Is this an end to Wholesaling?

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Is this an end to Wholesaling?

Alan AsriantsBusiness Member
Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes

Bigger pockets just released an article that goes into Wholesaling and how it can become illegal to Wholesale Real Estate in South Carolina.

Here is the link for reference:

https://www.biggerpockets.com/blog/new-south-carolina-law-wo...

Wholesaling real estate seems like a great strategy but with that strategy, I've seen a lot of fishy characters who promote things that aren't true, lie to sellers directly, lie to Buyers and intentionally misrepresent information. Some of this misrepresented information includes things like after repair values, repair costs, rental comps and more. 

I have even encountered wholesalers who push properties with title issues onto buyers that are not knowledgeable enough to understand that this issue could be a very serious problem. 

A lot of the pitch that wholesalers make to sellers is that they were going to be buying a property with cash, even though they have no cash. So if they don't end up finding a buyer to reassign the contract to, they just lied to the seller and wasted their time. 

Again, this is not to bash on all wholesalers, because I do believe that there are some decent people out there. That being said, the majority of my experience comes from people who are pushy salesman who try to get you to buy something. 

At the end of the day, wholesaling real estate is like getting a net listing for a real estate agent. Except the real estate agent discloses that they will be making the difference upfront and not lying to the seller about buying their property for cash. 

That being said, in many states and jurisdictions net listings are actually illegal. 

My personal opinion was that a lot of this Wholesaling activity couldn't go on much longer. There had to be a breaking point, where unlicensed and unaccredited individuals could be handling real estate transactions. Lots of these individuals didn't have mentors or licensed professionals to help guide them through a transaction process. And on top of that I have seen files were there has been over five wholesalers, making a cut from the sale of a property. 

So before that property went into the buyers hands it went through five other individuals. They were all making money on this transaction, and likely not being transparent with the original owner. 

I remember, speaking directly with wholesalers, who would tell me not to disclose that a profit is being made. 

Look, I respect the hustle. I am all for individuals trying to make their way in the Real Estate sphere. But there has to be a way that is more transparent with individuals. We can't have a large amount of unregulated people, pushing values, and figures onto the end consumer who will be the one that's really suffering at the end of the road. 

To extend an olive branch there are plenty of bad real estate agents that also push things onto their clients, but those individuals work under a broker who carries a fiduciary duty to their client. Here there are no licenses regulations or implemented ethics. 

What are your thoughts? 

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Will GastonPro Member
Rental Property Investor · Columbia, SC · Member since 2010 · 1k+ posts · 2k+ votes
2y

@Alan Asriants there is a ton of nuance to these situations, but I am personally done with wholesalers who require me to tell an owner that I am their "business partner."

Transparency is best for all those acting in good faith.

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  • Shane H.
    Member since 2018 · 433 posts · 208 votes
    2y

    Clarification. I hope it’s the end to contract flipper. Specifically those with no cash. 

    I think I can let the animosity slide on those who do indeed buy properties, but who also will sell their interest if the opportunity arises. But if you’re locking in contracts you cannot fulfill in hopes of finding a buyer, you’re selling real estate without a license. Whether you should need a license to sell real estate is debatable, but loopholing that isn’t in my opinion. 

    1Reply
  • Shane H.
    Member since 2018 · 433 posts · 208 votes
    2y
    Quote from @Will Gaston:

    @Alan Asriants there is a ton of nuance to these situations, but I am personally done with wholesalers who require me to tell an owner that I am their "business partner."

    Transparency is best for all those acting in good faith.

    Or that you’re there to do repairs when you look at it? 

    Or that I can’t see the contract?

    I’m buying the contract not the property. I need to see the contract. 
    0Reply
  • Matthew Paul
    Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    2y

    I had a wholesaler approach me about one of my properties . Seemed like a decent young guy , so I listened to his pitch . he emailed me a full price offer with so many weasel clauses and fees on the contract I couldnt stop laughing .  I also checked him out thru the court system , and he had 9 filings against him for not paying rent in the last 11 months .  

    I called him back and told him I wouldnt touch that contract with a 10 ft pole , and I cant do business with someone who wouldnt qualify to rent any of my properties . 

    2Reply
  • Shane H.
    Member since 2018 · 433 posts · 208 votes
    2y
    Quote from @Melanie P.:

    @Jay Hinrichs You make an excellent point about simply charging a commission that reflects the work required by the deal. It's a good area for former wholesalers or brokers in certain markets to carve a niche in. "We Sell Ugly Houses." The last deal we received from a wholesaler that wholesaler made the equivalent of a 25% commission by contracting the property 60% under market and assigning the deal to us 40% under market. WHolesaler would have done better selling for 25% commission and listing 5-10% below market value. 

    The South Carolina law does not seem to put an end to wholesaling. The text says: 4) "Wholesaling" means having a contractual interest in purchasing residential real estate from a property owner, then marketing the property for sale to a different buyer prior to taking legal ownership of the property. Advertising or marketing real estate owned by another individual or entity with the expectation of compensation falls under the definition of "broker" and requires licensure. "Wholesaling" does not refer to the assigning or offering to assign a contractual right to purchase residential real estate.

    Confusing. So is the problem the marketing of the property while owned by another? But you could technically market just your contractual interest? The wholesaler can certainly close on the property and list it FSBO the very same day. It will be interesting to see if the Commission imposes these light but annoying administrative penalties fairly.

    I don’t think it’s confusing, but I really didn’t think there was a loophole before. You can sell your interest, I.e. the conteact. You can’t sell the property. You can’t market the property. My experience with wholesalers is they are showing the property, and having the buyer act like a contractor who’s looking the property over for repairs. This almost always means they’re scamming a seller. A seller who understood what was going on would catch on to the 5 “partners” or “contractors” paraded through their property. I’ve end run around wholesalers and found out how the property owner was being (in my opinion) abused. 

    0Reply
  • Nate Marshall
    Real Estate Consultant · Evergreen, CO · Member since 2018 · 1k+ posts · 735 votes
    2y

    Colorado will be next. 46-19 democrats to republicans. They just passed some extreme anti landlord laws. They are gearing up for some extreme anti wholesaling laws if they still have a 2-1 majority in 2025. 

    1Reply
  • Jacob Sherman
    12 Penns Trail Suite 138 Newtown, PA 18940 · Member since 2023 · 1k+ posts · 319 votes
    2y

    awesome write up . all accurate and factual 

    1Reply
  • Shane H.
    Member since 2018 · 433 posts · 208 votes
    2y
    Quote from @Nate Marshall:

    Colorado will be next. 46-19 democrats to republicans. They just passed some extreme anti landlord laws. They are gearing up for some extreme anti wholesaling laws if they still have a 2-1 majority in 2025. 

    I’m not sure this is a Republican democrat topic like rentals are. The republicans tout themselves as the law and order party after all…

    2Reply
  • Nate Marshall
    Real Estate Consultant · Evergreen, CO · Member since 2018 · 1k+ posts · 735 votes
    2y
    Quote from @Shane H.:
    Quote from @Nate Marshall:

    Colorado will be next. 46-19 democrats to republicans. They just passed some extreme anti landlord laws. They are gearing up for some extreme anti wholesaling laws if they still have a 2-1 majority in 2025. 

    I’m not sure this is a Republican democrat topic like rentals are. The republicans tout themselves as the law and order party after all…


     My brother is in the state legislature. I follow from a different vantage point. 

    0Reply
  • Alan AsriantsBusiness Member
    OP
    Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
    2y
    Quote from @Melanie P.:
    Quote from @Alan Asriants:
    Quote from @Melanie P.:

    @Jay Hinrichs You make an excellent point about simply charging a commission that reflects the work required by the deal. It's a good area for former wholesalers or brokers in certain markets to carve a niche in. "We Sell Ugly Houses." The last deal we received from a wholesaler that wholesaler made the equivalent of a 25% commission by contracting the property 60% under market and assigning the deal to us 40% under market. WHolesaler would have done better selling for 25% commission and listing 5-10% below market value. 

    The South Carolina law does not seem to put an end to wholesaling. The text says: 4) "Wholesaling" means having a contractual interest in purchasing residential real estate from a property owner, then marketing the property for sale to a different buyer prior to taking legal ownership of the property. Advertising or marketing real estate owned by another individual or entity with the expectation of compensation falls under the definition of "broker" and requires licensure. "Wholesaling" does not refer to the assigning or offering to assign a contractual right to purchase residential real estate.

