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
    Quote from @Account Closed:
    Quote from @Shane H.:

    You either didn't read and comprehend what I wrote, or you deliberately put in my mouth things I didn't say. I equated a car owner to what you insist is invariably an "elderly individual" or a "widow" (as far as I know car owners come in different ages, genders, marital statuses, mental capacities and etc.). Car dealer, in that equation, is a prototype for a wholesaler in a RE transaction, not a seller of home. We are comparing RE wholesale transaction to trading-in a vehicle to a dealer for a wholesale value. 

    You have a big long winded explanation of how you come prepared to the desperate drive a hard bargain and they don’t like you. That was what this was in reference to. 
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  • Dominic Mauro
    Austin, TX · Member since 2018 · 8 posts · 2 votes
    2y

    I did not read every comment and I am guessing this may be a repeat but nonetheless... 

    As someone who has a small business and markets for their own properties in a midsize, active area I can say that the vast majority of wholesalers I encounter bring little or nothing to the table. We have some big corporate wholesalers who are pretty "bleh" but it seems like every few weeks a guru class lets out and I get inundated with deals that would be bad for everyone except *maybe* the wholesaler. These people add much noise to the entire market while doing little to actually move things along.

    Furthermore, they really just pull funds from sellers since the only way they are remotely a deal is if they are lowballed to sh$t so they can make their spread. Those same people would almost certainly end up with a cash buyer who would pay most of a wholesalers spread directly to them.

    Bottom line, I am not a big goverment oversight guy but I would have no issue if the practice was more regulated.  I think the "new" standard would be to buy it and flip it after purchase. No more having to say I am a contractor so the seller doesn't know I'm the actal buyer. No more coaching people when their contracts are so bad Title won't take them, etc. 

    I mean, honestly, if you can't figure out how to fund a property you shouldn't be in real estate.

    1Reply
  • Omo Okin
    Member since 2022 · 1 post · 1 vote
    2y

    @Jack Seiden...I completely agree with you. The "Value add" by most wholesalers usually adds up to a big fat zero. It was alright "ish" when they made a little profit and moved on, most investor would just shrug it off as cost of business, but when you are an investor working with properties with low profit margins or in economically depressed areas and wholesalers are on social media blabbing bout how they made bank ....that's not hustle , it's dumb and it should be banned everywhere for all I care. If you wanna invest, invest, put your money...in...any other thing is just gaming the system, and the truth is someone, somewhere is paying for it

    1Reply
  • Account Closed
    MD · Member since 2018 · 195 posts · 53 votes
    2y
    Quote from @Shane H.:
    Quote from @Account Closed:
    Quote from @Shane H.:
    Quote from @Account Closed:

    REA and Brokers will always dislike wholesalers, that's just the nature of business where EVERYONE is driven and motivated by selfish interests and greed and nothing but selfish interests (all "moral" talk is a smokescreen, for naive to fall). Anyone who aspires to be a wholesaler and reads this forum, grow a thick skin. Business is like a high school and most people in real world are emotionally driven and irrational. Don't expect to be liked and don't try to be liked. No one will roll red carpet for you except the ones who can benefit from your business and services. Just do your thing, know what you are doing, don't lie, don't misrepresent, don't break the law. 

    I completely understand why you would convince yourself that all business is immoral in order to justify doing immoral things yourself. It is 100% possible to operate business in a moral manner. Of course different folks have different views of what is moral, but literally everyone here who has dealt with wholesalers has noticed their propensity to seek out elderly sellers. The legal bar for a criminal transaction or claiming the person was unable to enter into a contract are not necessarily equivalent to the bar for those who need guidance I.e. the elderly. Your obsessive focus on the buyer and their business acumen is strange… unless… it’s a distraction from the individuals who actually need the protection. The often less capable sellers.

    Early on in this discussion I thought you were just a wide eyed fellow taken in by the ability to enter into a market with little investment. At this point I suspect a more nefarious reason for your defensiveness of this group of people. While some have different morals than others most reasonable people agree that certain groups need protection. That’s why we write criminal laws, and why many of us are advocating to expand slightly in this area, what is to be considered criminal.

    By requiring licensing that you think is so onerous, which is usually quite easy to complete and reasonably priced  maybe $1,000 and somewhere between a day and 2 weeks of online classes, we can protect a segment of people that need protection. Repeatedly you’ve gone back to say brokers would likely inflate the price because if commission. That would literally be beneficial to the segment that needs to be protected so that’s a horrible argument  investors hardly need protection at the same level that little old widows need. Now somehow youve equated auto dealers and professional car salesman with those elderly individuals the rest of us would like to protect. Everyone reading can see how absurd that is. I suspect you can as well. 

    You’ve actually inspired me to write to my legislator to encourage a stronger protection of those individuals from wholesalers, even if that means banning the practice entirely. 
     

     You can suspect and think all you want. First question is: what is your definition of "moral" versus "immoral" wholesale transaction? Please be concrete and elaborate. I understand you mean "moral" is something beyond "legal", but what exactly you mean when you say that?

    Second, there are numbers involved here. Let's say there is a property on 123 Main Street, Anytown, Maryland. It has 3 br and 2 ba. I call my REA, we run comps and find that similar homes that were sold in that area in the past 6 months fetched $100,000.00 each. I call my HML guy and he says the area is good, property looks good and that they would lend hard money to an investor willing to buy , repair and flip it.

    If I am an investor who wants to buy the investment property, I will want to buy this property for (let's say) 70% of ARV minus my repair costs, provided it's in an area where there is steady demand for homes. Let's suppose all those homes we found in MLS to run comps that were sold for $100K were in good enough shape to meet the definition of ARV. Suppose I brought in a contractor and I know that it will cost investor $30K to repair this particular home to make it retail ready. Now I know that I could offer this home AS IS to an investor for $40K. That's just how much investor/rehabber will pay to acquire it, or else they won't get a return on investment to justify their risks and costs. So, $40K is how much it's worth in a wholesale market. Suppose I have spent 2 months to find a seller of this property, I have spent hundreds of dollars on Facebook ads, spent $1300 to a company that placed 2000 cold calls in the US, spent another couple of thousands on direct mailing campaign. I am not counting MY time and effort, driving for dollars and paying for my gas and wear and tear on my car. As you can see, I have already spent at least $4K to find that seller (he didn't just come and nock on my door out of the blue). So, it's only natural that I add my finders fee to it, to make it worthwhile to do this (I am not an idiot nor a charitable , non profit organization that receives government grants and tax deductions, after all. I run a for profit business and I either have to profit or quit). So, I add my fee to a assignment contract, let's say $8,000. And I deduct those $8K from $40K. So, realistically $32K is my MAO, that's all I can offer the seller to make this work worthwhile of doing. I offer $30K to seller, we haggle and he agrees to give it up for $31K. I am not adding closing costs there, to make math simple, but you get the drill. So now tell me, is it "immoral" to offer $31K to a seller? Is it immoral to have a contract with that figure with a seller and to collect assignment fee in the amount of $8K? Let's talk real numbers here, not pontificate like if we were priests in a Sunday school. So, what wholesaler is supposed to do to be "moral" in your books? May be pay $60K out of his pocket, to get seller $100K, to make seller happy? Is that what you propose here? I am just curious what your rationale is on this. I am not interested in your "moral" lessons, but I want to understand how you think wholesaler should operate in this particular case as described? Please be specific.

