The answer to those "wholesaling is illegal, unethical, immoral" statements...
Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes
The answer to those "wholesaling is illegal, unethical, immoral" statements...
Most Popular Reply
I just want to know what website he got his $106mm POF letter from.
137 Replies
@Troy Sheets - When you quote someone, the mention comes above the quote. If you try to mention again for the same person, it won't work since you've already done it.
- Developer · Philadelphia, PA · Member since 2013 · 1k+ posts · 902 votes12y
Gotcha. How come Bill G. didn't work?
- Canal Winchester, OH · Member since 2014 · 151 posts · 55 votes12y
wait wait wait so if you make 7 million dollars illegally it is ok? or is it that the state laws in NY let people wholesale? Oh wait I'm still confused, he wen in contract 9 months ago and the price went up roughly 7% maybe that was just a good year and the price of the building went up over that almost year. does anyone have the CMA from when he 1st went in contract? has anyone check the state laws to see if wholesaling is illegal in that state? And one last statement, unethical/immoral, well is he a buy who could have actually bought the property and during that course of almost a year plans changed? did he intend to rob the seller of those 7 million from the start ?
- Real Estate Investor · OR · Member since 2012 · 390 posts · 133 votes12y
Originally posted by @Account Closed:
ROTFL!! Yup, here we are again. Thanks for the laffs @David R
- Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes12y
Originally posted by @Aaron Mazzrillo:
What the hell are you even talking about? Are you implying that complex deals don't get done on this website or though relationships created here? I guess we're all just a bunch of idiots. None of us on this site can put together a deal like this because we're not smart enough to understand the complexities involved or be associated with those who might. Nobody here has any vision. You must be here for entertainment purposes. Enjoy slumming it for old time's sake do ya?
This guy analyzed a property and made an offer on it which got accepted. He then assigned his contract to another developer for a fee. How is that not EXACTLY what wholesalers on this site do every day? Maybe you're scared by the decimal place? Just because you couldn't doesn't mean nobody can.
Aaron: let's you and me do a big assignment or double-close deal and post it here. The most I've ever made on a deal that I didn't "close on" was $170K (4 houses, the mother of probate and distressed property, in deep inner city. It did take some cash upfront to an heir and an attorney, but in the end it was a double close on the package, in about 2005). How about you?
I rarely do an assignment these days (but I did one this summer for the first time in 10 years). I usually prefer to close in order to control the property and resell by listing for the best price. But for the sake of adding something of value to this mostly useless and repetitive, recurring discussion......Let's do it for fun and profit!
- Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes12y
Originally posted by @Account Closed:
Originally posted by @Aaron Mazzrillo:
What the hell are you even talking about? Are you implying that complex deals don't get done on this website or though relationships created here? I guess we're all just a bunch of idiots. None of us on this site can put together a deal like this because we're not smart enough to understand the complexities involved or be associated with those who might. Nobody here has any vision. You must be here for entertainment purposes. Enjoy slumming it for old time's sake do ya?
This guy analyzed a property and made an offer on it which got accepted. He then assigned his contract to another developer for a fee. How is that not EXACTLY what wholesalers on this site do every day? Maybe you're scared by the decimal place? Just because you couldn't doesn't mean nobody can.
Aaron: let's you and me do a big assignment or double-close deal and post it here. The most I've ever made on a deal that I didn't "close on" was $170K (4 houses, the mother of probate and distressed property, in deep inner city. It did take some cash upfront to an heir and an attorney, but in the end it was a double close on the package, in about 2005). How about you?
I rarely do an assignment these days (but I did one this summer for the first time in 10 years). I usually prefer to close in order to control the property and resell by listing for the best price. But for the sake of adding something of value to this mostly useless and repetitive, recurring discussion......Let's do it for fun and profit!
I'm always up for making some money. I have a $65K deal closing next Friday. Not quite $170K, but as Jack Miller used to say "It's good enough!"