    Confusing. So is the problem the marketing of the property while owned by another? But you could technically market just your contractual interest? The wholesaler can certainly close on the property and list it FSBO the very same day. It will be interesting to see if the Commission imposes these light but annoying administrative penalties fairly.


     If I was the wholesaler, I would've just bought the property for that value. Of course as agents we have to disclose that we have market knowledge and seller understands that they can be selling under market value - something wholesalers do not have - this is where the ambiguity lies. Because as an agent you are always liable, but as a wholesaler you don't have to disclose anything


     Most wholesalers are wholesaling because they have no capital. Occasionally one does a good enough job that the wholesaler makes a nice payday (for him) and you get a good deal. The vast majority of wholesalers are totally inept, don't put the work in and can't get their deals to a closing table,


    Professional shoe salesmen going into RE

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  • Account Closed
    MD · Member since 2018 · 195 posts · 53 votes
    2y
    Quote from @Chaim Shwartz:
    Quote from @Russell Brazil:

    South Carolina, Virginia, Arizona, Ohio, Illinois, Maryland, Philadelphia have all recently passed wholesaling bills. Many more states have them in the works too....and in some of those states, further legislation is in the works to fill in some of the gaps in the legislation they just passed.

    So yes, it does seem like the tide is turning on this practice.

    Seems like they require you to have Insurance. 

    Most of you in the thread:
     

     It's kind of a lame excuse, to say "we don't have enough resources to go after criminals, so we will outlaw the wholesaling for good". That's like outlawing RE agents and brokers because there are some fraudsters and criminals among them and there are no resources to go after and penalize the bad guys, Therefore, all must be outlawed. I am sure brokers and RE agents love this trend, after all less competition for them is good for them. But it's business killing legislation. Wholesalers don't look for property that can be staged and sold in market to end buyers (that's what realtors and brokers do). Wholesalers look for properties that can not be sold to end buyer and, as others mentioned, realtors won't touch most of these properties because it isn't worth their time and effort when they can stage and retail a prime property in excellent or good to pass all inspections condition. Why bother with few thousands of dollars worth of deal when you can sell a house for million dollars and net 3% on it? 

    P.S. It's a nice T-shirt. Tragically, we have a lot of people who yearn for a daddy to govern them harder. As if it ever delivered any good results in past. 

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  • Alan AsriantsBusiness Member
    OP
    Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
    2y
    Quote from @Account Closed:
    Quote from @Chaim Shwartz:
    Quote from @Russell Brazil:

    South Carolina, Virginia, Arizona, Ohio, Illinois, Maryland, Philadelphia have all recently passed wholesaling bills. Many more states have them in the works too....and in some of those states, further legislation is in the works to fill in some of the gaps in the legislation they just passed.

    So yes, it does seem like the tide is turning on this practice.

    Seems like they require you to have Insurance. 

    Most of you in the thread:
     

     It's kind of a lame excuse, to say "we don't have enough resources to go after criminals, so we will outlaw the wholesaling for good". That's like outlawing RE agents and brokers because there are some fraudsters and criminals among them and there are no resources to go after and penalize the bad guys, Therefore, all must be outlawed. I am sure brokers and RE agents love this trend, after all less competition for them is good for them. But it's business killing legislation. Wholesalers don't look for property that can be staged and sold in market to end buyers (that's what realtors and brokers do). Wholesalers look for properties that can not be sold to end buyer and, as others mentioned, realtors won't touch most of these properties because it isn't worth their time and effort when they can stage and retail a prime property in excellent or good to pass all inspections condition. Why bother with few thousands of dollars worth of deal when you can sell a house for million dollars and net 3% on it? 

    P.S. It's a nice T-shirt. Tragically, we have a lot of people who yearn for a daddy to govern them harder. As if it ever delivered any good results in past. 


     For properties in the lower tier budget I usually negotiate a flat fee commission because the sales price isn't high enough for a 3% commission to make sense. And this flat fee is certainly not killer. Im not putting a flat fee of 20k. 

    Its not just about how much wholesalers earn as much as it is about their practice. Marketing that you buy houses cash and end up just selling the contract is false advertising. Lots of sellers are kept in the dark about the final sales price and what is going on with the contract. This is the issue.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    2y
    Quote from @Alan Asriants:
    Quote from @Account Closed:
    Quote from @Chaim Shwartz:
    Quote from @Russell Brazil:

    South Carolina, Virginia, Arizona, Ohio, Illinois, Maryland, Philadelphia have all recently passed wholesaling bills. Many more states have them in the works too....and in some of those states, further legislation is in the works to fill in some of the gaps in the legislation they just passed.

    So yes, it does seem like the tide is turning on this practice.

    Seems like they require you to have Insurance. 

    Most of you in the thread:
     

     It's kind of a lame excuse, to say "we don't have enough resources to go after criminals, so we will outlaw the wholesaling for good". That's like outlawing RE agents and brokers because there are some fraudsters and criminals among them and there are no resources to go after and penalize the bad guys, Therefore, all must be outlawed. I am sure brokers and RE agents love this trend, after all less competition for them is good for them. But it's business killing legislation. Wholesalers don't look for property that can be staged and sold in market to end buyers (that's what realtors and brokers do). Wholesalers look for properties that can not be sold to end buyer and, as others mentioned, realtors won't touch most of these properties because it isn't worth their time and effort when they can stage and retail a prime property in excellent or good to pass all inspections condition. Why bother with few thousands of dollars worth of deal when you can sell a house for million dollars and net 3% on it? 

    P.S. It's a nice T-shirt. Tragically, we have a lot of people who yearn for a daddy to govern them harder. As if it ever delivered any good results in past. 


     For properties in the lower tier budget I usually negotiate a flat fee commission because the sales price isn't high enough for a 3% commission to make sense. And this flat fee is certainly not killer. Im not putting a flat fee of 20k. 

    Its not just about how much wholesalers earn as much as it is about their practice. Marketing that you buy houses cash and end up just selling the contract is false advertising. Lots of sellers are kept in the dark about the final sales price and what is going on with the contract. This is the issue.


    or when they cant find a buyer and the sellers are counting on it and get into big trouble because they believed a wholesaler who was just flat lying to them.
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  • Doug SmithPro Member
    Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
    2y

    Good Post, @Alan Asriants. From a lender's perspective, we're also seeing a lot of greed with some wholesalers raising their spread to the point that the math doesn't work for the end buyer. For instance, we had an application today where the wholesaler got a home under contract for $200k and then put a $50K mark-up on it to sell it to the "C" buyer for $250K. The math didn't work at $250K, but it works at $222K. They are sticking to their full $50K. We as a lender are passing on the deal. If you're a wholesaler, one much understand that a rising tide raises all ships. If you're end buyer can't get the numbers to work, you'll likely have no deal anyway. We used to do a ton of wholesale deals, but the spreads are getting out of hand. 

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  • Alan AsriantsBusiness Member
    OP
    Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
    2y
    Quote from @Doug Smith:

    Good Post, @Alan Asriants. From a lender's perspective, we're also seeing a lot of greed with some wholesalers raising their spread to the point that the math doesn't work for the end buyer. For instance, we had an application today where the wholesaler got a home under contract for $200k and then put a $50K mark-up on it to sell it to the "C" buyer for $250K. The math didn't work at $250K, but it works at $222K. They are sticking to their full $50K. We as a lender are passing on the deal. If you're a wholesaler, one much understand that a rising tide raises all ships. If you're end buyer can't get the numbers to work, you'll likely have no deal anyway. We used to do a ton of wholesale deals, but the spreads are getting out of hand. 


    I've seen far worse deals off market. Lots of it has to do with creating "hype" and marketing the "off market" approach. Comps on the MLS were better deals.

    Another part of it is that there is a lot of people out there just doing this all for the money. They don't care that peoples finances are tied to it, that there can be issues down the road. As long as there is money to be made

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  • Account Closed
    MD · Member since 2018 · 195 posts · 53 votes
    2y
    Quote from @Doug Smith:

    Good Post, @Alan Asriants. From a lender's perspective, we're also seeing a lot of greed with some wholesalers raising their spread to the point that the math doesn't work for the end buyer. For instance, we had an application today where the wholesaler got a home under contract for $200k and then put a $50K mark-up on it to sell it to the "C" buyer for $250K. The math didn't work at $250K, but it works at $222K. They are sticking to their full $50K. We as a lender are passing on the deal. If you're a wholesaler, one much understand that a rising tide raises all ships. If you're end buyer can't get the numbers to work, you'll likely have no deal anyway. We used to do a ton of wholesale deals, but the spreads are getting out of hand. 