    P.S. Please feel free to write to anyone you wish. I can do the same! LOL

    This has gone on far longer than I anticipated, but my last word. 

    I’ve given examples repeatedly of what would be immoral. So have others. One last time. 

    lying about what you’re doing. 

    manipulating numbers. I literally gave numbers in another comment of what I actually saw happen. But to use your example. If you had to narrow or expand criteria to come up with the 100k comps. In the case I sat in on, the individual uses straight up 3/2 comps even though this property had another 2,5000 square feet of home to include a bar, dance floor, and 3 “bonus rooms, as a bi-level they didn’t have egress to be considered bedrooms. He includes the price of adding a bath to the half to make it 3 bath. Yet comped to 2 bath. He then narrowed it to the tiniest neighborhood ever requiring to go back 18 months in a quickly rising market. My agent didnt do any of that and comped 150k higher on arv.

    This was not simply a slight difference. These were manipulated comps. To the tune of 40%. So if your comps as honestly run were 140 and you manipulated them to get to 100… as for your criminal standard this would be very difficult to prove as a criminal act. Nonetheless, it’s clearly manipulative. Clearly not an honest practice.

    Telling them it’s worth 140k and you want to make 30k and the buyer of which you are not, wants to make 30k and it needs 30k so you can give them 50 is an honest practice. Telling them it’s worth 100 when you know it’s worth 140 is not. It’s quite simple really. 

    I gave an analogy of an act in another business, the hvac contractor. Do you disagree that telling them it’s going to explode to sell a unit when it shut off because of a simple issue is okay?

     You wrote a long post, I didn't even address all of your allegations. I addressed only some in my first reply and one in particular in my second reply to it. You make a statement, I respond. This is how any discussion goes. Not sure what you expected by writing a long post if you didn't anticipate this discussion to go as far as it did.

    Some of the examples you gave are criminal by definition and laws already exist in the books that should be enforced by AG to eliminate such practices and abuses. Getting senile, mentally disabled person sign a contract they can't comprehend renders the said contract void and null in the eyes of the law. How many times should I repeat it? As to manipulating numbers, misrepresentation with intent to defraud seller is illegal. You can't impersonate an expert in RE and lie all day long to seller that his property is worth $10, knowing very well that it's a blatant and gross lie. I don't understand wholesalers who do this. It's not criminal per se, it is very stupid thing to do. If you want to risk going to prison for 1 year or more for misdemeanor or felony, and paying a hefty fine for mere $5000-$10000 you will grab (and later part with) then you are just being stupid. A year in prison is a hardship that can't be compensated by $10K or even $100K. There are zillions of ways to make $10K without risking your freedom. There are only so many ways I will end up talking with you if you are a motivated seller of the property you own. One, you see my ad and call me because you want to sell me your house. Two, I make a cold call because I know you have a vacant house or a house with high equity that I think you may want to get rid of. Once I speak with you I don't have to tell you anything other than making an offer to have your home purchased from you. That's it! you go and do your own math. You go and talk to whomever you want to figure your comps, the value of your property and what you want for it. It's none of my responsibility. My job is to take a look at your house and say I will give you X dollars for it. Take it or leave it. Yes, I might sympathize with you, have a nice conversation, see if you are truly motivated to sell and etc. But at no point I have to lie or misrepresent anything to you to make you an offer. I don't have any pressing need, i am not desperate, I have absolutely no interest in forcing or begging you to do anything. Or telling you that there is bomb that will explode if you don't sell it to me for a dollar. What kind of nonsense is this? As far as I care, there are thousands of properties out there and you are just one of the owners I make an offer to. Here is my number. You own this home, you know better what you want and what you need. If you don't like my offer have a nice life. I will wish you all the best and we part ways. I wrote this dozen of times already, but you still bring an example of some fool who calls himself a wholesaler and is so desperate that he will engage in fraud in misrepresentation to earn couple of bucks.  And then you use your example as a justification to badmouth all wholesalers as a group. Of course you can continue doing so, but it has no legs to stand on if one looks at it with rational mind. What some fool does out there for few bucks has nothing to do with the legal business of wholesaling properties. 

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  • Johnna Lodge
    Investor · Mableton, GA · Member since 2013 · 78 posts · 43 votes
    2y

    I am a real estate investor and Realtor in GA.

    My wholesale contracts state I plan to make a profit. Noone works for free for a living.

    I also state I am a realtor.

    I have helped so many people where a realtor would not or could not help.

    I have had seller's who state they do not want to work with a realtor.

    I usually approach the seller by giving them options to list, what needs to be done to get their best return versus selling wholesale.

    I've had people tell me they don't wish to do what it takes to list.

    Sometimes I just buy the property where a Realtor would not. I do not wholesale the property. 

    I have had some issues with other wholesalers mainly due to unethical sellers.

    An unethical seller is one who goes under contract with another wholesaler while already under contract.  This scenario gets to be more of an issue when you have an unethical wholesaler on the other end.

    In every industry there are bad seeds. It can't be helped because you have ethical and non ethical people in every field.

    What I have found lately is inexperienced wholesalers lying to Realtors as if they are buyers. This provides ridicously low offers with crazy terms such as earnest money due after ridiculously long term due dilligence ends. This can lead to a bad taste in Realtors and Seller's mouth.   

    Just be upfront. 

    In my humble opinion there is a need for wholesalers and Realtors. Be ethical and upfront with everyone you engage with. 

    4Reply
  • Account Closed
    MD · Member since 2018 · 195 posts · 53 votes
    2y
    Quote from @Johnna Lodge:

    I am a real estate investor and Realtor in GA.

    My wholesale contracts state I plan to make a profit. Noone works for free for a living.

    I also state I am a realtor.

    I have helped so many people where a realtor would not or could not help.

    I have had seller's who state they do not want to work with a realtor.

    I usually approach the seller by giving them options to list, what needs to be done to get their best return versus selling wholesale.

    I've had people tell me they don't wish to do what it takes to list.

    Sometimes I just buy the property where a Realtor would not. I do not wholesale the property. 

    I have had some issues with other wholesalers mainly due to unethical sellers.

    An unethical seller is one who goes under contract with another wholesaler while already under contract.  This scenario gets to be more of an issue when you have an unethical wholesaler on the other end.

    In every industry there are bad seeds. It can't be helped because you have ethical and non ethical people in every field.

