Wholesaling business is for dishonest, crooks?

Wholesaling
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Wholesaling business is for dishonest, crooks?

Account Closed
Investor · Wood Dale, IL · Member since 2014 · 65 posts · 3 votes

My subject is not direct, but a legitimate question.

I recently got a prime follow up call for a prospect that could absolutely be wholesaled. Upon making an offer and coming to negotiating terms with the seller, I needed to find an attorney who is familiar with how wholesaling works. After reading a response to a forum posted by @Tyler O'Malley, apparently all RE attorneys are familiar with wholesaling or are able/willing to work with you. This is not the case at all. After several phone calls with attorneys, I have not gotten one single attorney who wants to deal with wholesaling because it is a "dishonest" thing to have the seller under the impression that YOU are going to close on the property and/or it is a waste of their time because "most of the time these assignments of contracts never work out". After giving it some serious thought, it does seem pretty dishonest to mislead the seller into believing YOU are going to close on the property and then worst case scenario ending up voiding it all together through a "weasel clause" and wasting everyones time. My question is can anyone convince me this is not a dishonest business and also is it possible to find an attorney willing to work with you without actually being dishonest with him too.

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Ryan Dossey
Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
11y

These bash the wholesaler threads get pretty old. May not be your intention but I guarantee 9/10 people reading your title will come here to do that. There is a difference between tying up a property for months hoping you find a buyer and being a wholesaler. 

As a wholesaler (a term I don't mind calling myself) I provide a service. The property closes one way or another. I have private investors, a portfolio lender, HML, and cash. I make offers that are a great deal for me to PERSONALLY close on. If however I can make cash and not have to do anything.... Why wouldn't I?

Seller receives FULL upfront disclosure. I am buying your house for X because it needs Y. I work with other investors as well. I'm sure you don't care who's name is on the check as long as it clears right? 

I have NEVER used a "weasel" clause to "get out" of a contract. I have several buyers that come back to me for repeat deals, sellers send me referrals, and my clients love me. 

I have moved trap houses, homes with flooded basements, foundations that look like tectonic plates shifting, even one with mold/bug issues. Could the seller have sold the property without me???

Maybe. A solid majority of the sellers I talk to tried with no success. 

I may transition into "wholetaling" actually closing on everything and listing on MLS. I typically double close. I don't like assignments.

Most people have issues with people "marketing the property" using "equitable interest". If your contract gives you permission to market the property as an "owner by contract" I have no morale issues with it. 

Promising to close yourself and doing an assignment. I see the morale qualm. Being upfront and honest... I sleep great at night. 

My mentor told me the grocery store model is best:

"You don't want to sell a seller in the grocery store and have to duck around a corner. You want to walk right up to them and ask how the kids are." -Jerry Puckett

Final part of my rant.... A seller who knows I wholesaled her property (saw it marketed online for CONSIDERABLY more) has came to me and asked me to help them potentially invest the profits they got from selling to me. That says something.

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  • Tim G.
    Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
    11y

    A rehabber gets a deal at ANY price, and its a pat on the back. Nice work! What a killer spread! Rehabber fixes it up, sells and profits for his efforts. There is no discussion of if they stole the house or mislead the seller when in reality its their hard money or private lender that really bought the house. 

    A wholesaler does the same, and they are a crook? I don't buy it. They worked to get the lead, added value and left enough for the flipper.  

    Haters gonna hate, potatoes gonna potate. In many cases I earn less than what a seller would pay out in commissions. I just saved them money, that rhetoric makes no sense and if we didn't add value we wouldn't exist. 

    You can wholesale off your states association of realtors contract, as long as its setup properly. Don't let road blocks stop you from closing a deal! Get it done!

    11Reply
  • Richard C.
    Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
    11y

    If everything Tim G. says is true, then there is no need to lie to the seller, is there?