    As a wholesaler I can acquire a mobile home for $10,000 , mark it up by million dollars and offer to cash buyer for $1,010.000. Obviously, no intelligent buyer will buy it from me.  Market will correct me. Why is it necessary to outlaw wholesaling, when market laws can easily take care of this problem?

    The rules are simple: find a property. Get comps from MLS for similar homes bought in the past 30-180 days in the same area. That should bring you to the ARV. Deduct 30% from that number. Then do your estimate of repairs (use a software or hire a contractor if it's too complicated for you). Deduct the estimated figure from the ARV as well. Then deduct whatever you want to charge for your service. Thus you will arrive at your MAO. Make an offer to seller. Keep negotiating with seller as long as what they ask leaves room for you to make what you deserve. If seller accepts your offer then get your contract with seller signed and present your contract to investor , with your cut added on top of what seller agreed to sell for. If the numbers are right, if your comps are accurate, ARV is real, the repair estimates are accurate and etc., then any investor who stands to gain their 30% should be interested in buying the property. You should not get stuck as a wholesaler with a contract if you didn't inflate the ARV and didn't artificially diminish the repair costs.

    Of course, i could be an idiot who does that, as in example I cited at the very beginning: I could get a mobile home for $10,000 that is worth $8,000 after the repairs ,and try to add million dollars to selling price for finding it. That deal simply won't close. And the market will kick me out of wholesaling business as a punishment for my sheer incompetence. No one will deal with me, no one will buy a property from me. But why should everyone in wholesale business be penalized and outlawed if I am so clueless about it?

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    2y
    Quote from @Doug Smith:

    Good Post, @Alan Asriants. From a lender's perspective, we're also seeing a lot of greed with some wholesalers raising their spread to the point that the math doesn't work for the end buyer. For instance, we had an application today where the wholesaler got a home under contract for $200k and then put a $50K mark-up on it to sell it to the "C" buyer for $250K. The math didn't work at $250K, but it works at $222K. They are sticking to their full $50K. We as a lender are passing on the deal. If you're a wholesaler, one much understand that a rising tide raises all ships. If you're end buyer can't get the numbers to work, you'll likely have no deal anyway. We used to do a ton of wholesale deals, but the spreads are getting out of hand. 


    Doug the big issue to me is as a cash buyer  I do not get title insurance for the amount of the assignment fee.. I insist on it some title companies will allow it others wont.. its a big issue and I am sure many buyers out there who pay cash have no clue when they pay 250k for a property and the assingment fee is 50k they are only getting 200k in title insurance.. So if title is buggered and one has to make a claim and I seem to have to make about 1 a year with these deals coming through wholesalers if you dont have title insurance that includes the assignment fee you will lose that money.
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  • Account Closed
    MD · Member since 2018 · 195 posts · 53 votes
    2y
    Quote from @Jay Hinrichs:
    Quote from @Doug Smith:

    Good Post, @Alan Asriants. From a lender's perspective, we're also seeing a lot of greed with some wholesalers raising their spread to the point that the math doesn't work for the end buyer. For instance, we had an application today where the wholesaler got a home under contract for $200k and then put a $50K mark-up on it to sell it to the "C" buyer for $250K. The math didn't work at $250K, but it works at $222K. They are sticking to their full $50K. We as a lender are passing on the deal. If you're a wholesaler, one much understand that a rising tide raises all ships. If you're end buyer can't get the numbers to work, you'll likely have no deal anyway. We used to do a ton of wholesale deals, but the spreads are getting out of hand. 


    Doug the big issue to me is as a cash buyer  I do not get title insurance for the amount of the assignment fee.. I insist on it some title companies will allow it others wont.. its a big issue and I am sure many buyers out there who pay cash have no clue when they pay 250k for a property and the assingment fee is 50k they are only getting 200k in title insurance.. So if title is buggered and one has to make a claim and I seem to have to make about 1 a year with these deals coming through wholesalers if you dont have title insurance that includes the assignment fee you will lose that money.

     Jay, why are you buying anything from wholesalers? Why don't you go out and find the sellers who own property directly, so you can buy from individual homeowners and cut the middleman out? 

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    2y
    Quote from @Account Closed:
    Quote from @Jay Hinrichs:
    Quote from @Doug Smith:

    Good Post, @Alan Asriants. From a lender's perspective, we're also seeing a lot of greed with some wholesalers raising their spread to the point that the math doesn't work for the end buyer. For instance, we had an application today where the wholesaler got a home under contract for $200k and then put a $50K mark-up on it to sell it to the "C" buyer for $250K. The math didn't work at $250K, but it works at $222K. They are sticking to their full $50K. We as a lender are passing on the deal. If you're a wholesaler, one much understand that a rising tide raises all ships. If you're end buyer can't get the numbers to work, you'll likely have no deal anyway. We used to do a ton of wholesale deals, but the spreads are getting out of hand. 


    Doug the big issue to me is as a cash buyer  I do not get title insurance for the amount of the assignment fee.. I insist on it some title companies will allow it others wont.. its a big issue and I am sure many buyers out there who pay cash have no clue when they pay 250k for a property and the assingment fee is 50k they are only getting 200k in title insurance.. So if title is buggered and one has to make a claim and I seem to have to make about 1 a year with these deals coming through wholesalers if you dont have title insurance that includes the assignment fee you will lose that money.

     Jay, why are you buying anything from wholesalers? Why don't you go out and find the sellers who own property directly, so you can buy from individual homeowners and cut the middleman out? 

    Well because I am a JV partner ( I am the Money) and I live in Oregon and do these deals in 10 states.. So we get them from all sources  MLS  courthouse steps  and of course wholesalers.. And we pay cash for everything.  Thats why I was commenting on the title insurance issues which your average investor probably has no clue. 
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  • Account Closed
    MD · Member since 2018 · 195 posts · 53 votes
    2y
    Quote from @Jay Hinrichs:
    Quote from @Account Closed:
    Quote from @Jay Hinrichs:
    Quote from @Doug Smith:

    Good Post, @Alan Asriants. From a lender's perspective, we're also seeing a lot of greed with some wholesalers raising their spread to the point that the math doesn't work for the end buyer. For instance, we had an application today where the wholesaler got a home under contract for $200k and then put a $50K mark-up on it to sell it to the "C" buyer for $250K. The math didn't work at $250K, but it works at $222K. They are sticking to their full $50K. We as a lender are passing on the deal. If you're a wholesaler, one much understand that a rising tide raises all ships. If you're end buyer can't get the numbers to work, you'll likely have no deal anyway. We used to do a ton of wholesale deals, but the spreads are getting out of hand. 


    Doug the big issue to me is as a cash buyer  I do not get title insurance for the amount of the assignment fee.. I insist on it some title companies will allow it others wont.. its a big issue and I am sure many buyers out there who pay cash have no clue when they pay 250k for a property and the assingment fee is 50k they are only getting 200k in title insurance.. So if title is buggered and one has to make a claim and I seem to have to make about 1 a year with these deals coming through wholesalers if you dont have title insurance that includes the assignment fee you will lose that money.

     Jay, why are you buying anything from wholesalers? Why don't you go out and find the sellers who own property directly, so you can buy from individual homeowners and cut the middleman out? 

    Well because I am a JV partner ( I am the Money) and I live in Oregon and do these deals in 10 states.. So we get them from all sources  MLS  courthouse steps  and of course wholesalers.. And we pay cash for everything.  Thats why I was commenting on the title insurance issues which your average investor probably has no clue. 

    I get it. But if I were you and had such a negative perception of wholesalers, or any specific wholesale deal where I can't get a title fully insured, I would simply forego the assets offered by wholesaler/s. Every day I go buy things for my household I decide whether the price I pay for an item is worth it or not. If it's not, or if purchase is too risky and costly, I simply don't buy it. 

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  • Account Closed
    MD · Member since 2018 · 195 posts · 53 votes
    2y
    Quote from @Account Closed:
    Quote from @Jay Hinrichs:
    Quote from @Account Closed:
    Quote from @Jay Hinrichs:
    Quote from @Doug Smith:

    Good Post, @Alan Asriants. From a lender's perspective, we're also seeing a lot of greed with some wholesalers raising their spread to the point that the math doesn't work for the end buyer. For instance, we had an application today where the wholesaler got a home under contract for $200k and then put a $50K mark-up on it to sell it to the "C" buyer for $250K. The math didn't work at $250K, but it works at $222K. They are sticking to their full $50K. We as a lender are passing on the deal. If you're a wholesaler, one much understand that a rising tide raises all ships. If you're end buyer can't get the numbers to work, you'll likely have no deal anyway. We used to do a ton of wholesale deals, but the spreads are getting out of hand. 


