water. Most don't get licensed because they are to lazy, know they can no longer lie to sellers with their stories of inspections and partners coming by (when really they are potential buyers), telling potential buyers in writing to not disclose to the seller or agent who they are, and the list goes on.
The only way to legally and ethically "wholesale" would be to have your buyer first, partner with that buyer in a new entity or trust and then search for properties that meet the partner's requirements, negotiate with the seller as a principle in the transaction (owner of the entity) and close in that entity, selling your shares to your partner at the end for your fee. On top of that, disclosing to the seller that your cash offer is less than market value and that they could list with an agent on the MLS and likely receive a higher offer would be prudent, morally correct, and ethical, likely keeping you our of a court room.
Double closing means you have two closing fees, borrowed funds fees, and your wholesale fee. To account for all of that, you really need to make an offer well under market value to the seller, which is in effect, taking equity from seller to pay for your transactional fees. If this was done to your Mother or your Grandmother, would you not take issue with it?
Now for agents. It is true that a good 80% of agents really suck. Same could be said about contractors, politicians (OK, actually 99.9% suck), barbers, etc. There are bad people in every industry. The good thing is that creating at least a small barrier to entry helps keep some of those bad apples out. Ongoing education is never a bad thing in any industry and maintaining a license which has oversight, fiduciary responsibilities, etc. is also a good thing.
Wholesalers get such a bad rep in large part because their arguments to support their niche (as evidenced in this thread and many others are so pathetic and lack any foundation. They promulgate lies, offer advice to others that is illegal or incorrect, and often make arguments just for personal gratification that they are doing some good deed. This is NOT to say that every single wholesaler is a scum bag. It is to say that generally speaking, many are and many more wannabies disseminate this invalid, illegal, and immoral behavior that the experienced investors will not stand idly by and watch them do it without jumping in. If that makes BP "anti wholesalers" then you have a very poor perception of the facts.
- Griffith, IN · Member since 2019 · 114 posts · 56 votes4y
@Charlie MacPherson. Well, I see you think all wholesalers are the scum of the Earth. You're probably right about 90% of them. But there's 10% that provide a valuable service to sellers and help them out of their situation. You said that realtors can find thousand of buyers. Really? Then why does maybe 80% of my sellers tell me their realtor did NOTHING for them? I'll tell you why. Because if there isn't enough "cash" in it for them, they won't even bother trying to sell it. If the property is run down, you're lucky if they post 2 or 3 pictures. The vast majority of realtors don't want anything to do with "fixer uppers." Yet you claim they have a "fiduciary" responsibility. Yeah...right. Tell the sellers I've worked with that, when their realtor won't even show interested buyers a beat up property. You said there's "nothing" a wholesaler can do that a realtor can't." BULL. Many wholesalers work with investors that will buy the properties that others don't want. They can find buyers that realtors can't. I see VERY few realtors who as you said "Will bring the buyer who is looking for a fixer upper-to call their own." Where are these realtors?? Of course investors want low prices properties. Don't ALL buyers? When a deal is wholesaled, I would say that 85% of the sellers have no other option. Why? Because the realtors couldn't sell it! They barely market the property. Try to get a realtor to show you a "beat up" property on a timely basis. Good luck with that. Sellers turn to wholesalers many times, because the realtors did NOTHING to sell their property. So DON'T blame the wholesalers for everything. Like I said before, many wholesalers are crooks. They don't care about anything but making a buck. But there are honest wholesalers out there. Do you have any idea how many incompetent licensed realtors are out there? Trust me, they have PLENTY of them. I don't think it's fair to bash an entire group of people and say they're all crooks. That's NOT a responsible or accurate statement what so ever.
One of the reasons we don't get licensed is because we don't want to spend 60 hours a week showing houses. We also want to work for ourselves. Plus, realtors can bust their butt and on a $10k commission, sometimes they're lucky if they see $2500 of that profit. Sorry, but if I'm going to work my butt off, I want the money to go into in MY pocket...NOT another realtors or a broker. So try to understand that there's always 2 sides to a story. Just my 2 cents.