    What I have found lately is inexperienced wholesalers lying to Realtors as if they are buyers. This provides ridicously low offers with crazy terms such as earnest money due after ridiculously long term due dilligence ends. This can lead to a bad taste in Realtors and Seller's mouth.   

    Just be upfront. 

    In my humble opinion there is a need for wholesalers and Realtors. Be ethical and upfront with everyone you engage with. 


    Great post! Some individuals who posted comments on this subject appear to insist that wholesaler has to go way beyond being upfront, acting within boundaries of law and being honest. They insist that it's a moral duty of wholesaler to pay retail price to sellers who own distressed properties and also act like caregivers, counselors and advisors of sellers, to help sellers get top dollar on their property. They allege that it's immoral to buy property at wholesale price, which would fall under 70% rule minus cost of repairs and wholesaler's fee for locating it. Anything other than working for the seller and paying him 100% of the ARV is "immoral" in their books. They also insist that all sellers of houses are invariably senile elderly men or widows. I am not sure if they are trolling or truly believe what they say.

    0Reply
  • Account Closed
    MD · Member since 2018 · 195 posts · 53 votes
    2y
    Quote from @Shane H.:
    Quote from @Account Closed:

    people are not hating you. You’re not the star of this show no matter how much you’d like to be. People dislike what they’ve seen run rampant in an industry. 

    what are these insane regulations and licensing requirements you’re referring to to become an agent. In most states with no criminal background you can do it in an afternoon. Lol

    I know very well about those Congressional Hearings, I even posted clips from one. And while they are ongoing current Boeing CEO continues to hold his job and plans to retire in due time, with all the perks and benefits that come with it. So, where is your outrage and all your "moral and ethical standards" when it comes to powerful and connected men who run businesses in such criminal ways that the commercial planes they manufacture started to fall off the skies? Perhaps you still consider that Boeing CEO a respectable, moral and upstanding guy, simply because he had $34mil bonus and salary package and runs such a "big and respectful" company? But you are on the @$$-es of wholesalers who won't offer to pay seller full ARV for dilapidated junk, while they owe it to sellers under your "moral and ethical" standards LOL
    People are applying double standards and being hypocritical - that's the point I make when I bring Boeing CEO as an example. 

    I think you are projecting some of what you might be doing here, such as hoping to be a star of the show or get 15 minutes of fame. For me that's high school stuff I couldn't care less of. I don't care if I am an anti-hero in someone's books or a knight in shining armor, their perception of me means nothing to me, has zero tangible value and significance to me. But it's obvious to me, from reading the comments and posts here, that a lot of people hate wholesalers as a group for reasons they would kiss @$$ of the Boeing CEO. So, as I understand, it's all about power, a piece of pie everyone wants to bite and selfish, monetary interests. No one, IMHO, in re business cares about sellers or anyone other than themselves (if they did they would be million times more vocal about Boeing CEO than wholesalers, at least wholesalers don't kill hundreds of people each time they eff-up a deal). :-) If you TRULY care for sellers, why don't you fire legislators and executives who make bad economic policies which lead to hyper inflation, high interest rates, economic downturn, mass poverty, loss of jobs, desperation and need to sell for cash a property that  fell into uninhabitable condition? Why don't you find some of those sellers before they are desperate to sell their homes and help them with their finances, jobs and lives? If you so much care about seller. Which, I am absolutely certain, you don't. 

    As to REA licensing and gov regulation, you probably don't know anything about both. I have repeatedly stated that I have nothing against checking criminal background and registering wholesalers , like they do gun buyers in state of MD. That type of license would be beneficial to all. But putting wholesaler through 60 hours of training, then passing exam, then waiting 3 years under MD licensing regulations before they can apply to become Brokers, with fiduciary duty to sellers  is an absurd and preposterous requirement of someone who is out there to find a distressed, off market dilapidated property for half the retail/ARV price, to assign to an investor who will take all risks and buy it AS IS for profit.

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  • Account Closed
    MD · Member since 2018 · 195 posts · 53 votes
    2y
    Quote from @Shane H.:
    Quote from @Account Closed:
    Quote from @Shane H.:

    You either didn't read and comprehend what I wrote, or you deliberately put in my mouth things I didn't say. I equated a car owner to what you insist is invariably an "elderly individual" or a "widow" (as far as I know car owners come in different ages, genders, marital statuses, mental capacities and etc.). Car dealer, in that equation, is a prototype for a wholesaler in a RE transaction, not a seller of home. We are comparing RE wholesale transaction to trading-in a vehicle to a dealer for a wholesale value. 

    You have a big long winded explanation of how you come prepared to the desperate drive a hard bargain and they don’t like you. That was what this was in reference to. 
     That wasn't to compare a licensed dealer to a home seller, it was simply to give an example of my negotiating tactics. Btw, it required ZERO lying, misrepresentation or fraudulent claims about the value of their car in the market. You can't fool car dealers in their own business. It involved on my part an understanding and knowing how much I wanted to pay for a car, making my offer and never wavering to pay dealer what he demanded. Here is my offer, take it or leave. Period. I don't care if you are a car dealer or home seller. I won't beg, lie or misrepresent anything to you. Offer is offer, money is money. Goods are yours and decision to accept or reject my offer is also yours to make. 
    0Reply
  • Don KonipolBusiness Member
    Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
    2y

    Everyone has their own “take” on every aspect of “wholesaling” covering a full range of opinions, emotions, and of course self interest.

    In an inflamed rhetoric environment I have previously been accused of being anti wholesaler and biased.  I don’t believe I am anti wholesaling at all.  I am anti committing fraud in a business negotiation; I am anti lying to homeowners, and I am anti recommending that inexperienced and undercapitalized people misleading desperate homeowners into believing they have a solid sale when all they’ve done is provided a “wholesaler” with a no cost, no risk OPTION to purchase their property.

    1. THE FRAUD - this occurs when the wholesaler sign a contract to purchase a property he has no intention of buying. IF the wholesaler explains to the home seller (in writing and verbally) that he will only conclude the transaction IF he can flip the contract at a profit, then fraud is ELIMINATED from the equation.

    2. THE LIE - this occurs when the wholesaler shows the homeowner false  comps or provides false information which lead the homeowner to believe his property is worth significantly less than it is.  The cure is either (1) the wholesaler makes his offer without indicating a false property value to the homeowner or (2) the wholesaler explains why he is offering X amount by showing the profit a fix in flipper requires, his own profit requirement, and the resultant price range he can offer. 