    Doug the big issue to me is as a cash buyer  I do not get title insurance for the amount of the assignment fee.. I insist on it some title companies will allow it others wont.. its a big issue and I am sure many buyers out there who pay cash have no clue when they pay 250k for a property and the assingment fee is 50k they are only getting 200k in title insurance.. So if title is buggered and one has to make a claim and I seem to have to make about 1 a year with these deals coming through wholesalers if you dont have title insurance that includes the assignment fee you will lose that money.

     Jay, why are you buying anything from wholesalers? Why don't you go out and find the sellers who own property directly, so you can buy from individual homeowners and cut the middleman out? 

    Well because I am a JV partner ( I am the Money) and I live in Oregon and do these deals in 10 states.. So we get them from all sources  MLS  courthouse steps  and of course wholesalers.. And we pay cash for everything.  Thats why I was commenting on the title insurance issues which your average investor probably has no clue. 

    I get it. But if I were you and had such a negative perception of wholesalers, or any specific wholesale deal where I can't get a title fully insured, I would simply forego the assets offered by wholesaler/s. Every day I go buy things for my household I decide whether the price I pay for an item is worth it or not. If it's not, or if purchase is too risky and costly, I simply don't buy it. 

    As to assignment fee, the average is said to be $10,000, with actual fee ranging from $2,000 to $50,000 or more. It all depends on numbers. Let's assume I , as a wholesaler, after netting $2000 per deal x 20 deals I closed in an entire year, stumbled upon certain property in town A. I run comps with my agent and they come at $450,000. I have full report drawn from MLS. That's my ARV. I deduct 30% and arrive at 315K. I hire a contractor to do accurate estimate of repairs and they quote $45,000. That brings the total down to $270,000. Suppose I want to make $10,000 , so I am ready to write a contract for $260,000. That's my MAO. The seller is motivated and says they want to get out of that property ASAP and will give it to anyone who pays them $220,000. $270,000 is a fair price for that property for an investor. I run my numbers, I know the market, I know the ARV. If I send this property to my buyers I will have three people next day wanting to pay cash to buy it at $270,000. Suppose you, as an investor, also find out (through my RE agent) about that property and want to buy it. Do you think I should assign it to you for less than $270,000, so you can get full title insurance on it, while three other buyers are willing to buy it for 270K with no questions asked (and aware of the issue with title insurance)? How much should I assign it to you for? $230K? And forego other investors/buyers? If yes, please tell me why should I consider it a fair deal and give that contract to you, knowing that this house has $450K ARV after $45K spent on rehab/renovation? What I think is fair is for you to do what I did, to find that exact house or similar property on your own, close the deal at $220K and not deal with me at all. But if you go through me, then I am entitled to my fair share. You didn't pay me to work the entire year, driving one town after another, putting up signs, making cold calls, networking, paying for local ads to make $2000 on each deal I netted prior to this $50K gem. Why should I give it to you for less than it's worth in a wholesale market?

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    2y
    Quote from @Account Closed:
    Quote from @Account Closed:
    Quote from @Jay Hinrichs:
    Quote from @Account Closed:
    Quote from @Jay Hinrichs:
    Quote from @Doug Smith:

    Good Post, @Alan Asriants. From a lender's perspective, we're also seeing a lot of greed with some wholesalers raising their spread to the point that the math doesn't work for the end buyer. For instance, we had an application today where the wholesaler got a home under contract for $200k and then put a $50K mark-up on it to sell it to the "C" buyer for $250K. The math didn't work at $250K, but it works at $222K. They are sticking to their full $50K. We as a lender are passing on the deal. If you're a wholesaler, one much understand that a rising tide raises all ships. If you're end buyer can't get the numbers to work, you'll likely have no deal anyway. We used to do a ton of wholesale deals, but the spreads are getting out of hand. 


    Doug the big issue to me is as a cash buyer  I do not get title insurance for the amount of the assignment fee.. I insist on it some title companies will allow it others wont.. its a big issue and I am sure many buyers out there who pay cash have no clue when they pay 250k for a property and the assingment fee is 50k they are only getting 200k in title insurance.. So if title is buggered and one has to make a claim and I seem to have to make about 1 a year with these deals coming through wholesalers if you dont have title insurance that includes the assignment fee you will lose that money.

     Jay, why are you buying anything from wholesalers? Why don't you go out and find the sellers who own property directly, so you can buy from individual homeowners and cut the middleman out? 

    Well because I am a JV partner ( I am the Money) and I live in Oregon and do these deals in 10 states.. So we get them from all sources  MLS  courthouse steps  and of course wholesalers.. And we pay cash for everything.  Thats why I was commenting on the title insurance issues which your average investor probably has no clue. 

    I get it. But if I were you and had such a negative perception of wholesalers, or any specific wholesale deal where I can't get a title fully insured, I would simply forego the assets offered by wholesaler/s. Every day I go buy things for my household I decide whether the price I pay for an item is worth it or not. If it's not, or if purchase is too risky and costly, I simply don't buy it. 

    As to assignment fee, the average is said to be $10,000, with actual fee ranging from $2,000 to $50,000 or more. It all depends on numbers. Let's assume I , as a wholesaler, after netting $2000 per deal x 20 deals I closed in an entire year, stumbled upon certain property in town A. I run comps with my agent and they come at $450,000. I have full report drawn from MLS. That's my ARV. I deduct 30% and arrive at 315K. I hire a contractor to do accurate estimate of repairs and they quote $45,000. That brings the total down to $270,000. Suppose I want to make $10,000 , so I am ready to write a contract for $260,000. That's my MAO. The seller is motivated and says they want to get out of that property ASAP and will give it to anyone who pays them $220,000. $270,000 is a fair price for that property for an investor. I run my numbers, I know the market, I know the ARV. If I send this property to my buyers I will have three people next day wanting to pay cash to buy it at $270,000. Suppose you, as an investor, also find out (through my RE agent) about that property and want to buy it. Do you think I should assign it to you for less than $270,000, so you can get full title insurance on it, while three other buyers are willing to buy it for 270K with no questions asked (and aware of the issue with title insurance)? How much should I assign it to you for? $230K? And forego other investors/buyers? If yes, please tell me why should I consider it a fair deal and give that contract to you, knowing that this house has $450K ARV after $45K spent on rehab/renovation? What I think is fair is for you to do what I did, to find that exact house or similar property on your own, close the deal at $220K and not deal with me at all. But if you go through me, then I am entitled to my fair share. You didn't pay me to work the entire year, driving one town after another, putting up signs, making cold calls, networking, paying for local ads to make $2000 on each deal I netted prior to this $50K gem. Why should I give it to you for less than it's worth in a wholesale market?


    Correct if the title company you were using would not give me insurance sufficient to cover your fee I would not buy it or fund it for one of my JV Partners.. Risk is not worth it.. We have no shortage of deals so this would just be another one in our pipeline nothing special.. And if your other TRUE cash buyers were not smart enough to know about title insurance then thats one them. I suspect a lot of your buyers to most of your buyers are getting HML Loans in that case title insurance is for the amount of the loan and if the loan included our fee then they are insured.. I am sure these are issues your probably just not experienced enough to know of.

    The reality is the writing is on the wall states are after NON licensed wholesaling assigning just is what it is.. the fact that you would make 50k on a 220k sale when a brokerage fee would be 15k.. thats 35k that is being taken from a seller who probably knows no better or has just been lied to by the wholesaler as to the real value.. and that is what the law makers and regulators are focused on.. 

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    0Reply
  • Account Closed
    MD · Member since 2018 · 195 posts · 53 votes
    2y
    Quote from @Jay Hinrichs:
    Quote from @Account Closed:
    Quote from @Account Closed:
    Quote from @Jay Hinrichs:
    Quote from @Account Closed:
    Quote from @Jay Hinrichs:
    Quote from @Doug Smith:

    Good Post, @Alan Asriants. From a lender's perspective, we're also seeing a lot of greed with some wholesalers raising their spread to the point that the math doesn't work for the end buyer. For instance, we had an application today where the wholesaler got a home under contract for $200k and then put a $50K mark-up on it to sell it to the "C" buyer for $250K. The math didn't work at $250K, but it works at $222K. They are sticking to their full $50K. We as a lender are passing on the deal. If you're a wholesaler, one much understand that a rising tide raises all ships. If you're end buyer can't get the numbers to work, you'll likely have no deal anyway. We used to do a ton of wholesale deals, but the spreads are getting out of hand. 