- Investor · Canton-Akron, OH · Member since 2012 · 917 posts · 477 votes12y
Small potatoes here, but it helps pay the mortgage, I have two 5,000 ones closing next week that are assignments, and one 9,500 one that I closed on a couple days ago, on the buy side. I do have funds to buy if my buyer would back out, so maybe those don't count. :-)
- Corona, CA · Member since 2014 · 154 posts · 100 votes12y
Took the words right out of my mouth, im tired of the negative mumbo jumbo from some of these people too...no need to name them you did a great job
I love it, great article, never give up....
- Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes12y
Originally posted by @Dell Schlabach:
Small potatoes here, but it helps pay the mortgage, I have two 5,000 ones closing next week that are assignments, and one 9,500 one that I closed on a couple days ago, on the buy side. I do have funds to buy if my buyer would back out, so maybe those don't count. :-)
The assignment I just did was for $7K. They all count.
I somehow doubt the investor in the $99M deal had $99M sitting around. Likely he had something to show: experience, partners, ability to borrow, etc. But the sellers were willing to go into contract with a long closing period. Appreciation in some markets is gangbusters. Just a few points and 6 months on $99M is going to create a spread.
- Homeowner · Pittsburgh, PA · Member since 2014 · 854 posts · 511 votes12y
I am sure you were outside enjoying a beautiful warm sunny day
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes12y
What I got out of the article is that one person didn't make 7 million as he has a bunch of investor partners to answer to. His percentage is not disclosed in the article.
The other item if I read it right is that he has assigned his rights for a certain price to another group. In development prices are re-traded all the time before closing. So until this closes and the fee is earned and we know what percentage the developer assigning after paying out investors was there is nothing concrete.
I am all for people assigning their interest in a contract. Some of the other strategies taught that border on practicing RE is where the issue can lie. With anything it's how you set it up.
I remember when I worked for a developer on a land assemblage project. 20 parcels on 25 acres mostly old businesses and house on a busy street with 40k plus cars a day. After build value of 150 million on a 650,000 sq ft mixed use project. The other developers were used to buying one plot of land or maybe 2 sellers to deal with. I learned after words they told my developers they were nuts for trying to assemble so many properties. The developer gave me a target for each price acquiring the land. The first week I had 10 out of 20 under contract meeting the goals. I had never done land assemblage before and didn't know what I was doing was supposed to be near impossible. I just went out and did it as I had nothing to lose.
So yes it's important to be realistic but at the same time do not let that self limit you. In martial arts we ask students to set goals for themselves. Many times they will set cautious goals knowing they can reach them easily. We discourage that and set goals for them higher than they think possible and they call us crazy etc. Some of the time they actually hit those goals and surpass them and other times while not hitting the goal they go much further than if they set a self-limiting safe goal on themselves.
- Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes12y
Not to say anything untoward happened here, because it doesn't appear anything did.
But how does the fact that someone made a lot of money doing something mean that other people doing superficially similar things must be not be acting, "illegally, unethically, or immorally?"
This story doesn't "answer" those arguments at all. It is a total straw man.
- Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes12y
Originally posted by @Richard C.:
Not to say anything untoward happened here, because it doesn't appear anything did.
But how does the fact that someone made a lot of money doing something mean that other people doing superficially similar things must be not be acting, "illegally, unethically, or immorally?"
This story doesn't "answer" those arguments at all. It is a total straw man.
This deal doesn't prove or answer anything. However, it's a good example of a high profile, high dollar amount assignment of contract. So far we haven't heard about backlash or law suits on this deal about brokering without a license, lack of intent to close, ability to close, etc. And we probably won't. In spite of all the opinion on BP about "wholesaling" automatically and absolutely being considered a brokering activity, it is not. Some state realtor boards and RE departments are trying to clamp down on what they believe to be unlicensed activity. Especially of concern is how someone markets for sale that which they have a contractual interest in but do not own. But a straight assignment of contract is not a brokering activity.
- Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes12y
Actually, so you know, there is no doubt about the "wholesaler" here having the ability to close, and since he owned neighboring property and had big development plans, he very likely had the intent as well. In no way is that situation analogous to some kid without a penny to his name locking up a property in contract with no intention of doing anything but marketing it.
