Do you have to lie to wholesale?
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Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes"I also thing it is important to be honest and upfront with people. Says "hey, I am buying your house, but I need to make money. I plan on eventually selling it. It may not be the right house for my portfolio, but I know some people it may work for." If you find phrases like that, you're not lying and you are prepping them for an assignment of contract."
If you never intend to purchase the house yourself, then the above is still a lie. I suggest telling the absolute truth; if your business model does not work when or because you are truthful, then find a different business model.
37 Replies
Absolutely. People telling the truth will likely be around much longer than people who lie. Think about building your buyers list, if you have an investor who you can call anytime you get a deal if you lie to him on the first deal than you've probably burned up a valuable relationship.
If you don't lie about #1 you wouldn't have to lie about #2. #3 I don't see why you wouldn't tell them about the water bill to begin with.
- Houston, TX · Member since 2013 · 10 posts · 3 votes12y
Kay,
I am a starting wholesaler, and a christian as well. I see wholesaling as a beautiful express of my faith being able to serve people in their time of need.
I also thing it is important to be honest and upfront with people. Says "hey, I am buying your house, but I need to make money. I plan on eventually selling it. It may not be the right house for my portfolio, but I know some people it may work for." If you find phrases like that, you're not lying and you are prepping them for an assignment of contract.
- 12yDon KonipolBusiness MemberInvestor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
"I also thing it is important to be honest and upfront with people. Says "hey, I am buying your house, but I need to make money. I plan on eventually selling it. It may not be the right house for my portfolio, but I know some people it may work for." If you find phrases like that, you're not lying and you are prepping them for an assignment of contract."
If you never intend to purchase the house yourself, then the above is still a lie. I suggest telling the absolute truth; if your business model does not work when or because you are truthful, then find a different business model.
Originally posted by @Don Konipol:
"I also thing it is important to be honest and upfront with people. Says "hey, I am buying your house, but I need to make money. I plan on eventually selling it. It may not be the right house for my portfolio, but I know some people it may work for." If you find phrases like that, you're not lying and you are prepping them for an assignment of contract."
If you never intend to purchase the house yourself, then the above is still a lie. I suggest telling the absolute truth; if your business model does not work when or because you are truthful, then find a different business model.
So what's an example of some phrases I could use to tell the absolute truth?
Originally posted by @Chris K.:
Absolutely. People telling the truth will likely be around much longer than people who lie. Think about building your buyers list, if you have an investor who you can call anytime you get a deal if you lie to him on the first deal than you've probably burned up a valuable relationship.
If you don't lie about #1 you wouldn't have to lie about #2. #3 I don't see why you wouldn't tell them about the water bill to begin with.
Chris, so what are some phases you would use in response to some of my examples to tell the absolute truth?
- Houston, TX · Member since 2013 · 10 posts · 3 votes12y
Originally posted by @Don Konipol:
"I also thing it is important to be honest and upfront with people. Says "hey, I am buying your house, but I need to make money. I plan on eventually selling it. It may not be the right house for my portfolio, but I know some people it may work for." If you find phrases like that, you're not lying and you are prepping them for an assignment of contract."
If you never intend to purchase the house yourself, then the above is still a lie. I suggest telling the absolute truth; if your business model does not work when or because you are truthful, then find a different business model.
Don, you're right. I look at deals first if its something that I can buy, but if you don't have an intention to buy don't say that.
You may want to check out the Red Pill Investor podcast, they have a pawnshop presentation that may at the very least give you some ideas.
- 12yDon KonipolBusiness MemberInvestor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
Let's back up a minute and clarify some issues related to wholesaling. Most residential real estate contracts used by local Realtor Boards these days have an option section built in. For a consideration ($1 or more) the buyer is provided a certain amount of time (negotiable) to conduct due diligence and decide if (s)he wants to purchase the property or not. If not the buyer is refunded their earnest money with the seller keeping the option fee.
The basis of utilizing the option was to avoid the litigation that used to occur when a buyer discovered problems with the subject property and demanded repairs or backed out - now the buyer has an automatic out and most litigation associated with deals "falling through" is avoided.
When the powers that be decided on the option clause, which by the way does not HAVE to be used by the parties, they were thinking in terms of buyers who actually wanted to BUY property, not flip it to another party before closing.
So one school of thought regarding wholesaling is that the wholesaler just uses the standard real estate contract, giving themselves sufficient time in the option period to find a real buyer at a higher price. The wholesaler lets the contract do the talking; if he is unable to flip the property at a profit he merely exercises his option to walk away.