    Doug the big issue to me is as a cash buyer  I do not get title insurance for the amount of the assignment fee.. I insist on it some title companies will allow it others wont.. its a big issue and I am sure many buyers out there who pay cash have no clue when they pay 250k for a property and the assingment fee is 50k they are only getting 200k in title insurance.. So if title is buggered and one has to make a claim and I seem to have to make about 1 a year with these deals coming through wholesalers if you dont have title insurance that includes the assignment fee you will lose that money.

     Jay, why are you buying anything from wholesalers? Why don't you go out and find the sellers who own property directly, so you can buy from individual homeowners and cut the middleman out? 

    Well because I am a JV partner ( I am the Money) and I live in Oregon and do these deals in 10 states.. So we get them from all sources  MLS  courthouse steps  and of course wholesalers.. And we pay cash for everything.  Thats why I was commenting on the title insurance issues which your average investor probably has no clue. 

    I get it. But if I were you and had such a negative perception of wholesalers, or any specific wholesale deal where I can't get a title fully insured, I would simply forego the assets offered by wholesaler/s. Every day I go buy things for my household I decide whether the price I pay for an item is worth it or not. If it's not, or if purchase is too risky and costly, I simply don't buy it. 

    As to assignment fee, the average is said to be $10,000, with actual fee ranging from $2,000 to $50,000 or more. It all depends on numbers. Let's assume I , as a wholesaler, after netting $2000 per deal x 20 deals I closed in an entire year, stumbled upon certain property in town A. I run comps with my agent and they come at $450,000. I have full report drawn from MLS. That's my ARV. I deduct 30% and arrive at 315K. I hire a contractor to do accurate estimate of repairs and they quote $45,000. That brings the total down to $270,000. Suppose I want to make $10,000 , so I am ready to write a contract for $260,000. That's my MAO. The seller is motivated and says they want to get out of that property ASAP and will give it to anyone who pays them $220,000. $270,000 is a fair price for that property for an investor. I run my numbers, I know the market, I know the ARV. If I send this property to my buyers I will have three people next day wanting to pay cash to buy it at $270,000. Suppose you, as an investor, also find out (through my RE agent) about that property and want to buy it. Do you think I should assign it to you for less than $270,000, so you can get full title insurance on it, while three other buyers are willing to buy it for 270K with no questions asked (and aware of the issue with title insurance)? How much should I assign it to you for? $230K? And forego other investors/buyers? If yes, please tell me why should I consider it a fair deal and give that contract to you, knowing that this house has $450K ARV after $45K spent on rehab/renovation? What I think is fair is for you to do what I did, to find that exact house or similar property on your own, close the deal at $220K and not deal with me at all. But if you go through me, then I am entitled to my fair share. You didn't pay me to work the entire year, driving one town after another, putting up signs, making cold calls, networking, paying for local ads to make $2000 on each deal I netted prior to this $50K gem. Why should I give it to you for less than it's worth in a wholesale market?


    Correct if the title company you were using would not give me insurance sufficient to cover your fee I would not buy it or fund it for one of my JV Partners.. Risk is not worth it.. We have no shortage of deals so this would just be another one in our pipeline nothing special.. And if your other TRUE cash buyers were not smart enough to know about title insurance then thats one them. I suspect a lot of your buyers to most of your buyers are getting HML Loans in that case title insurance is for the amount of the loan and if the loan included our fee then they are insured.. I am sure these are issues your probably just not experienced enough to know of.

    The reality is the writing is on the wall states are after NON licensed wholesaling assigning just is what it is.. the fact that you would make 50k on a 220k sale when a brokerage fee would be 15k.. thats 35k that is being taken from a seller who probably knows no better or has just been lied to by the wholesaler as to the real value.. and that is what the law makers and regulators are focused on.. 

     The first part of your post makes sense and I find nothing to disagree with. It's a free market, no body can force anybody to buy or sell anything. If the product/contract/service I offer is not suitable to you then I don't want you to be my customer. We both can happily part our ways under free market conditions.

    But the second part of your post implies that all sellers are idiots, or that I (or State) is a nanny that must make decisions for mentally deranged sellers , all of whom have an IQ of 10 years old child. I don't believe this to be true. On my part, I would avoid to close any transaction with someone who is handicapped, has IQ of 10 years old child and is unable to read and understand the contract they are signing. After all, if someone was clinically handicapped and not able to understand and consent to terms of the legal agreement, then the agreement itself could be declared null and void in the court of law. 

    I will be dealing with adults, not handicapped individuals. And it's their responsibility to figure what they want to ask for their property. I don't run charity, I don't run educational non-profit classes. By the way, that's one of the reasons I don't want to touch pre-foreclosures, with accounts delinquent for 60 days. Some wholesalers do, they go and offer to help sellers to stay in their homes, educate them about loss mitigation , ask if seller needs help with it and etc., before seller begs them to just rid them of their house. I will have none of it. It's none of my concern to educate or baby sit another adult in my state. No one did for to me, except for my parents, and I have no intention to parent strangers. But once I have an adult, with full cognitive abilities, who is motivated to sell and get out of that property for MAO or less, rest assured I will make my offer on that property and if they accept it I will write a contract. Let them State AG's come after me in droves, there is no crime in making an offer to someone who owns the property to buy it from them. It's marketing to public that is illegal and I have no intention to sell dilapidated , dirty , stinky and full of trash property to an end buyer in MD or anywhere. I won't sell it to investor either, I will simply secure my interest in the contract. So, which part of it is illegal or wrong? You could say I am taking it from seller if I had a contract for 220K and paid seller 185K. That would be stealing from a seller. But if seller is entitled to get more, then who is forcing them to give their property to me for 220K? Who is stopping them from finding you or other investor on their own and getting full $270K in their pocket? I certainly don't. Regulators and law makers in these blue states couldn't care less about the sellers. If they did they would have better economic policies , create safe neighborhoods and investor/business friendly atmosphere, to make their citizens prosper and able to afford the houses they live in, instead of losing it to banks in foreclosures. No, it's not the sellers they care about. They care about eating all the pie by themselves and sharing it with those who finance their campaigns and free vacations, that's what those law makers really care about. And while at it they will make sure there will be more poverty , more foreclosures and less opportunities for average Joe to make a living here. We all know the drill. I am just glad that we have 50 States and not all of them are blue and purple. So, we can still focus on doing business, even if it means we have to move out of blue and into a red state in the near future.

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    2y
    Quote from @Account Closed:
    Quote from @Jay Hinrichs:
    Quote from @Account Closed:
    Quote from @Account Closed:
    Quote from @Jay Hinrichs:
    Quote from @Account Closed:
    Quote from @Jay Hinrichs:
    Quote from @Doug Smith:

    Good Post, @Alan Asriants. From a lender's perspective, we're also seeing a lot of greed with some wholesalers raising their spread to the point that the math doesn't work for the end buyer. For instance, we had an application today where the wholesaler got a home under contract for $200k and then put a $50K mark-up on it to sell it to the "C" buyer for $250K. The math didn't work at $250K, but it works at $222K. They are sticking to their full $50K. We as a lender are passing on the deal. If you're a wholesaler, one much understand that a rising tide raises all ships. If you're end buyer can't get the numbers to work, you'll likely have no deal anyway. We used to do a ton of wholesale deals, but the spreads are getting out of hand. 


    Doug the big issue to me is as a cash buyer  I do not get title insurance for the amount of the assignment fee.. I insist on it some title companies will allow it others wont.. its a big issue and I am sure many buyers out there who pay cash have no clue when they pay 250k for a property and the assingment fee is 50k they are only getting 200k in title insurance.. So if title is buggered and one has to make a claim and I seem to have to make about 1 a year with these deals coming through wholesalers if you dont have title insurance that includes the assignment fee you will lose that money.

     Jay, why are you buying anything from wholesalers? Why don't you go out and find the sellers who own property directly, so you can buy from individual homeowners and cut the middleman out? 

    Well because I am a JV partner ( I am the Money) and I live in Oregon and do these deals in 10 states.. So we get them from all sources  MLS  courthouse steps  and of course wholesalers.. And we pay cash for everything.  Thats why I was commenting on the title insurance issues which your average investor probably has no clue. 