    3. DANGEROUS WHOLESALE WANNA BE - This person is himself a VICTUM of mis information, fraudulent marketing or outright scam.  The situation is created when good people wanting to better their life’s are tricked into believing that wholesaling real estate successfully is the path they should take.  The saddest example is the people who pay $40k for a ,mentorship they can not afford, have no capital to invest, are poorly trained with no understanding of real estate principles, law or finance, and are unleashed on unsuspecting home owners to try to fool them into allowing the wholesaler a fre option to buy/sell their house.  The cure the various regulatory authorities have come up with is twofold, legislation that restricts the methods wholesalers may use, and regulations requiring wholesalers to hold real estate brokers license.  I do not necessarily agree with these solutions, although I am open to the argument that they may be effective.  I would much rather see wholesaler operating under the “I’m going to buy your property but not really” system sued for fraud and have fraud established so thoroughly that almost nobody would offer on a property they did not intend to close on.  But, then again legislators are attorneys, not business people. 

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

    I am a real estate investor and Realtor in GA.

    My wholesale contracts state I plan to make a profit. Noone works for free for a living.

    I also state I am a realtor.

    I have helped so many people where a realtor would not or could not help.

    I have had seller's who state they do not want to work with a realtor.

    I usually approach the seller by giving them options to list, what needs to be done to get their best return versus selling wholesale.

    I've had people tell me they don't wish to do what it takes to list.

    Sometimes I just buy the property where a Realtor would not. I do not wholesale the property. 

    I have had some issues with other wholesalers mainly due to unethical sellers.

    An unethical seller is one who goes under contract with another wholesaler while already under contract.  This scenario gets to be more of an issue when you have an unethical wholesaler on the other end.

    In every industry there are bad seeds. It can't be helped because you have ethical and non ethical people in every field.

    What I have found lately is inexperienced wholesalers lying to Realtors as if they are buyers. This provides ridicously low offers with crazy terms such as earnest money due after ridiculously long term due dilligence ends. This can lead to a bad taste in Realtors and Seller's mouth.   

    Just be upfront. 

    In my humble opinion there is a need for wholesalers and Realtors. Be ethical and upfront with everyone you engage with. 


    wholesaling like we see back east is justs really starting in earnest here in PDX  in regards to wholesalers approaching agents.. and of course resi agents here have no clue about this whole underworld of  wholesaling East cost style i will call it..  So it does confuse them and they might take the bait one time but when the deal fails and as we know they do fail.. they will be very tough nut to crack next time.

    Even my wife who has been around this for decades and is a top producing Resi agent is starting to see these goofy offers.. And she will bring them to me and Ask you ever see anything like this.. And I say YUP its all over BP and back east thats where we fund a lot of our buyers inventory from.. I give her a little key advice to smoke them out.  Also any other agent i run into if they ask I help them also .. no one needs to deal with time wasters and inexperienced and experienced Resi agents in this market are new to this.  

    Kind of reminds me when I basically did the first escalation clauses in my contracts in Charleston SC when i was buying building lots.. Agents had never seen it before and out here on the West we started using escalation in the mid 80s  :)

    When and if I am buying direct from a seller out here I simply put that I am buying this property for profit or loss.. just like that .. works everytime and full disclosure of course I attach a real bank statement showing we can pay cash if our offer is in fact cash.
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  • Account Closed
    MD · Member since 2018 · 195 posts · 53 votes
    2y
    Quote from @Don Konipol:

    Everyone has their own “take” on every aspect of “wholesaling” covering a full range of opinions, emotions, and of course self interest.

    In an inflamed rhetoric environment I have previously been accused of being anti wholesaler and biased.  I don’t believe I am anti wholesaling at all.  I am anti committing fraud in a business negotiation; I am anti lying to homeowners, and I am anti recommending that inexperienced and undercapitalized people misleading desperate homeowners into believing they have a solid sale when all they’ve done is provided a “wholesaler” with a no cost, no risk OPTION to purchase their property.

    1. THE FRAUD - this occurs when the wholesaler sign a contract to purchase a property he has no intention of buying. IF the wholesaler explains to the home seller (in writing and verbally) that he will only conclude the transaction IF he can flip the contract at a profit, then fraud is ELIMINATED from the equation.

    2. THE LIE - this occurs when the wholesaler shows the homeowner false  comps or provides false information which lead the homeowner to believe his property is worth significantly less than it is.  The cure is either (1) the wholesaler makes his offer without indicating a false property value to the homeowner or (2) the wholesaler explains why he is offering X amount by showing the profit a fix in flipper requires, his own profit requirement, and the resultant price range he can offer. 

    3. DANGEROUS WHOLESALE WANNA BE - This person is himself a VICTUM of mis information, fraudulent marketing or outright scam.  The situation is created when good people wanting to better their life’s are tricked into believing that wholesaling real estate successfully is the path they should take.  The saddest example is the people who pay $40k for a ,mentorship they can not afford, have no capital to invest, are poorly trained with no understanding of real estate principles, law or finance, and are unleashed on unsuspecting home owners to try to fool them into allowing the wholesaler a fre option to buy/sell their house.  The cure the various regulatory authorities have come up with is twofold, legislation that restricts the methods wholesalers may use, and regulations requiring wholesalers to hold real estate brokers license.  I do not necessarily agree with these solutions, although I am open to the argument that they may be effective.  I would much rather see wholesaler operating under the “I’m going to buy your property but not really” system sued for fraud and have fraud established so thoroughly that almost nobody would offer on a property they did not intend to close on.  But, then again legislators are attorneys, not business people. 

     I read your posts and don't think you are ANTI-wholesaler. I understand where you are coming from. I agree that FRAUD should be eliminated from business, it's just a bad business. As a wholesaler of goods that had to acquire liquidation products in bulk I have dealt with a lot of unethical , cut throat sellers and it never helped anyone along the way. Btw, new MD law in effect from October 1st mandates disclosure on part of the wholesalers and I see no problem with it.

    Showing false comps is an outright fraud and deceit. Not sure why anyone would do this to sellers. It can come back biting the middle man in future, since one could be accused of acquiring the goods/property by misrepresentation and deceit. I would prefer to explain nothing to seller, except making an offer and making it clear that I may assign the purchase to another buyer if it's not an investment I am looking for.

    Paying $40K for mentorship is indeed terrible investment to learn this trade. I know fix and flippers who paid $40K to Kiyosaki and other gurus teaching RE basics (and they are being vogue about it, selling 80% fluff and may be 20% of somewhat useful information that one could gather for free just by browsing the internet). 

    I have a problem with requiring wholesaler to get Broker's or REA license. It's too cumbersome, very time consuming and absolutely unnecessary for someone who will be selling deals/transacting with investors in B2B environment and by definition can't have fiduciary duty to seller.  One would be motivated to inflate the price of selling property to maximize proceed to a seller and a commission on transaction, which would make it counterproductive and absolutely bad investment for a business that wanted to purchase distressed home to rehab and profit.

    0Reply
  • Scott TrenchPro Member
    Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes
    2y
    Quote from @Don Konipol:

    Everyone has their own “take” on every aspect of “wholesaling” covering a full range of opinions, emotions, and of course self interest.