    1Reply
  • Account Closed
    OP
    Investor · Wood Dale, IL · Member since 2014 · 65 posts · 3 votes
    11y

    Tim G. gave great encouragement and I agree with everything he has to say. Although, if sellers recognize the possibility of you not closing the property in the end, they will be highly unlikely to do business you. Therefore, you're going to have to mislead the seller that you will close in order to get a signed contract?

    0Reply
  • Clinton Riskus
    Real Estate Consultant · Lake Elsinore, CA · Member since 2009 · 52 posts · 3 votes
    11y

    Good post Tim.

    0Reply
  • Michael Hicks
    Real Estate Investor · Rossville, GA · Member since 2014 · 218 posts · 96 votes
    11y

    @Tim G., the difference between a rehabber and wholesalers is that rehabbers close the deal.  Not saying that wholesalers don't but from what I've seen, everyone wants to enter real estate as a wholesaler because "it takes no money".  I've never walked from a deal.  If I cant make it happen with plan A, I have plans B and C ready.  I have no problem with wholesalers but I feel that is where the dishonesty and bad rap comes from.  Just my humble opinion.

    7Reply
  • Troy Whitney
    Contractor · Seattle, WA · Member since 2014 · 137 posts · 44 votes
    11y

    My question is, why not just become an agent?  Why is wholesaling better than being an agent?  I understand that the upside with wholesaling is theoretically higher but in reality, you'll find more prospective sellers, not just people in dire straights.  Also you'll have more time and resources available to you to make things happen and you won't feel like you're trying to take advantage of people by trying to take their property off of their hands for a 30-40% discount.  Just my two cents...

    5Reply
  • Tim G.
    Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
    11y

    What would the internet be without people having different opinions and expressing them freely. What works for me might not work for you and vice versa, that is entirely fine. 

    The idea that every rehabber closes every deal they tie up and wholesalers never close theirs is again silly. I've supported myself for two years now wholesaling, we close deals all day long. I know many rehabbers who also back out of deals once they realize the numbers don't work. Both of your generalizations are false, if you want to get into semantics at least use some valid points. 

    This wholesaling forum is the most active forum in its category, yet the most active users are either new wholesalers or non wholesalers crapping on the plans of new wholesalers. What's the point? Is that really the best use of time for your business or on this forum? 

    Wholesaling exists, I am the guy that shows up and closes deals. I negotiate with crazy tenants, family members who won't speak to each other and projects with margins so thin, the seller couldn't sell if an agent and broker on both ends of the deal needed commissions. That is why we exist and do deals. 

    No one, can make a living by stealing houses. You may get a deal or two here and there every few years that is an absolute grand slam. The rest are deals you are securing at a close range to market price for a fixer upper. Once you back out agents commissions its pretty easy to tack on $10,000 and be done with the deal quickly. In my case the seller just saved money, dealt with only one person and can move on with life. 

    I stop posting here often out of frustration of the "holier than thou" attitude towards wholesalers and the discouraging remarks made to them when trying to start out. You're likely not going to convince anyone to quit or take on a new career path of your choice. Why not offer some encouraging advice or just find another forum to participate in. 

    12Reply
  • Account Closed
    OP
    Investor · Wood Dale, IL · Member since 2014 · 65 posts · 3 votes
    11y

    I appreciate the helpful input from everyone and would be more than happy to hear more

    Thanks

    1Reply
  • Ryan Dossey
    Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
    11y

    These bash the wholesaler threads get pretty old. May not be your intention but I guarantee 9/10 people reading your title will come here to do that. There is a difference between tying up a property for months hoping you find a buyer and being a wholesaler. 

    As a wholesaler (a term I don't mind calling myself) I provide a service. The property closes one way or another. I have private investors, a portfolio lender, HML, and cash. I make offers that are a great deal for me to PERSONALLY close on. If however I can make cash and not have to do anything.... Why wouldn't I?

    Seller receives FULL upfront disclosure. I am buying your house for X because it needs Y. I work with other investors as well. I'm sure you don't care who's name is on the check as long as it clears right? 