    I get it. But if I were you and had such a negative perception of wholesalers, or any specific wholesale deal where I can't get a title fully insured, I would simply forego the assets offered by wholesaler/s. Every day I go buy things for my household I decide whether the price I pay for an item is worth it or not. If it's not, or if purchase is too risky and costly, I simply don't buy it. 

    As to assignment fee, the average is said to be $10,000, with actual fee ranging from $2,000 to $50,000 or more. It all depends on numbers. Let's assume I , as a wholesaler, after netting $2000 per deal x 20 deals I closed in an entire year, stumbled upon certain property in town A. I run comps with my agent and they come at $450,000. I have full report drawn from MLS. That's my ARV. I deduct 30% and arrive at 315K. I hire a contractor to do accurate estimate of repairs and they quote $45,000. That brings the total down to $270,000. Suppose I want to make $10,000 , so I am ready to write a contract for $260,000. That's my MAO. The seller is motivated and says they want to get out of that property ASAP and will give it to anyone who pays them $220,000. $270,000 is a fair price for that property for an investor. I run my numbers, I know the market, I know the ARV. If I send this property to my buyers I will have three people next day wanting to pay cash to buy it at $270,000. Suppose you, as an investor, also find out (through my RE agent) about that property and want to buy it. Do you think I should assign it to you for less than $270,000, so you can get full title insurance on it, while three other buyers are willing to buy it for 270K with no questions asked (and aware of the issue with title insurance)? How much should I assign it to you for? $230K? And forego other investors/buyers? If yes, please tell me why should I consider it a fair deal and give that contract to you, knowing that this house has $450K ARV after $45K spent on rehab/renovation? What I think is fair is for you to do what I did, to find that exact house or similar property on your own, close the deal at $220K and not deal with me at all. But if you go through me, then I am entitled to my fair share. You didn't pay me to work the entire year, driving one town after another, putting up signs, making cold calls, networking, paying for local ads to make $2000 on each deal I netted prior to this $50K gem. Why should I give it to you for less than it's worth in a wholesale market?


    Correct if the title company you were using would not give me insurance sufficient to cover your fee I would not buy it or fund it for one of my JV Partners.. Risk is not worth it.. We have no shortage of deals so this would just be another one in our pipeline nothing special.. And if your other TRUE cash buyers were not smart enough to know about title insurance then thats one them. I suspect a lot of your buyers to most of your buyers are getting HML Loans in that case title insurance is for the amount of the loan and if the loan included our fee then they are insured.. I am sure these are issues your probably just not experienced enough to know of.

    The reality is the writing is on the wall states are after NON licensed wholesaling assigning just is what it is.. the fact that you would make 50k on a 220k sale when a brokerage fee would be 15k.. thats 35k that is being taken from a seller who probably knows no better or has just been lied to by the wholesaler as to the real value.. and that is what the law makers and regulators are focused on.. 

     The first part of your post makes sense and I find nothing to disagree with. It's a free market, no body can force anybody to buy or sell anything. If the product/contract/service I offer is not suitable to you then I don't want you to be my customer. We both can happily part our ways under free market conditions.

    But the second part of your post implies that all sellers are idiots, or that I (or State) is a nanny that must make decisions for mentally deranged sellers , all of whom have an IQ of 10 years old child. I don't believe this to be true. On my part, I would avoid to close any transaction with someone who is handicapped, has IQ of 10 years old child and is unable to read and understand the contract they are signing. After all, if someone was clinically handicapped and not able to understand and consent to terms of the legal agreement, then the agreement itself could be declared null and void in the court of law. 

    I will be dealing with adults, not handicapped individuals. And it's their responsibility to figure what they want to ask for their property. I don't run charity, I don't run educational non-profit classes. By the way, that's one of the reasons I don't want to touch pre-foreclosures, with accounts delinquent for 60 days. Some wholesalers do, they go and offer to help sellers to stay in their homes, educate them about loss mitigation , ask if seller needs help with it and etc., before seller begs them to just rid them of their house. I will have none of it. It's none of my concern to educate or baby sit another adult in my state. No one did for to me, except for my parents, and I have no intention to parent strangers. But once I have an adult, with full cognitive abilities, who is motivated to sell and get out of that property for MAO or less, rest assured I will make my offer on that property and if they accept it I will write a contract. Let them State AG's come after me in droves, there is no crime in making an offer to someone who owns the property to buy it from them. It's marketing to public that is illegal and I have no intention to sell dilapidated , dirty , stinky and full of trash property to an end buyer in MD or anywhere. I won't sell it to investor either, I will simply secure my interest in the contract. So, which part of it is illegal or wrong? You could say I am taking it from seller if I had a contract for 220K and paid seller 185K. That would be stealing from a seller. But if seller is entitled to get more, then who is forcing them to give their property to me for 220K? Who is stopping them from finding you or other investor on their own and getting full $270K in their pocket? I certainly don't. Regulators and law makers in these blue states couldn't care less about the sellers. If they did they would have better economic policies , create safe neighborhoods and investor/business friendly atmosphere, to make their citizens prosper and able to afford the houses they live in, instead of losing it to banks in foreclosures. No, it's not the sellers they care about. They care about eating all the pie by themselves and sharing it with those who finance their campaigns and free vacations, that's what those law makers really care about. And while at it they will make sure there will be more poverty , more foreclosures and less opportunities for average Joe to make a living here. We all know the drill. I am just glad that we have 50 States and not all of them are blue and purple. So, we can still focus on doing business, even if it means we have to move out of blue and into a red state in the near future.


     so Eric you have not actually done any deals it sounds like.. U understand the 70% minus rehab costs those numbers have been going around for a long time.. its pretty tough out there right now but hopefully you can make it work.. although I always wonder why those that want to sell real estate  ( that is what your doing at the end of the day bringing a buyer and seller together) why you dont just get in the game with a license and make a career of it.. if your any good at sales and can stick to it can be a very rewarding occupation.. wholesalers they dont last very long unless they are very well capitalized and vertically integrated. 

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    0Reply
  • Account Closed
    MD · Member since 2018 · 195 posts · 53 votes
    2y
    Quote from @Jay Hinrichs:
    Quote from @Account Closed:
    Quote from @Jay Hinrichs:
    Quote from @Account Closed:
    Quote from @Account Closed:
    Quote from @Jay Hinrichs:
    Quote from @Account Closed:
    Quote from @Jay Hinrichs:
    Quote from @Doug Smith:

    Good Post, @Alan Asriants. From a lender's perspective, we're also seeing a lot of greed with some wholesalers raising their spread to the point that the math doesn't work for the end buyer. For instance, we had an application today where the wholesaler got a home under contract for $200k and then put a $50K mark-up on it to sell it to the "C" buyer for $250K. The math didn't work at $250K, but it works at $222K. They are sticking to their full $50K. We as a lender are passing on the deal. If you're a wholesaler, one much understand that a rising tide raises all ships. If you're end buyer can't get the numbers to work, you'll likely have no deal anyway. We used to do a ton of wholesale deals, but the spreads are getting out of hand. 


    Doug the big issue to me is as a cash buyer  I do not get title insurance for the amount of the assignment fee.. I insist on it some title companies will allow it others wont.. its a big issue and I am sure many buyers out there who pay cash have no clue when they pay 250k for a property and the assingment fee is 50k they are only getting 200k in title insurance.. So if title is buggered and one has to make a claim and I seem to have to make about 1 a year with these deals coming through wholesalers if you dont have title insurance that includes the assignment fee you will lose that money.

     Jay, why are you buying anything from wholesalers? Why don't you go out and find the sellers who own property directly, so you can buy from individual homeowners and cut the middleman out? 

    Well because I am a JV partner ( I am the Money) and I live in Oregon and do these deals in 10 states.. So we get them from all sources  MLS  courthouse steps  and of course wholesalers.. And we pay cash for everything.  Thats why I was commenting on the title insurance issues which your average investor probably has no clue. 

    I get it. But if I were you and had such a negative perception of wholesalers, or any specific wholesale deal where I can't get a title fully insured, I would simply forego the assets offered by wholesaler/s. Every day I go buy things for my household I decide whether the price I pay for an item is worth it or not. If it's not, or if purchase is too risky and costly, I simply don't buy it. 