IMO, the problem with this is two fold. First, we are dealing with a business professional who should have much greater knowledge than the consumer homeowner. Second, severe financial harm may result to the homeowner, if, for example he waits for a sale than doesn't close and is foreclosed on in the meantime, having lost his ability to negotiate with a buyer that would actually buy his property.
The second school of thought is for the wholesaler to lay his cards on the table and explain to the seller that he will not be the final buyer, that he plans to sell the property for a higher price to one of his real estate investor clients. That the seller will have his property exposed to a market different from that which listing with a Realtor would provide, and that he would be saving the Realtor's commission.
BTW, many potential real estate investors enter wholesaling because they are trying to build capital; they lack cash and credit further creating an unethical situation if they do not inform the seller as they are representing themselves as ready to purchase a property they know they can not pay for.
- Denver, CO · Member since 2013 · 409 posts · 105 votes12y
I would be interested to know your perception of wholesaling after you have actually done a couple of wholesale deals.
- Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes12y
Look up the word dissembling. This is still lying. IMHO if you say "I'm buying your house" you dang well better be planning to do exactly that. Period.
That includes putting up signs saying "we buy houses for cash".
Real estate agents don't claim they're going to buy your house. They say they are going to try to find a buyer. The contract is a listing agreement, not a purchase agreement. A wholesaler does exactly the same job as an agent.
Be honest. You can say "I have buyers who are interested in houses like yours. They can close quickly and will buy the house as-is."
As a wholesaler if you don't tell at least 3 lies within your 1st two deal you won't be allowed in the wholesalers club.... j/k :-)
Here's my nickel of knowledge: Whether its a little lie, big lie or slight bending of the truth, if you feel it compromises your morals to the point you can't live with yourself then by all means stay clear from it. Noone can or will ever force you to wholesale or to partake in any other sort of entrepreneurial pursuit. So you tried it and its not for you. Treat it like a bad habit....
Kudos,
Mary
- Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes12y
@Kay H. I absolutely believe that you can wholesale without lying.
Here is the issue, you're looking at it as "I need to lie to get this person to sign a contract with me". You need to be focusing on those people that are really really ready to sell. You are finding those people that are so ready to sell that they just want you to fix their problem. Almost no ones best option is to sign a contract with a wholesaler, even a distressed property that needs serious repair will probably sell for more listed on the MLS which most investors check and will see and can make their own cash offer.
Others here (I think Michael Quarles is one who has mentioned this) have mentioned up front that they may assign the contract to another investor, those sellers that still sign with you are the truly motivated sellers you are looking for.
- Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes12y
Originally posted by @Kay H.:
it seems you have to tell the following lies:
1. I'm buying the property
2. My contractors (not the investors) are coming by to check out the place.
3. Title is free and clear. Just a small water bill
Is there anyway for a person who likes to tell the truth to do this and still make money?
Interesting that you view the business this way. Here is the way I see it; If I make an offer I close whether or not I find a buyer to wholesale it to. When I write the offer, it is my company or myself as the buyer. I assign the contract, which is legal and the seller has no say in it as long as the contract is fulfilled and the assignment isn't expressly forbidden, when I decide I want to wholesale the property. The seller still gets the same price he was offered, under the same terms. How is that lying?
Common law, which is based on case law, which is based on the decisions of judges, favors assignments.
Now, if you write an offer and can't find a buyer, will you still close? Or, will you use a bunch of BS contingencies to get out of the contract?
You write the offer - you close or the person you assigned your position in the contract closes. If you can't make that happen, then yes, you are a liar and you don't belong in this business.
I don't even get #3? I've never heard anyone say something about a water bill..
- 12yDawn AnastasiPro MemberRental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
Originally posted by @Kay H.:
hi,
I'm a newbie. Also a Christian so I feel a little twinge if I have to lie. In my experience working my first deal, it seems you have to tell the following lies:
1. I'm buying the property
2. My contractors (not the investors) are coming by to check out the place.
3. Title is free and clear. Just a small water bill
Is there anyway for a person who likes to tell the truth to do this and still make money?
Were you told to tell these lies in order to make deals by someone claiming to be a guru or selling a course?
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes12y
Didn't really read all the posts.\
Cowards lie. People lie, mislead, embellish or mislead when they lack skills, knowledge and expertise that can convince someone to follow them.
With real buyers or sellers, when you are caught, you're done, it's over, you won't be trusted, you name is mud.