- China, ME · Member since 2014 · 3k+ posts · 4k+ votes4y
Quote from @Scott Swanson:
@Charlie MacPherson. Well, I see you think all wholesalers are the scum of the Earth. You're probably right about 90% of them. But there's 10% that provide a valuable service to sellers and help them out of their situation. You said that realtors can find thousand of buyers. Really? Then why does maybe 80% of my sellers tell me their realtor did NOTHING for them? I'll tell you why. Because if there isn't enough "cash" in it for them, they won't even bother trying to sell it. If the property is run down, you're lucky if they post 2 or 3 pictures. The vast majority of realtors don't want anything to do with "fixer uppers." Yet you claim they have a "fiduciary" responsibility. Yeah...right. Tell the sellers I've worked with that, when their realtor won't even show interested buyers a beat up property. You said there's "nothing" a wholesaler can do that a realtor can't." BULL. Many wholesalers work with investors that will buy the properties that others don't want. They can find buyers that realtors can't. I see VERY few realtors who as you said "Will bring the buyer who is looking for a fixer upper-to call their own." Where are these realtors?? Of course investors want low prices properties. Don't ALL buyers? When a deal is wholesaled, I would say that 85% of the sellers have no other option. Why? Because the realtors couldn't sell it! They barely market the property. Try to get a realtor to show you a "beat up" property on a timely basis. Good luck with that. Sellers turn to wholesalers many times, because the realtors did NOTHING to sell their property. So DON'T blame the wholesalers for everything. Like I said before, many wholesalers are crooks. They don't care about anything but making a buck. But there are honest wholesalers out there. Do you have any idea how many incompetent licensed realtors are out there? Trust me, they have PLENTY of them. I don't think it's fair to bash an entire group of people and say they're all crooks. That's NOT a responsible or accurate statement what so ever.
One of the reasons we don't get licensed is because we don't want to spend 60 hours a week showing houses. We also want to work for ourselves. Plus, realtors can bust their butt and on a $10k commission, sometimes they're lucky if they see $2500 of that profit. Sorry, but if I'm going to work my butt off, I want the money to go into in MY pocket...NOT another realtors or a broker. So try to understand that there's always 2 sides to a story. Just my 2 cents.
Nice rant, but there is so much misinformation that it's hard to believe that you could pick a Realtor out of a one person lineup.
The only thing we can agree on is that there are bad Realtors out there. Just like there are bad carpenters, dock workers and teachers. The difference is that bad Realtors starve themselves out of the business pretty fast.
But the rest? Nobody wants to buy a fixer-upper to live in? A Realtor taking home 25% of a commission? Posting 3 photos on MLS?
As you-know-who would say, C'mon, man! - 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Scott Swanson:
@Charlie MacPherson. Well, I see you think all wholesalers are the scum of the Earth. You're probably right about 90% of them. But there's 10% that provide a valuable service to sellers and help them out of their situation. You said that realtors can find thousand of buyers. Really? Then why does maybe 80% of my sellers tell me their realtor did NOTHING for them? I'll tell you why. Because if there isn't enough "cash" in it for them, they won't even bother trying to sell it. If the property is run down, you're lucky if they post 2 or 3 pictures. The vast majority of realtors don't want anything to do with "fixer uppers." Yet you claim they have a "fiduciary" responsibility. Yeah...right. Tell the sellers I've worked with that, when their realtor won't even show interested buyers a beat up property. You said there's "nothing" a wholesaler can do that a realtor can't." BULL. Many wholesalers work with investors that will buy the properties that others don't want. They can find buyers that realtors can't. I see VERY few realtors who as you said "Will bring the buyer who is looking for a fixer upper-to call their own." Where are these realtors?? Of course investors want low prices properties. Don't ALL buyers? When a deal is wholesaled, I would say that 85% of the sellers have no other option. Why? Because the realtors couldn't sell it! They barely market the property. Try to get a realtor to show you a "beat up" property on a timely basis. Good luck with that. Sellers turn to wholesalers many times, because the realtors did NOTHING to sell their property. So DON'T blame the wholesalers for everything. Like I said before, many wholesalers are crooks. They don't care about anything but making a buck. But there are honest wholesalers out there. Do you have any idea how many incompetent licensed realtors are out there? Trust me, they have PLENTY of them. I don't think it's fair to bash an entire group of people and say they're all crooks. That's NOT a responsible or accurate statement what so ever.
One of the reasons we don't get licensed is because we don't want to spend 60 hours a week showing houses. We also want to work for ourselves. Plus, realtors can bust their butt and on a $10k commission, sometimes they're lucky if they see $2500 of that profit. Sorry, but if I'm going to work my butt off, I want the money to go into in MY pocket...NOT another realtors or a broker. So try to understand that there's always 2 sides to a story. Just my 2 cents.