    In an inflamed rhetoric environment I have previously been accused of being anti wholesaler and biased.  I don’t believe I am anti wholesaling at all.  I am anti committing fraud in a business negotiation; I am anti lying to homeowners, and I am anti recommending that inexperienced and undercapitalized people misleading desperate homeowners into believing they have a solid sale when all they’ve done is provided a “wholesaler” with a no cost, no risk OPTION to purchase their property.

    1. THE FRAUD - this occurs when the wholesaler sign a contract to purchase a property he has no intention of buying. IF the wholesaler explains to the home seller (in writing and verbally) that he will only conclude the transaction IF he can flip the contract at a profit, then fraud is ELIMINATED from the equation.

    2. THE LIE - this occurs when the wholesaler shows the homeowner false  comps or provides false information which lead the homeowner to believe his property is worth significantly less than it is.  The cure is either (1) the wholesaler makes his offer without indicating a false property value to the homeowner or (2) the wholesaler explains why he is offering X amount by showing the profit a fix in flipper requires, his own profit requirement, and the resultant price range he can offer. 

    3. DANGEROUS WHOLESALE WANNA BE - This person is himself a VICTUM of mis information, fraudulent marketing or outright scam.  The situation is created when good people wanting to better their life’s are tricked into believing that wholesaling real estate successfully is the path they should take.  The saddest example is the people who pay $40k for a ,mentorship they can not afford, have no capital to invest, are poorly trained with no understanding of real estate principles, law or finance, and are unleashed on unsuspecting home owners to try to fool them into allowing the wholesaler a fre option to buy/sell their house.  The cure the various regulatory authorities have come up with is twofold, legislation that restricts the methods wholesalers may use, and regulations requiring wholesalers to hold real estate brokers license.  I do not necessarily agree with these solutions, although I am open to the argument that they may be effective.  I would much rather see wholesaler operating under the “I’m going to buy your property but not really” system sued for fraud and have fraud established so thoroughly that almost nobody would offer on a property they did not intend to close on.  But, then again legislators are attorneys, not business people. 

    This.

    Podcast Guest on Show #223
    BiggerPockets
    1Reply
  • Johnna Lodge
    Investor · Mableton, GA · Member since 2013 · 78 posts · 43 votes
    2y
    Quote from @Jay Hinrichs:
    Quote from @Alan Asriants:
    Quote from @Jack Seiden:
    Quote from @Alan Asriants:
    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.


     DDidn't even know Philadelphia had a licensing requirement looks like they do:

    https://www.phila.gov/services/permits-violations-licenses/g...

    Doesn't seem like the barrier to entry. Is that low though. Just pay a fee and take it from there


     Yes but net listings are illegal in most if not all states, in theory at least the real estate commission could revoke your license for wholesaling.


     Yep this was my thinking too. At least a net listing with an agent is business with a licensed person


    I think US Brokers sometimes get lost in the fact that commissions are and have always been negotiable.  No need for net listing if a deal is a tough one you just charge what you want to make and if the seller does not agree you move on.. When i started in the mid 70s I only sold land and land commish in those days was 10%  .. most of the deals I took on were ones that other agents simply could not sell as they were very rural props in N. CA way back in the hills 20 30 miles on dirt roads most realtors could not even find the parcels :) I charged anywhere from 15 to 30% commish on those and got it.. it was a waste of time to put them in / on MLS  I doubled ended very one of them for a good 5 to 7 years.  

    then for builder bail outs in Oregon same thing my fee was generally double standard rates and I double ended all of those.  For instance I had a builder who was really up against it on 20 duplexs that were sitting.. these were 200k each at the time.. I charged 15% And I spent the money to run a fly buy program with CA investors and sold them all in one weekend at a big event that cost me 50k to put on up front :) so there is more to selling real estate than conformity to norms.
    0Reply
  • Chris Williams
    Wholesaler · Member since 2024 · 99 posts · 39 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.


    I am switching to a wholetailing type model. It is cleaner and makes more profits. I have been burned too many times on assignments and trying to beg a cash buyer to pay a number I want. I know that MLS will always give more than a cash buyer.

    1Reply
  • Chris Williams
    Wholesaler · Member since 2024 · 99 posts · 39 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 am not sure the Democrats are the reason wholesaling is getting banned lol. It is getting banned because people have abused it. 

    1Reply
  • Chris Williams
    Wholesaler · Member since 2024 · 99 posts · 39 votes
    2y
    Quote from @Alan Asriants:
    Quote from @Account Closed:
    Quote from @Alan Asriants:
    Quote from @Account Closed:
    Quote from @Jay Hinrichs:
    Quote from @Account Closed:
    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.


     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.. 


     Thank you. But from what I understand in wholesaling it's not so much luck but consistent work, good discipline, persistence and ability to analyze deal that deliver results. Discipline and consistent work would probably top the list, as analyzing the deal doesn't take much brain power and effort. Negotiating comes naturally once you properly analyze the deal.

    The gurus are another subject. May be they are the ones who should be outlawed. There is absolutely nothing one can learn in this business worth paying 30K. The rules of the game are simple, can be read and understood in less than a day. It's amount of WORK and CONCENTRATION that will make a difference between make or break, and no GURU can make you stick to your regimen and do something persistently and systematically if you can't make yourself do it. 


     The issue is that many wholesalers falsely advertise themselves, lie, or keep seller in the dark to make the deal work. They lose deals unfortunately when they are transparent 

     A lot of people are stupid. Not just house owners/sellers, but people in general. 15 years ago I was in reverse logistics/liquidation business. I was able to consistently buy and then liquidate certain number of pallets/goods through the channel I have established. I would go to warehouses, negotiate/make an offer on a truckload of goods and then purchase one pallet at the time to help miserable seller to get rid of it. I never spent fortune to fill my warehouse with truckloads of goods, but I was buying them at the rate I could liquidate them and as long as I could liquidate them. Obviously, I profited handsomely while doing it. And what I recall is that out of 10-15 warehouses I dealt with ONLY TWO were owned by decent men who knew how to do business. One was a Chinese owned in NYC and another was owned by Hasidic Jew in New Jersey. These two were grateful to me that I was helping them clean their warehouse and get rid of their shittiest products that no one was willing to buy from them. All the rest grew resentful, angry and jealous when they saw how quickly I was moving their pallets. They were angry and resentful that I was making money on the trash that was sitting in their warehouses forever and that they couldn't sell to anyone on Earth. They would start playing games, sometimes pretending that they were not available or able to deliver goods. At others they would ghost me. Or, worst of all, try to go behind my back and find the distributor/seller I was dealing with, to cut me out of the deal. If I asked them why were they being so idiotic (of course in milder, non insulting terms), their answer would be "it's a dog eat dog town". Idiots! One of them lost the business and money couple of years later. I don't know what happened to others. But the point is, I am very well familiar with this idiotic type of product owner who is NEVER able to sell his goods, but gets angry and resentful at you if you help him to, because he thinks he is entitled to get what you get just because it's his goods that you found him a buyer for. I hope to spot sellers like that during my fist contact and send them to kick rocks and forever live in the $*it they are, with no help coming from me to get them rid of their property. 