Regulators, and for that matter state legislatures, are in my experience not as in-thrall to moneyed interests as many believe. What they do care a lot about is people getting hurt, and when those people are sympathetic examples (grandma being cheated out of her house for example), then their caring and their political self-interest match up nicely.
The seller in the linked article was clearly not elderly Mrs. Jones, or Ken down the street who is desperate because he is about to go into foreclosure. This case is so easily distinguished from the typical "wholesaler" activity as to be completely meaningless as a tool to "answer" anything at all.
- Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes12y
Originally posted by @Richard C.:
The seller in the linked article was clearly not elderly Mrs. Jones, or Ken down the street who is desperate because he is about to go into foreclosure. This case is so easily distinguished from the typical "wholesaler" activity as to be completely meaningless as a tool to "answer" anything at all.
The challenge here for me is how almost all retail buyers represented by buyers agents are protected by clauses allowing them to perform due diligence in a certain time frame and back out --- for any reason --- with no consequence. This is a good consumer protection measure IMO. But no one seems too concerned about the seller as the consumer in these cases. What about their pending default or foreclosure or tax sale or immediate need to relocate?
Deals fall out of escrow lawfully all day long, with no particular public outrage or concern for the seller. I find it odd that so many here continue to focus on "wholesalers" as being a serious cause of seller distress. For sure there are bad actors out there. But the bulk of deals falling out of escrow and contracts being canceled aren't originated by "wholesalers" who can't perform.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes12y
Didn't really look deeper into the deal then the article presented by the OP. I'm smart enough to know when something is above my pay grade and I think a 99 million NYC commercial deal qualifies as such. Therefore I don't really have an opinion on said deal.
I do have an opinion on all the BP wholesale bashing. Typically things like the following are posted on BP and "bashed" because they don't look like anything other then brokering real estate without a license.
"These are in Georgia. 144 homes off market from 2 sellers. Both fully occupied.
What do I do next? Established direct contact today.
Looking for a buyer, and/or guidance, and open to questions.
I have 5 more in the Southeast, is why I ask, tired of failing because of others. I'l fail on my own or stay in failure because of others. I choose to THINK THAT I CAN SUCCEED with others as well as without if necessary."
"Motivated Seller! Savy Investors! Make Offer!
So what do I do next?"
Fayettville NC.
Asking $52,500 for this 3/2 1276 sq ft., cabin style home on a nice, wooded lot. Wood siding with an asphalt roof. Windows intact.
Interior is in fair to poor condition with an open floor plan. Mostly drywall throughout. Most flooring needs to be replaced. Plumbing and electric appear to be intact for the most part. Kitchen is complete with a damaged vinyl floor and opens up to the living room/dining room area via breakfast bar. Both full baths are complete but need work. Will need paint thruout.
For address, showing, etc., and how to make your offer, please include full name and contact number in emails or call/text xxxxxxxxx. Guess I can't edit the title. Meant be a savvy investor. Seller's asking price is open to counters.
Thank You""Critique My Wholesale Purchase Agreement....Please...
SALES AND PURCHASE AGREEMENT
Date: / /
I / We will give for the following described property located in (NAME) County, in the state of (STATE), and legally known as: (INSERT FULL LEGAL DESCRIPTION)
Address: 123 Any St. Any City, Any State. Any Zip Code
Purchase Price: Seventy-two Thousand ($72,000.00)
Payment: Cash at closing.
Earnest Money Deposit: A deposit in the sum of (Twenty-dollars) ($20) will be paid by buyer and held in escrow at:
( NAME) Title/Escrow Company. Whose address is: (ADDRESS).
Closing: Closing will be no sooner than 45-days and no longer than 60-days from the date of acceptance this contract as demonstrated by buyer and seller signing this agreement. 45-day date: 60-day date:
Title: An unencumbered, marketable title to said property to be conveyed by deed of General Warranty, with the usual covenants such as any title company will insure, except easements of record, restrictive covenants of record as to use and improvement of said property, and except applicable regulations imposed by any planning and zoning commission.