Scott there is no question that the low value assets out in the mid west and rust belts are not prime target for most realtors.. but there are realtors who specialize in them. I know i fund many who buy from them. As well as areas of the US that frankly are pretty dangerous so your realtors are not really interested in most of those areas and wholesalers do dominate the transactions as they are willing to work in cat pee houses and the hood :) just like I am one of the funders for these that will walk in those neighborhoods personally and or the super scary parts of the cities which we know where those are :) I would never let my wife go anywhere near this inventory..
- Rental Property Investor · Torrance, CA · Member since 2016 · 724 posts · 1k+ votes4y
@Rudy Ferrara idk if it’s agents that are behind the hostility. My agents network with wholesalers. They’ll add their commission into the sale. I bought my Indianapolis house this way. The wholesaler he knew gave us first look before he sent it out to his buyer’s. I bought it, and my agent added his commission on top. Win win
- Griffith, IN · Member since 2019 · 114 posts · 56 votes4y
@Charlie MacPherson and @Jay Hinrichs. So Charlie, you responded to me....Nice rant? You said I posted "misinformation?" I'm not going back and forth with you and this is the last thing I'll say. It's irresponsible to lump "everyone" into the same category and that's exactly what you did. I admitted that most wholesalers don't have a clue what they're doing. You can cast blame everywhere, if you so desire. The bad wholesalers give the good wholesalers a bad name and i think we all know that. So does that mean we're ALL scum? Of course not. But you're entitled to your opinion, as am I.
Jay, IMHO, your statement is correct. But I don't go into many of these bad areas. Even in middle class areas, I've sold houses where there was cat pee everywhere! I agree 100% that most realtors don't want to deal with some areas on the south side of Chicago. I don't blame them. But they shouldn't take the listing if they're not interested in selling/showing it.
My whole point is that the wholesaling business has a very bad reputation and I understand why. That doesn't mean that everyone in the business is a crook.
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Scott Swanson:
@Charlie MacPherson and @Jay Hinrichs. So Charlie, you responded to me....Nice rant? You said I posted "misinformation?" I'm not going back and forth with you and this is the last thing I'll say. It's irresponsible to lump "everyone" into the same category and that's exactly what you did. I admitted that most wholesalers don't have a clue what they're doing. You can cast blame everywhere, if you so desire. The bad wholesalers give the good wholesalers a bad name and i think we all know that. So does that mean we're ALL scum? Of course not. But you're entitled to your opinion, as am I.
Jay, IMHO, your statement is correct. But I don't go into many of these bad areas. Even in middle class areas, I've sold houses where there was cat pee everywhere! I agree 100% that most realtors don't want to deal with some areas on the south side of Chicago. I don't blame them. But they shouldn't take the listing if they're not interested in selling/showing it.
My whole point is that the wholesaling business has a very bad reputation and I understand why. That doesn't mean that everyone in the business is a crook.
well state of IL drew a line in the sand when they passed the law that said you can only wholesale one house a year if your not licensed..
Texas has a very clear carve out for non licensed wholesalers.. its really state specific and its just like many other violations of the law many do it because there is no real enforcement. Does not make it legal though .. and the ones that get complaints against them will have issues of the legal variety.
And for sure even if its technically illegal to wholesale IE: whole business model is to never really buy anything and just mirror what an agent does some states really dont care and the activity is prevalent especially as stated in the under served hoody or low value asset areas.
- Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes4y
Scott Swanson appears to take issue with the comment of "all wholesalers are scum" and I can agree. Using the word "all" is not appropriate as it is untrue and same can be said for any industry, including RE agents, contractors, teachers, cops, etc. The majority (of wholesalers) appear to be as so many operate in illegal and/or immoral fashion. Anyone can make another argument that many or most (NOT ALL) agents suck. It has been stated above that agents do not want to list run down properties in bad areas. That is likely true for many agents as the work load vs the commission amount may not align. There is nothing wrong with saying no thanks to that listing. On the other hand, IF the agent does take that listing, he/she should certainly perform the duties as contracted and failure to do so is a breach of duty on their part and should be reported to their broker (and then the RE board if needed). This is the difference between an unlicensed wholesaler and a licensed agent. There is a body of oversight for agents and NONE for wholesalers (other than the general public reporting them to the RE board or other authorities).