    Nothing wrong with buying the property and closing on it then selling it for more. That is true wholesaling. 

    But flipping contracts and tying people up into deals they are blind about is a concern

    I agree that people often times dont value your connections and are greedy to find out you can sell something for more. Best to just not work with those kinds of people. Your connections and time are certainly worth $$$

    Agreed. I think that the buy and resell model is going to force a lot of wholesalers to actually become business owners and operate as a business and have capital. 
    1Reply
  • Chris Williams
    Wholesaler · Member since 2024 · 99 posts · 39 votes
    2y
    Quote from @Russell Brazil:

    Anyone with this amount of push back against such simple regulation as the requirement to be licensed, and thus the ability of the state to provide easy redress shady operators, makes me think that person is a shady operator.  Anyone who operates ethically has nothing to fear from the requirements to be licensed. Only those with something to hide have something to fear.


     This is what I been saying for a while now. 

    0Reply
  • Chris Williams
    Wholesaler · Member since 2024 · 99 posts · 39 votes
    2y
    Quote from @Nate Marshall:
    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.


    The wholesaling gurus are amongst the worst. EMD funding gurus are catching up. Hamas gurus are like in 3rd now.


     Yep. Real estate costs money. I think a lot of people want to run a business without any cash and are suprised that they have to have some capital to run a business over the long haul. It is not as easy as buy my course = be a millionaire lol. 

    0Reply
  • Chris Williams
    Wholesaler · Member since 2024 · 99 posts · 39 votes
    2y
    Quote from @Jay Hinrichs:
    Quote from @Account Closed:
    Quote from @Shane H.:
    Quote from @Account Closed:
    Quote from @Shane H.:
    Quote from @Account Closed:
    Quote from @Shane H.:
    Quote from @Account Closed:

    There is a guy who did just that in Mishawaka, IN. He was on Biggerpockets since 2013 or so, but stopped posting about 4 years ago. 

    He created a good thread about wholesaling , he was very informative and helpful (without any BS/fluff), gave all the valuable information for free (unlike some gurus charging $30K for a course that doesn't do anything for you). You can read his posts here: https://www.biggerpockets.com/forums/12/topics/862964-wholesaling-101-how-to-wholesale-for-beginners

    You will see he was attacked with just about every line of arguments you see today from those who badmouth wholesalers. 


    I see one person made an itemized list of arguments and misty encouraging comments on that thread. The only thing that catches my eye on that list is the earnest money. He says he provides a proof of funds, so if there were regulations requiring an earnest money deposit, he should have no problem putting it down. Obviously that’s not the law now so it’s not required. But I don’t see why if everything he said is true, that he has the intent and ability to close, it would be a problem… it’s a nice protection for these distressed sellers. If they get burned they have a few bucks to keep rolling to find an actual buyer. If the deal goes through nothing lost for anyone. It would keep a lot of the swindlers out. It would force the contract flippers to properly vet the deals. Not seeing an issue. And if the law requires obvious disclosure it would have zero affect on his model because he said he does so anyway. The point is that in my (and obviously a ton of other peoples) experience, most are not operating this way. And we would like those people weeded out. 


    Note that he advises against putting large EMD down. He says he usually gets away with $100, with $500 to $1000 being a max he would deposit if it was an extra ordinary deal. When asked what he does when seller asks for greater EMD, he responds that he simply walks out and looks for another seller. The last thing you want to do as a wholesaler is to lock up your money.

    POF is a different story. One can use it to show seller that I have means to close on deal (even if I ultimately end up reassigning a contract). You can use it to show that the transaction can be closed if seller accepts your offer and everything smoothly falls into the place. You don't part with any money when you produce POF. I think what Chris emphasizes is that he never ends up closing on the wholesale property, because he almost always finds buyers for them (simply because they are true wholesale deals). But in the event if for whatever reason such buyer can not be located, then he will be in a good place taking control over the property that is known to have higher value than what he pays for it. So, it ends up being a win-win situation for him.

    I believe, as I stated it before, that if you select the property and negotiate its price as if you were the investor to part with your hard earned money to own it, then your deals should be good enough to sell themselves. Provided you do understand the market, the value of the property and the potential to profit from it. 

    I don't like dealing with bad people. But humans are humans, human nature is what it is. There are a lot of stupid people out there. Some of them are nuts and evil. I never knew how bad humans can get over a buck until I ran a wholesale operation of my own. So, we may never be able to weed them all out from any of the industries where humans participate. What we can do is be alert and understand that doing business is like going on hunt in a jungle. You wouldn't sleep in the middle of savannah, exposed to all the animals and harsh conditions with assumptions that lions, wolves and coyotes are your friends. You would probably put your protective gear on, be on high alert and ready to take action and protect yourself as needed. 

    Aside from that, the state should step in when something outrageous and obviously criminal takes place. Putting a gun on the head of 86 years old senile man to sign the sales agreement shall never be tolerated in a civilized society. And other things that are done with clear intent to harm shall be prosecuted under existing laws. Not enforcing laws is not an excuse to pass draconian laws. Enforcing criminal laws on the books is what the gov is for. And it should leave the business alone, as long as no criminal law is violated. 

    Are you advocating we get rid of real estate licensing? 

     No, I don't. Somebody has to be out there with fiduciary duty to sellers and buyers. Unlike a wholesaler who markets B2B, finds distressed (uninhabitable/dilapidated) property and sells it AS IS to an investor to profit. 

    I disagree it’s strictly b2b. The seller is rarely if ever business savvy. They’re probably the most in need of an agent with fiduciary duty if any sellers out there. I feel like you focus heavily on the wholesaler to investor part and not the seller to wholesaler. There’s nothing at all b2b about that.

    Then let that seller get a REA to list his property in MLS and get most of it from end buyers. Why seller doesn't do it? Hint: perhaps he tried and no REA wanted to touch his dilapidated junk. Or, he wants quick sale, can't afford to wait for underwriters to find zillions of reasons to deny the conventional loan (which they most likely will, because the house is in need of major repair. And it can't be staged/shown to public with all the trash hoarded all over the place). But, by all means, if REA is needed who is stopping the seller from getting one? Why he even considers selling his property at 50% off?


    once again Eric you simply do not know how it really works in the real world.. Many agents list fixers as is  Cash only no inspections.. what your describing is a retail transaction with a nice home to an owner occ.. fixer houses go to investors. There is NOTHING that a wholesaler can do that is better or faster than an agent who works with fixer as is houses.. I have bought hundreds of them through agents. Some of the very best deals are bank owned OREO and ALL of those are listed with agents who specialize in those types of properties.
    Agreed. If you are serious about conducting business in this space you would work with agents and not against them. That's something I found with a lot of wholesalers was them bad mouthing agents in order to get sellers to sign with them. Are all real estate agents good? Nope. If you want consistent lead flow however a stream of good agents is a way to get free leads. 
    0Reply
  • Chris Williams
    Wholesaler · Member since 2024 · 99 posts · 39 votes
    2y
    Quote from @Johnna Lodge:

    I am a real estate investor and Realtor in GA.