Contract Stipulations:
-Outstanding property taxes shall be pro-rated between Buyer and Seller as of closing date.
-Property is being purchased in “AS-IS” condition. Seller is not responsible for any repairs.
-Seller shall maintain property in good working order until Buyer takes possession.
-All closing costs to be paid by Buyer.
-Contract to purchase property is contingent upon satisfactory property inspection and final business associate approval.
-A lock-box will be discretely affixed to the property to permit access upon proper notification to seller.
Possession: At closing
We have read the entire contents of this agreement and acknowledge receipt of same. We are not relying on verbal statements not contained herein.
The above proposition is accepted this ________ day of ____________________, 20__.
Seller
Seller Signature: ___________________________________
Seller Printed Name: ________________________________
Buyer
Buyer Signature: ___________________________________
Buyer Printed Name: ________________________________"
- Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes12y
No, only the most egregious examples.
There is a meaningful difference, in my mind and the minds of many (apparently including on state Real Estate Commissions) between a retail buyer who includes a financing contingency expecting and having a reasonable belief that that financing will come through, and a wholesaler who has no ability whatsoever to close if he cannot sell the contract.
One difference is simply that the risk of the retail buyer not getting a mortgage is known, well understood, and able to be managed by the seller (as with POF). It is also completely transparently disclosed up front. That is very different from a wholesaler who presents his offer as "cash" when he has no cash, advertises "quick sales" when such sales are entirely beyond his control, and generally is in the re-marketing business, not a bona fide buyer.
- Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes12y
Anyway, we don't have to re-fight the whole wholesaling fight. The point is that the OP apparently thinks he has come up with some sort of "zing" that "answers" the criticism of wholesalers, when he has done nothing of the kind.
- Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes12y
Originally posted by @Richard C.:
No, only the most egregious examples.
There is a meaningful difference, in my mind and the minds of many (apparently including on state Real Estate Commissions) between a retail buyer who includes a financing contingency expecting and having a reasonable belief that that financing will come through, and a wholesaler who has no ability whatsoever to close if he cannot sell the contract.
One difference is simply that the risk of the retail buyer not getting a mortgage is known, well understood, and able to be managed by the seller (as with POF). It is also completely transparently disclosed up front. That is very different from a wholesaler who presents his offer as "cash" when he has no cash, advertises "quick sales" when such sales are entirely beyond his control, and generally is in the re-marketing business, not a bona fide buyer.
How many retail sale transactions have you been in on the seller side with a state realtor board contract? Forget the loan contingency. There is always an allowable period (some longer than others) in which the buyer may cancel for any reason. IMO, this is not different than someone going into contact with a lawful "weasel" clause (partner approval, appraisal contingency, inspection contingency, marketable title, etc.).
Neither scenario is desirable as they have exactly the same impact on the seller. One is overlooked because we put consumer protections in place in order to allow consumers to shop around and change their minds. That's pretty loose on "intent" if you ask me. But somehow an investor buyer with a lawful clause is the bad guy. Why is the consumer buyer exempt from scorn here?
That being said, I don't use any clauses. Not because they aren't ethical or lawful. But because it gives me a leg up on all the other buyers and offers out there. My contract says I'm going to buy and I do. Even the most supposedly "unsophisticated" sellers are looking for crystal clear commitments when it comes to final proceeds amount and end dates.
- Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes12y
Originally posted by @Richard C.:
Actually, so you know, there is no doubt about the "wholesaler" here having the ability to close, and since he owned neighboring property and had big development plans, he very likely had the intent as well. In no way is that situation analogous to some kid without a penny to his name locking up a property in contract with no intention of doing anything but marketing it.
Regulators, and for that matter state legislatures, are in my experience not as in-thrall to moneyed interests as many believe. What they do care a lot about is people getting hurt, and when those people are sympathetic examples (grandma being cheated out of her house for example), then their caring and their political self-interest match up nicely.
The seller in the linked article was clearly not elderly Mrs. Jones, or Ken down the street who is desperate because he is about to go into foreclosure. This case is so easily distinguished from the typical "wholesaler" activity as to be completely meaningless as a tool to "answer" anything at all.