To say (Scott Swanson) that you do not want to spend 60 hours a week showing houses is a gross misrepresentation of the duties and responsibilities of a licensed agent. There is also a big difference in duties from a listing agent and a selling agent. A selling agent is going to have to take their clients to many homes to view and make many offers to land a home in the market today. A list agent not so much as any property priced right will sell instantly in the hot markets of the country. Gross misrepresentation is exactly what you just complained about to @Charlie MacPherson and rightfully so and as such, I question why you would toss back more of it! That seems counterproductive to me. You asked where are the agents who can work with investor buyers - well, plenty are out there including my team and we work with investors more than we work with the typical retail buyer. Admittedly someone like myself with my history and experience are not easily found or duplicated, but that does not mean that we are not out there. I don't work in bad areas because my business model relies on good areas to gain top pricing at exit from a flip or development and that is difficult to do in bad areas (location, location, location). There are certainly agents out there hungry enough and willing to work the bad areas and low price points with lower commission values but know this, if they had a choice between that and a good area with a higher commission, which do you think they would choose? Just the same, if you were offered two jobs, one with lower pay and more danger to you vs higher pay at a nice office, which would you choose? Not really a question as we all know the answer.
Back to this endless debate, people on Biggerpockets need to realize that stating all of this and all of that is not helping anything as "all" is not ever accurate in these topics. The appearance that BP is anti wholesaling is also misinformation as it is simply not true. The experienced pros of BP who have seen first hand the illegal behavior and dissemination of bad advice regarding wholesaling and its proper process is the issue. The fact that most state they do not want to get licensed for any number of silly reasons shows the laziness, unwillingness to comply with laws, and desire to skirt laws for personal gain. This is where I and most others here take issue with "wholesalers". Wholesaling in of itself is not illegal, just like driving a car is not illegal but you can certainly operate the car illegally just as you can in wholesaling. This analogy I have used at least 100 times here on BP and people still seem to miss it.
It has become so bad that the politicians in Sacramento, CA are looking to pass a new law on flipping homes. Due to a recent article by NAR that stated that a majority of homes went to cash buyers (who they are lumping in as "investors/flippers - which is not accurate as owner occupants & second home buyers often pay in cash) that they want to add an additional tax of 25% to your flip income if the property is sold within 7 years. It is yet another example of politicians attempting to solve a problem by attacking a group that helps, not hurts the neighborhoods they work in and because these politicians seem to fail at getting info at ground level from those in the know, they come up with outrageous "cures" to problems. A lot of these cash transactions are certainly paper flips from wholesalers adding to the transaction count they are reviewing which doubles the count for each wholesale transaction. I believe in free enterprise and the forces of supply and demand, let the market bear what it does but certainly regulation has its part in this and regulation in my opinion has failed in the wholesale of RE world.
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Will Barnard one of the classic wholesaler egregious behavior is the tying up a property in foreclosure stringing the seller along with the hopes of selling it only to have the folks run out of time and lose the house.
in my court house steps days about once a quarter I would roll up on a house i just bought only to have the owner shocked.. The nice man said he would take care of it and not to worry.. of course sellers are not always sophisticated enough to understand the whole ramifications. And well there they were could have listed it could have filed a quick BK to try to work something out.. but nope wholesaler long gone Jay now owns it and gets stuck in a very messy emotional situation caused by the fake buyer who had no money no means and just spun a web.. this was not limited to wholesalers to be fair there were also crooks that had fake foreclosure rescue companies IE we will deal with the bank just send us 2k.. many based in FLA.. this is why the AG's in many states really went after preforeclosure schemes.
- Rental Property Investor · Los Angeles · Member since 2018 · 844 posts · 1k+ votes4y
I'm in the process of purchasing a non MLS listed home for my new primary. My LICENSED agent did it correctly because she knew the needs of the seller. Seller was willing to forego the opportunity of getting his house into a bidding war and was willing to sell his house off-market for about 50-75K less than what he could have gotten on the MLS. Why did he do this? He was going through some terrible personal issues and didn't want hundreds of folks entering his home. It was sheer luck that we ran into this opportunity (one year's worth of home searching finally paid off).
I believe that any wholesale type of transaction that isn't motivated by something similar to the above should NOT be done....and trying to pressure or convince the seller otherwise is not ethical, IMO.
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