    My wholesale contracts state I plan to make a profit. Noone works for free for a living.

    I also state I am a realtor.

    I have helped so many people where a realtor would not or could not help.

    I have had seller's who state they do not want to work with a realtor.

    I usually approach the seller by giving them options to list, what needs to be done to get their best return versus selling wholesale.

    I've had people tell me they don't wish to do what it takes to list.

    Sometimes I just buy the property where a Realtor would not. I do not wholesale the property. 

    I have had some issues with other wholesalers mainly due to unethical sellers.

    An unethical seller is one who goes under contract with another wholesaler while already under contract.  This scenario gets to be more of an issue when you have an unethical wholesaler on the other end.

    In every industry there are bad seeds. It can't be helped because you have ethical and non ethical people in every field.

    What I have found lately is inexperienced wholesalers lying to Realtors as if they are buyers. This provides ridicously low offers with crazy terms such as earnest money due after ridiculously long term due dilligence ends. This can lead to a bad taste in Realtors and Seller's mouth.   

    Just be upfront. 

    In my humble opinion there is a need for wholesalers and Realtors. Be ethical and upfront with everyone you engage with. 


     As someone who will invest in GA in the future, I appreciate your opinion. I think the wholesaling game is about to get a lot more fun. I think that the government and real estate decision makers will force wholesalers to be transparent business owners as yourself. Transparency is a cleaner way to do business. 

    1Reply
  • Account Closed
    MD · Member since 2018 · 195 posts · 53 votes
    2y
    Quote from @Chris Williams:
    Quote from @Russell Brazil:

    Anyone with this amount of push back against such simple regulation as the requirement to be licensed, and thus the ability of the state to provide easy redress shady operators, makes me think that person is a shady operator.  Anyone who operates ethically has nothing to fear from the requirements to be licensed. Only those with something to hide have something to fear.


     This is what I been saying for a while now. 


     You can, but it's called ad hominem and slander. I say it's OK to slander me because I see no harm in it at this moment.

    This being said, slanders and ad hominems are the only refuges of those who can't argue the case based on its' merits. 

    0Reply
  • Chris Williams
    Wholesaler · Member since 2024 · 99 posts · 39 votes
    2y
    Quote from @Account Closed:
    Quote from @Chris Williams:
    Quote from @Russell Brazil:

    Anyone with this amount of push back against such simple regulation as the requirement to be licensed, and thus the ability of the state to provide easy redress shady operators, makes me think that person is a shady operator.  Anyone who operates ethically has nothing to fear from the requirements to be licensed. Only those with something to hide have something to fear.


     This is what I been saying for a while now. 


     You can, but it's called ad hominem and slander. I say it's OK to slander me because I see no harm in it at this moment.

    This being said, slanders and ad hominems are the only refuges of those who can't argue the case based on its' merits. 


     Are you bored on here? Every post I just see you attacking people. Bigger Pockets is a place in which those who know about real estate come to chat. It is ok to disagree that's how we learn. You also don't have to conduct business in the way that other people do. I have friends who flip properties like $100k rehabs and make $50k in profit. I would never do that. Do I think they are bad people or that their business model is broken? Absolutely not. It is ok to have discourse and talk about things that you don't agree with. The point of Bigger Pockets isn't to get your feelings hurt. The point of the forums is to express ideas in a respectful way. 

    0Reply
  • Account Closed
    MD · Member since 2018 · 195 posts · 53 votes
    2y
    Quote from @Chris Williams:
    Quote from @Nate Marshall:
    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.


    The wholesaling gurus are amongst the worst. EMD funding gurus are catching up. Hamas gurus are like in 3rd now.


     Yep. Real estate costs money. I think a lot of people want to run a business without any cash and are suprised that they have to have some capital to run a business over the long haul. It is not as easy as buy my course = be a millionaire lol. 


     In wholesaling you need capital for effective marketing. If you don't  you will have to drive for dollars and just go from one neighborhood to another, to market in person. It's tedious thing to do and can burn you up quickly, but some people say they were able to get deals that way. Even that is not free: your time is has opportunity cost and gas is not free. Realistically, though, at bare minimum you should have enough money to subscribe to pop-streams, run your facebook ads, make cold calls, have CRM software, some money to invest into automations and etc. But the amount of the money required in wholesaling is nowhere near what it takes to  purchase a home for cash, close on it and either rehab or resell to a highest bidder. There are also less headaches and risks. You don't have deal with contractors who may ghost you and bring to screeching halt your renovation project or loose your sleep over ever changing market conditions. If you can 100% finance the whole transaction and scale it relying on your capital then good for you, but a lot of rehabbers I know use hard money. They have skin in the game and put up large chunk of their own money, but what you do when your interest payments add up and crews you hire take their sweet time to finish the project? You will be lucky to break even. No such concerns exist in wholesaling. Once you assign the contract and get your fee you are done. As long as you can repeat the cycle you should continue getting cash flow. And if you fail miserably your losses will be in the amount of money you spend in marketing, and opportunity cost for the time dedicated to it. All bearable risks compared to putting $100K+ of your cash into any deal (at bare minimum) and then loosing it all due to slight mistake or unforeseeable events that you can't control. It's not about easy path to become a billionaire over night. Anyone who smokes a dream pipe will be hugely disappointed. It's about alternatives and minimal monetary investment required to make things work. Of course, if I had couple of million dollars in cash sitting in a bank account and doing nothing for me, wholesaling wouldn't be something I would consider. But it's an error to judge others' circumstances based on your own and preposterous to demand that others do things in a way that is most convenient for you. Each individual has to make a choice based on their own individual circumstances. For a lot of people wholesaling is a bad business to get involved in. Someone with $10+ mil cash may find it highly unattractive, time and energy consuming, with less reward that other things one could do with their capital. But for others it's a good stepping stone into RE. Rate of success in this business should be about the same as in any other ventures, where a lot depends on what you do, how you do it and how efficient you are at doing it. None of those things make wholesaling or wholesalers evil , malicious or doomed to fail per se. 

    0Reply
  • Alan AsriantsBusiness Member
    OP
    Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
    2y
    Quote from @Chris Williams:
    Quote from @Alan Asriants:
    Quote from @Account Closed:
    Quote from @Alan Asriants:
    Quote from @Account Closed:
    Quote from @Jay Hinrichs:
    Quote from @Account Closed:
    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.