So, you're under the very false assumption that the only people who go to contract with wholesalers are elderly, desperate, financially challenged and intellectually inept grandmas and the wholesalers cheating them out of their houses are typically children with no money and zero expectation to close? I know my post about a $100M deal was a little out there, but you chose an end of the spectrum that couldn't be reached with a Mars rover! Who are these broke children hustling desperate grandmas heading to foreclosure? I'd love for you to post a link!
I consider myself a typical wholesaler. I haven't been a kid in many decades and the pile of letters from the local assessors office reminding me about their very soon-to-be-due bi-annual rent bill is a clear indication I have at least a few pennies to my name. While I do contract my fair share of houses from elderly people, none of whom were ever feeble and confused, but more often very slick negotiators, I can count on one hand with no fingers the number of houses I've wholesaled where the seller was desperate. I don't work the foreclosures either so that number could also be counted on the same fingerless hand.
The post is nothing more than an entertaining, motivating and informative article about, as was so well acknowledged by @Account Closed "a good example of a high profile, high dollar amount assignment of contract." I couldn't have said it any better.
If you go to the search box and type in 'wholesaling illegal' you'll find hundreds of pages of posts. I clicked on a few random pages and almost every page has one of the three key words from my headline somewhere in the list of forum posts. So, the next time an investors who is considering taking a shot at being a wholesaler, but heard some nonsense about it being illegal, unethical, or immoral, hopefully he/she will do a quick search to see what is already on the forum and come across my post with a link to an article about a very public high dollar transaction that involved an assignment of contract. Then, he/she hopefully will decide that he/she can also do it and if it can be done on a $100K house, why not try on a $1M house, a $10M house, or even a $100M piece of commercial real estate.
- Real Estate Investor · Encinitas, CA · Member since 2013 · 225 posts · 91 votes12y
@Account Closed
When you say "for any reason" I assume you are talking about an inspection contingency? I guess you can call this a "weasel clause" but even on my cash purchases, I am inspecting with an inspection clause. Because buying a house is not like buying a loaf of bread, and I can't know what is there without an inspection. Nor do I want to pay for an inspection on evey property I look at.
- Investor · Cranford, NJ · Member since 2012 · 303 posts · 153 votes12y
@Aaron Mazzrillo that these deals are traded all the time before closing but very rarely by someone whose sole intention was to wholesale the deal. It is possible for anyone with the drive, determination, and hard work to get into the big leagues of rei, but experiences gained from flipping a single family house are not necessarily comparable to developing a 300 unit apartment complex.
- Investor · Chicago, IL · Member since 2013 · 2k+ posts · 1k+ votes12y
Originally posted by @Aaron Mazzrillo:
$7M on one deal and it's out there for the whole world to see.
Now, all you naysayers, please have a seat because we're tired of you talking out your back.
Nice! Wholesalers rule! :-)
- Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes12y
Originally posted by @Steve Wilcox:
@Aaron Mazzrillo thanks for posting this article, its an inspiration to see what goes on in the mega deals.
However this is not comparable to the residential wholesale industry, these guys actually had funds lined up to close, planned on developing the property and for one reason or another liquidated it. I can make a pretty safe bet that anyone who lined up $100MM for a deal, went through some level of due diligence to get approvals or ideas of approved development did not do it to get a 7-10% return on their investors money. Investors who are putting up $50-100MM for a multistage development deal are not doing it for single digit ROI. I could not agree more with @Bill Gulley in the respect that the level of sophistication for a deal of this size is way beyond the deals we hash out on this site.
I also agree with @Joel Owens that these deals are traded all the time before closing but very rarely by someone whose sole intention was to wholesale the deal. It is possible for anyone with the drive, determination, and hard work to get into the big leagues of rei, but experiences gained from flipping a single family house are not necessarily comparable to developing a 300 unit apartment complex.
You're not an Engineer by any chance are you?
Join the conversationCreate a free account to reply, vote on answers and follow this thread.