    As to assignment fee, the average is said to be $10,000, with actual fee ranging from $2,000 to $50,000 or more. It all depends on numbers. Let's assume I , as a wholesaler, after netting $2000 per deal x 20 deals I closed in an entire year, stumbled upon certain property in town A. I run comps with my agent and they come at $450,000. I have full report drawn from MLS. That's my ARV. I deduct 30% and arrive at 315K. I hire a contractor to do accurate estimate of repairs and they quote $45,000. That brings the total down to $270,000. Suppose I want to make $10,000 , so I am ready to write a contract for $260,000. That's my MAO. The seller is motivated and says they want to get out of that property ASAP and will give it to anyone who pays them $220,000. $270,000 is a fair price for that property for an investor. I run my numbers, I know the market, I know the ARV. If I send this property to my buyers I will have three people next day wanting to pay cash to buy it at $270,000. Suppose you, as an investor, also find out (through my RE agent) about that property and want to buy it. Do you think I should assign it to you for less than $270,000, so you can get full title insurance on it, while three other buyers are willing to buy it for 270K with no questions asked (and aware of the issue with title insurance)? How much should I assign it to you for? $230K? And forego other investors/buyers? If yes, please tell me why should I consider it a fair deal and give that contract to you, knowing that this house has $450K ARV after $45K spent on rehab/renovation? What I think is fair is for you to do what I did, to find that exact house or similar property on your own, close the deal at $220K and not deal with me at all. But if you go through me, then I am entitled to my fair share. You didn't pay me to work the entire year, driving one town after another, putting up signs, making cold calls, networking, paying for local ads to make $2000 on each deal I netted prior to this $50K gem. Why should I give it to you for less than it's worth in a wholesale market?


    Correct if the title company you were using would not give me insurance sufficient to cover your fee I would not buy it or fund it for one of my JV Partners.. Risk is not worth it.. We have no shortage of deals so this would just be another one in our pipeline nothing special.. And if your other TRUE cash buyers were not smart enough to know about title insurance then thats one them. I suspect a lot of your buyers to most of your buyers are getting HML Loans in that case title insurance is for the amount of the loan and if the loan included our fee then they are insured.. I am sure these are issues your probably just not experienced enough to know of.

    The reality is the writing is on the wall states are after NON licensed wholesaling assigning just is what it is.. the fact that you would make 50k on a 220k sale when a brokerage fee would be 15k.. thats 35k that is being taken from a seller who probably knows no better or has just been lied to by the wholesaler as to the real value.. and that is what the law makers and regulators are focused on.. 

     The first part of your post makes sense and I find nothing to disagree with. It's a free market, no body can force anybody to buy or sell anything. If the product/contract/service I offer is not suitable to you then I don't want you to be my customer. We both can happily part our ways under free market conditions.

    But the second part of your post implies that all sellers are idiots, or that I (or State) is a nanny that must make decisions for mentally deranged sellers , all of whom have an IQ of 10 years old child. I don't believe this to be true. On my part, I would avoid to close any transaction with someone who is handicapped, has IQ of 10 years old child and is unable to read and understand the contract they are signing. After all, if someone was clinically handicapped and not able to understand and consent to terms of the legal agreement, then the agreement itself could be declared null and void in the court of law. 

    I will be dealing with adults, not handicapped individuals. And it's their responsibility to figure what they want to ask for their property. I don't run charity, I don't run educational non-profit classes. By the way, that's one of the reasons I don't want to touch pre-foreclosures, with accounts delinquent for 60 days. Some wholesalers do, they go and offer to help sellers to stay in their homes, educate them about loss mitigation , ask if seller needs help with it and etc., before seller begs them to just rid them of their house. I will have none of it. It's none of my concern to educate or baby sit another adult in my state. No one did for to me, except for my parents, and I have no intention to parent strangers. But once I have an adult, with full cognitive abilities, who is motivated to sell and get out of that property for MAO or less, rest assured I will make my offer on that property and if they accept it I will write a contract. Let them State AG's come after me in droves, there is no crime in making an offer to someone who owns the property to buy it from them. It's marketing to public that is illegal and I have no intention to sell dilapidated , dirty , stinky and full of trash property to an end buyer in MD or anywhere. I won't sell it to investor either, I will simply secure my interest in the contract. So, which part of it is illegal or wrong? You could say I am taking it from seller if I had a contract for 220K and paid seller 185K. That would be stealing from a seller. But if seller is entitled to get more, then who is forcing them to give their property to me for 220K? Who is stopping them from finding you or other investor on their own and getting full $270K in their pocket? I certainly don't. Regulators and law makers in these blue states couldn't care less about the sellers. If they did they would have better economic policies , create safe neighborhoods and investor/business friendly atmosphere, to make their citizens prosper and able to afford the houses they live in, instead of losing it to banks in foreclosures. No, it's not the sellers they care about. They care about eating all the pie by themselves and sharing it with those who finance their campaigns and free vacations, that's what those law makers really care about. And while at it they will make sure there will be more poverty , more foreclosures and less opportunities for average Joe to make a living here. We all know the drill. I am just glad that we have 50 States and not all of them are blue and purple. So, we can still focus on doing business, even if it means we have to move out of blue and into a red state in the near future.


     so Eric you have not actually done any deals it sounds like.. U understand the 70% minus rehab costs those numbers have been going around for a long time.. its pretty tough out there right now but hopefully you can make it work.. although I always wonder why those that want to sell real estate  ( that is what your doing at the end of the day bringing a buyer and seller together) why you dont just get in the game with a license and make a career of it.. if your any good at sales and can stick to it can be a very rewarding occupation.. wholesalers they dont last very long unless they are very well capitalized and vertically integrated. 

    Good question, Jay. For couple of reasons. First, becoming REA requires 60 hours of schooling , and then you are stuck with less than 3% commission per transaction (see below link with average rates of REA's compensation), and tons of regulations on top of it while competing with hundreds of other realtors on MLS. It's just not worth doing it in my opinion. It works well for those who have been doing it for decades, but it may take at least a decade to get anywhere as REA.

    Becoming a broker takes 3 years in MD after becoming REA. You can't apply and become a broker without those 3 years under your belt. And then you split commissions with agents and have a cap limiting what you can earn on each transaction regardless of the deal you struck.  How is this fair to the broker?))

    After much research and talking to people who did it all (running crews/flipping, owning to rent/passive investment, brokering, selling real estate as agents and etc.). I concluded that wholesaling is best to start with. Gradually, if you are able to make it work, you can explore flipping, owning to rent and other options to build wealth. But none offers a quick turn around and cash flow, with the least amount of headache and financial risks (not to confuse with the least amount of WORK),  as wholesaling. It's just a good stepping stone when you enter the world of RE investment.

    LINK: https://listwithclever.com/average-real-estate-commission-rate/maryland/

    The average total real estate agent commission rate in Maryland is 5.34% of the final sale price. Based on the latest median home sale price in Maryland ($418,534), that translates to a total cost of roughly $22,350.

    Home sellers typically cover the total commission fee from their sale proceeds, which is split between the listing and buyer’s agents who handle the sale. In Maryland, the average listing agent fee is 2.76%, while the average buyer’s agent fee is 2.58%.

    Real estate agent commissions make up a significant portion of the closing costs for Maryland home sellers. But you don't have to pay the full 5.34% to a traditional agent. If you're selling a home in Maryland, you can use a discount broker to save on realtor fees. In fact, depending on your situation and the agents you work with, you could save 33% on realtor fees, or about $7,366 on average.

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    2y
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    Quote from @Doug Smith:

    Good Post, @Alan Asriants. From a lender's perspective, we're also seeing a lot of greed with some wholesalers raising their spread to the point that the math doesn't work for the end buyer. For instance, we had an application today where the wholesaler got a home under contract for $200k and then put a $50K mark-up on it to sell it to the "C" buyer for $250K. The math didn't work at $250K, but it works at $222K. They are sticking to their full $50K. We as a lender are passing on the deal. If you're a wholesaler, one much understand that a rising tide raises all ships. If you're end buyer can't get the numbers to work, you'll likely have no deal anyway. We used to do a ton of wholesale deals, but the spreads are getting out of hand. 


    Doug the big issue to me is as a cash buyer  I do not get title insurance for the amount of the assignment fee.. I insist on it some title companies will allow it others wont.. its a big issue and I am sure many buyers out there who pay cash have no clue when they pay 250k for a property and the assingment fee is 50k they are only getting 200k in title insurance.. So if title is buggered and one has to make a claim and I seem to have to make about 1 a year with these deals coming through wholesalers if you dont have title insurance that includes the assignment fee you will lose that money.