     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.. 


     Thank you. But from what I understand in wholesaling it's not so much luck but consistent work, good discipline, persistence and ability to analyze deal that deliver results. Discipline and consistent work would probably top the list, as analyzing the deal doesn't take much brain power and effort. Negotiating comes naturally once you properly analyze the deal.

    The gurus are another subject. May be they are the ones who should be outlawed. There is absolutely nothing one can learn in this business worth paying 30K. The rules of the game are simple, can be read and understood in less than a day. It's amount of WORK and CONCENTRATION that will make a difference between make or break, and no GURU can make you stick to your regimen and do something persistently and systematically if you can't make yourself do it. 


     The issue is that many wholesalers falsely advertise themselves, lie, or keep seller in the dark to make the deal work. They lose deals unfortunately when they are transparent 

     A lot of people are stupid. Not just house owners/sellers, but people in general. 15 years ago I was in reverse logistics/liquidation business. I was able to consistently buy and then liquidate certain number of pallets/goods through the channel I have established. I would go to warehouses, negotiate/make an offer on a truckload of goods and then purchase one pallet at the time to help miserable seller to get rid of it. I never spent fortune to fill my warehouse with truckloads of goods, but I was buying them at the rate I could liquidate them and as long as I could liquidate them. Obviously, I profited handsomely while doing it. And what I recall is that out of 10-15 warehouses I dealt with ONLY TWO were owned by decent men who knew how to do business. One was a Chinese owned in NYC and another was owned by Hasidic Jew in New Jersey. These two were grateful to me that I was helping them clean their warehouse and get rid of their shittiest products that no one was willing to buy from them. All the rest grew resentful, angry and jealous when they saw how quickly I was moving their pallets. They were angry and resentful that I was making money on the trash that was sitting in their warehouses forever and that they couldn't sell to anyone on Earth. They would start playing games, sometimes pretending that they were not available or able to deliver goods. At others they would ghost me. Or, worst of all, try to go behind my back and find the distributor/seller I was dealing with, to cut me out of the deal. If I asked them why were they being so idiotic (of course in milder, non insulting terms), their answer would be "it's a dog eat dog town". Idiots! One of them lost the business and money couple of years later. I don't know what happened to others. But the point is, I am very well familiar with this idiotic type of product owner who is NEVER able to sell his goods, but gets angry and resentful at you if you help him to, because he thinks he is entitled to get what you get just because it's his goods that you found him a buyer for. I hope to spot sellers like that during my fist contact and send them to kick rocks and forever live in the $*it they are, with no help coming from me to get them rid of their property. 


    Nothing wrong with buying the property and closing on it then selling it for more. That is true wholesaling. 

    But flipping contracts and tying people up into deals they are blind about is a concern

    I agree that people often times dont value your connections and are greedy to find out you can sell something for more. Best to just not work with those kinds of people. Your connections and time are certainly worth $$$

    Agreed. I think that the buy and resell model is going to force a lot of wholesalers to actually become business owners and operate as a business and have capital. 

     I think it is the right thing tbh. That being said I will admit that covering transfer taxes both times can hurt your bottom line. 

    [email protected]267-767-0111
    Alan Asriants - New Century Real Estate 591 Reviews
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    0Reply
  • Alan AsriantsBusiness Member
    OP
    Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
    2y
    Quote from @Alan Asriants:
    Quote from @Chris Williams:
    Quote from @Alan Asriants:
    Quote from @Account Closed:
    Quote from @Alan Asriants:
    Quote from @Account Closed:
    Quote from @Jay Hinrichs:
    Quote from @Account Closed:
    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.


     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.. 


     Thank you. But from what I understand in wholesaling it's not so much luck but consistent work, good discipline, persistence and ability to analyze deal that deliver results. Discipline and consistent work would probably top the list, as analyzing the deal doesn't take much brain power and effort. Negotiating comes naturally once you properly analyze the deal.

    The gurus are another subject. May be they are the ones who should be outlawed. There is absolutely nothing one can learn in this business worth paying 30K. The rules of the game are simple, can be read and understood in less than a day. It's amount of WORK and CONCENTRATION that will make a difference between make or break, and no GURU can make you stick to your regimen and do something persistently and systematically if you can't make yourself do it. 


     The issue is that many wholesalers falsely advertise themselves, lie, or keep seller in the dark to make the deal work. They lose deals unfortunately when they are transparent 

     A lot of people are stupid. Not just house owners/sellers, but people in general. 15 years ago I was in reverse logistics/liquidation business. I was able to consistently buy and then liquidate certain number of pallets/goods through the channel I have established. I would go to warehouses, negotiate/make an offer on a truckload of goods and then purchase one pallet at the time to help miserable seller to get rid of it. I never spent fortune to fill my warehouse with truckloads of goods, but I was buying them at the rate I could liquidate them and as long as I could liquidate them. Obviously, I profited handsomely while doing it. And what I recall is that out of 10-15 warehouses I dealt with ONLY TWO were owned by decent men who knew how to do business. One was a Chinese owned in NYC and another was owned by Hasidic Jew in New Jersey. These two were grateful to me that I was helping them clean their warehouse and get rid of their shittiest products that no one was willing to buy from them. All the rest grew resentful, angry and jealous when they saw how quickly I was moving their pallets. They were angry and resentful that I was making money on the trash that was sitting in their warehouses forever and that they couldn't sell to anyone on Earth. They would start playing games, sometimes pretending that they were not available or able to deliver goods. At others they would ghost me. Or, worst of all, try to go behind my back and find the distributor/seller I was dealing with, to cut me out of the deal. If I asked them why were they being so idiotic (of course in milder, non insulting terms), their answer would be "it's a dog eat dog town". Idiots! One of them lost the business and money couple of years later. I don't know what happened to others. But the point is, I am very well familiar with this idiotic type of product owner who is NEVER able to sell his goods, but gets angry and resentful at you if you help him to, because he thinks he is entitled to get what you get just because it's his goods that you found him a buyer for. I hope to spot sellers like that during my fist contact and send them to kick rocks and forever live in the $*it they are, with no help coming from me to get them rid of their property. 


    Nothing wrong with buying the property and closing on it then selling it for more. That is true wholesaling. 

    But flipping contracts and tying people up into deals they are blind about is a concern

    I agree that people often times dont value your connections and are greedy to find out you can sell something for more. Best to just not work with those kinds of people. Your connections and time are certainly worth $$$

    Agreed. I think that the buy and resell model is going to force a lot of wholesalers to actually become business owners and operate as a business and have capital. 

     I think it is the right thing tbh. That being said I will admit that covering transfer taxes both times can hurt your bottom line. 


     But it will also get rid of those severely under-qualified who pressure people into buying dumps for a 5k profit. 

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    Alan Asriants - New Century Real Estate 591 Reviews
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