Lie and you won't last long. Those who take an upfront professional attitude in this business won't deal with you, or, if they do deal with you, it will be not only acceptable but a desirable thing to do to really put it to you and run you out of business. If you get tagged as a scammer or one who screws around trying to get a deal, it will catch up with you, good luck. :)
- Real Estate Investor · Member since 2013 · 866 posts · 487 votes12y
If you have to lie in any business transaction you are doing it wrong.
@Matt Devincenzo and @Aaron Mazzrillo are right on the money.
I have never wholesaled. I have bought from wholesalers and there were times when I learned they lied to the seller to get them to sign on the dotted line. When that happened, I went around the wholesaler and offered the full price I agreed to pay the wholesaler to the original seller.
Not one of the wholesalers who threatened to sue ever followed through. They yammered on about not ever doing business with me again, like it was their choice.
Always do the right thing, even if it is uncomfortable.
Originally posted by @Dawn Anastasi:
Originally posted by @Kay H.:
hi,
I'm a newbie. Also a Christian so I feel a little twinge if I have to lie. In my experience working my first deal, it seems you have to tell the following lies:
1. I'm buying the property
2. My contractors (not the investors) are coming by to check out the place.
3. Title is free and clear. Just a small water bill
Is there anyway for a person who likes to tell the truth to do this and still make money?
Were you told to tell these lies in order to make deals by someone claiming to be a guru or selling a course?
yes....I was.....
Its not a lie if you tell the seller you want to buy their house. You might not be the buyer but you're in the business of buying.
A buyer for a company goes out to but lumber to add an addition or whatever to the warehouse. Does he go to home depot and tell the associate, "Hey I'm not the one really buying this wood? The company i work for is buying this wood." No he says, "I'm looking for some boards to buy. Can you help ME out?" When he gets to the check out and pulls the corp card out no one is going to say, "Hey, hey, hey! Hold on there partner, you said YOU were buying this timber!!!"
It's the same thing here. You're a real estate investor. You're in the business of buying houses. You may not be in the position to buy but you Corp (investor network) is plenty capable. I'm a christian also. I see where you're coming from but like a lot have said. No one likes working with a liar.
Tell your sellers you buy houses. Not a lie because you really do want to buy houses. Look at yourself like that company buyer and you'll be fine. Besides you'll be buying you're own soon enough. Be easy and God bless
- Real Estate Investor · Member since 2013 · 866 posts · 487 votes12y
If you 'wholesale' that way and aren't a licensed real estate agent or broker, in every single state and territory in this Republic you are brokering a real estate transaction without a license and it is 100% illegal.
You're going to have to help me understand this one. So by telling a seller I want to buy their house, agree to a price, get it under contract, then sell it to an investor, I'm performing an illegal act?
- Real Estate Investor · Member since 2013 · 866 posts · 487 votes12y
Originally posted by @Greg B.:
@Duncan Taylor
You're going to have to help me understand this one. So by telling a seller I want to buy their house, agree to a price, get it under contract, then sell it to an investor, I'm performing an illegal act?First, let's deal with this scenario of yours above, because it is different from what you posted before.
In the scenario above if you tell the seller you want to buy their house and sign a contract with them saying you are going to buy their house but your intention from the beginning was to either find another buyer or back out of the deal. It may or may not be illegal, but it is damn sure unethical unless you close on that original contract even if you can't find another buyer.
Now, to your scenario before where you were putting yourself out there as a buyer for someone else. Yes, that is a brokerage transaction. Do it without a license and yes it is illegal.
Originally posted by @Greg B.:
Tell your sellers you buy houses. Not a lie because you really do want to buy houses. Look at yourself like that company buyer and you'll be fine. Besides you'll be buying you're own soon enough.
Lets be honest here...that's still not being truthful. His intention is not to buy the house, it's to get it under contract and pass it along to someone who does want to buy, while he gets paid the difference. Unless he fully intends to close on the property as stated in the sale contract then he's not a "buyer".
Maybe I should have clarified my example. I was more interested in the showing how it wasn't a lie and not the scenario. I apologize for that. But i'm still lost on the me being unethical part by selling to an end buyer. Isn't that what wholesalers do? They put up we buy houses signs and direct mail. Callers call and they go out to see the house. Get it under contract and sell to a rehabber. I don't know. If I put a property under contract and there's a double close at the lawyers office, I'm pretty sure I bought the property. If I assign the contract for a fee the property was bought because I did the work. I guess its how you look at things.
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