     Jay, why are you buying anything from wholesalers? Why don't you go out and find the sellers who own property directly, so you can buy from individual homeowners and cut the middleman out? 

    Well because I am a JV partner ( I am the Money) and I live in Oregon and do these deals in 10 states.. So we get them from all sources  MLS  courthouse steps  and of course wholesalers.. And we pay cash for everything.  Thats why I was commenting on the title insurance issues which your average investor probably has no clue. 

    I get it. But if I were you and had such a negative perception of wholesalers, or any specific wholesale deal where I can't get a title fully insured, I would simply forego the assets offered by wholesaler/s. Every day I go buy things for my household I decide whether the price I pay for an item is worth it or not. If it's not, or if purchase is too risky and costly, I simply don't buy it. 

    As to assignment fee, the average is said to be $10,000, with actual fee ranging from $2,000 to $50,000 or more. It all depends on numbers. Let's assume I , as a wholesaler, after netting $2000 per deal x 20 deals I closed in an entire year, stumbled upon certain property in town A. I run comps with my agent and they come at $450,000. I have full report drawn from MLS. That's my ARV. I deduct 30% and arrive at 315K. I hire a contractor to do accurate estimate of repairs and they quote $45,000. That brings the total down to $270,000. Suppose I want to make $10,000 , so I am ready to write a contract for $260,000. That's my MAO. The seller is motivated and says they want to get out of that property ASAP and will give it to anyone who pays them $220,000. $270,000 is a fair price for that property for an investor. I run my numbers, I know the market, I know the ARV. If I send this property to my buyers I will have three people next day wanting to pay cash to buy it at $270,000. Suppose you, as an investor, also find out (through my RE agent) about that property and want to buy it. Do you think I should assign it to you for less than $270,000, so you can get full title insurance on it, while three other buyers are willing to buy it for 270K with no questions asked (and aware of the issue with title insurance)? How much should I assign it to you for? $230K? And forego other investors/buyers? If yes, please tell me why should I consider it a fair deal and give that contract to you, knowing that this house has $450K ARV after $45K spent on rehab/renovation? What I think is fair is for you to do what I did, to find that exact house or similar property on your own, close the deal at $220K and not deal with me at all. But if you go through me, then I am entitled to my fair share. You didn't pay me to work the entire year, driving one town after another, putting up signs, making cold calls, networking, paying for local ads to make $2000 on each deal I netted prior to this $50K gem. Why should I give it to you for less than it's worth in a wholesale market?


    Correct if the title company you were using would not give me insurance sufficient to cover your fee I would not buy it or fund it for one of my JV Partners.. Risk is not worth it.. We have no shortage of deals so this would just be another one in our pipeline nothing special.. And if your other TRUE cash buyers were not smart enough to know about title insurance then thats one them. I suspect a lot of your buyers to most of your buyers are getting HML Loans in that case title insurance is for the amount of the loan and if the loan included our fee then they are insured.. I am sure these are issues your probably just not experienced enough to know of.

    The reality is the writing is on the wall states are after NON licensed wholesaling assigning just is what it is.. the fact that you would make 50k on a 220k sale when a brokerage fee would be 15k.. thats 35k that is being taken from a seller who probably knows no better or has just been lied to by the wholesaler as to the real value.. and that is what the law makers and regulators are focused on.. 

     The first part of your post makes sense and I find nothing to disagree with. It's a free market, no body can force anybody to buy or sell anything. If the product/contract/service I offer is not suitable to you then I don't want you to be my customer. We both can happily part our ways under free market conditions.

    But the second part of your post implies that all sellers are idiots, or that I (or State) is a nanny that must make decisions for mentally deranged sellers , all of whom have an IQ of 10 years old child. I don't believe this to be true. On my part, I would avoid to close any transaction with someone who is handicapped, has IQ of 10 years old child and is unable to read and understand the contract they are signing. After all, if someone was clinically handicapped and not able to understand and consent to terms of the legal agreement, then the agreement itself could be declared null and void in the court of law. 

    I will be dealing with adults, not handicapped individuals. And it's their responsibility to figure what they want to ask for their property. I don't run charity, I don't run educational non-profit classes. By the way, that's one of the reasons I don't want to touch pre-foreclosures, with accounts delinquent for 60 days. Some wholesalers do, they go and offer to help sellers to stay in their homes, educate them about loss mitigation , ask if seller needs help with it and etc., before seller begs them to just rid them of their house. I will have none of it. It's none of my concern to educate or baby sit another adult in my state. No one did for to me, except for my parents, and I have no intention to parent strangers. But once I have an adult, with full cognitive abilities, who is motivated to sell and get out of that property for MAO or less, rest assured I will make my offer on that property and if they accept it I will write a contract. Let them State AG's come after me in droves, there is no crime in making an offer to someone who owns the property to buy it from them. It's marketing to public that is illegal and I have no intention to sell dilapidated , dirty , stinky and full of trash property to an end buyer in MD or anywhere. I won't sell it to investor either, I will simply secure my interest in the contract. So, which part of it is illegal or wrong? You could say I am taking it from seller if I had a contract for 220K and paid seller 185K. That would be stealing from a seller. But if seller is entitled to get more, then who is forcing them to give their property to me for 220K? Who is stopping them from finding you or other investor on their own and getting full $270K in their pocket? I certainly don't. Regulators and law makers in these blue states couldn't care less about the sellers. If they did they would have better economic policies , create safe neighborhoods and investor/business friendly atmosphere, to make their citizens prosper and able to afford the houses they live in, instead of losing it to banks in foreclosures. No, it's not the sellers they care about. They care about eating all the pie by themselves and sharing it with those who finance their campaigns and free vacations, that's what those law makers really care about. And while at it they will make sure there will be more poverty , more foreclosures and less opportunities for average Joe to make a living here. We all know the drill. I am just glad that we have 50 States and not all of them are blue and purple. So, we can still focus on doing business, even if it means we have to move out of blue and into a red state in the near future.


     so Eric you have not actually done any deals it sounds like.. U understand the 70% minus rehab costs those numbers have been going around for a long time.. its pretty tough out there right now but hopefully you can make it work.. although I always wonder why those that want to sell real estate  ( that is what your doing at the end of the day bringing a buyer and seller together) why you dont just get in the game with a license and make a career of it.. if your any good at sales and can stick to it can be a very rewarding occupation.. wholesalers they dont last very long unless they are very well capitalized and vertically integrated. 

    Good question, Jay. For couple of reasons. First, becoming REA requires 60 hours of schooling , and then you are stuck with less than 3% commission per transaction (see below link with average rates of REA's compensation), and tons of regulations on top of it while competing with hundreds of other realtors on MLS. It's just not worth doing it in my opinion. It works well for those who have been doing it for decades, but it may take at least a decade to get anywhere as REA.

    Becoming a broker takes 3 years in MD after becoming REA. You can't apply and become a broker without those 3 years under your belt. And then you split commissions with agents and have a cap limiting what you can earn on each transaction regardless of the deal you struck.  How is this fair to the broker?))

    After much research and talking to people who did it all (running crews/flipping, owning to rent/passive investment, brokering, selling real estate as agents and etc.). I concluded that wholesaling is best to start with. Gradually, if you are able to make it work, you can explore flipping, owning to rent and other options to build wealth. But none offers a quick turn around and cash flow, with the least amount of headache and financial risks (not to confuse with the least amount of WORK),  as wholesaling. It's just a good stepping stone when you enter the world of RE investment.

    LINK: https://listwithclever.com/average-real-estate-commission-rate/maryland/

    The average total real estate agent commission rate in Maryland is 5.34% of the final sale price. Based on the latest median home sale price in Maryland ($418,534), that translates to a total cost of roughly $22,350.

    Home sellers typically cover the total commission fee from their sale proceeds, which is split between the listing and buyer’s agents who handle the sale. In Maryland, the average listing agent fee is 2.76%, while the average buyer’s agent fee is 2.58%.

    Real estate agent commissions make up a significant portion of the closing costs for Maryland home sellers. But you don't have to pay the full 5.34% to a traditional agent. If you're selling a home in Maryland, you can use a discount broker to save on realtor fees. In fact, depending on your situation and the agents you work with, you could save 33% on realtor fees, or about $7,366 on average.


     this is why wholesale guru's can sell 30k packages as people drink the cool aid basically verbatim of what you just said.. Any way like I said good luck.. 

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