    I have NEVER used a "weasel" clause to "get out" of a contract. I have several buyers that come back to me for repeat deals, sellers send me referrals, and my clients love me. 

    I have moved trap houses, homes with flooded basements, foundations that look like tectonic plates shifting, even one with mold/bug issues. Could the seller have sold the property without me???

    Maybe. A solid majority of the sellers I talk to tried with no success. 

    I may transition into "wholetaling" actually closing on everything and listing on MLS. I typically double close. I don't like assignments.

    Most people have issues with people "marketing the property" using "equitable interest". If your contract gives you permission to market the property as an "owner by contract" I have no morale issues with it. 

    Promising to close yourself and doing an assignment. I see the morale qualm. Being upfront and honest... I sleep great at night. 

    My mentor told me the grocery store model is best:

    "You don't want to sell a seller in the grocery store and have to duck around a corner. You want to walk right up to them and ask how the kids are." -Jerry Puckett

    Final part of my rant.... A seller who knows I wholesaled her property (saw it marketed online for CONSIDERABLY more) has came to me and asked me to help them potentially invest the profits they got from selling to me. That says something.

    13Reply
  • Kerry Fladung
    Wholesaler · Sioux City, IA · Member since 2014 · 6 posts · 3 votes
    11y

    A year ago I wrote an offer via one of my LLC's and wanted to change it to a different one before the closing for finance reasons. The seller, and I dont remember which agency it was FHA/VA/FANNY would not let me switch company names because they did not allow "wholesaling". I ended up buying in the first LLC's name and transferred it after. But you should probably check and see if sellers will even allow you to do that.

    0Reply
  • Ryan Dossey
    Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
    11y

    @Troy Whitney Why I don't have my license. Freedom. I don't want to create objections for myself when I market. (having to disclose I am a Realtor vs an individual.) 

    There is nothing "under handed" about my process. I show them comps. I show them what there house is worth. I then give them a down to earth estimate of what it costs to get the home to that condition. I also explain I don't work for free and the fact that I close fast commands a premium. 

    While there are deals that come up to Realtors there are also deals that completely bypass you guys. I get house deals brought to me from Realtors before they are listed here and there. Investors typically run in tight groups. If you preform like you say you will people come back to you. Also for example.... I moved two drug houses. Gang signs plastered all over the walls. The guy who bought them from me double closed that day and made more on one of them. He is rehabbing the other. As a realtor my commission on that deal would have been a measly $3k. By wholesaling I made 20K. Could I have fixed them and made more... Yes. But my time is valuable. 

    6Reply
  • Ryan Dossey
    Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
    11y

    Kerry:

    You really can't wholesale to retail buyers. I only allow special sale contracts with cash buyers. You can REALLY screw over a buyer and seller if a loan falls through. Cash is cheaper and faster. It is also out there in abundance looking for your deals if you know where to look.

    1Reply
  • Account Closed
    OP
    Investor · Wood Dale, IL · Member since 2014 · 65 posts · 3 votes
    11y

    @Ryan Dossey "Promising to close yourself and doing an assignment. I see the morale qualm. Being upfront and honest... I sleep great at night."

    Ryan, this is the main issue. Unfortunately I don't have the capital to close on the property as a Plan B. The standard wholesale structure would typically use an assignment contract. I was under the impression that this is what makes a wholesaler a wholesaler. If you close, you would fit more appropriately in a different category. In most instances, if you're upfront and try to explain what you are doing a typical seller will not understand and will be driven away from doing business, especially if you bring up the possibility of not closing.

    Bashing wholesaling or not, I'm sure a lot of new wholesalers could educate themselves on the moral aspects of the business through this thread. Although, that wasn't my intention. 

    I genuinely appreciate your input though

    0Reply
  • Account Closed
    Investor · Member since 2015 · 40 posts · 6 votes
    11y

    Yeah, I'd go in telling the exact process of what your intentions are too.

    What I'm wondering is when you explain the process clearly to real estate agents or attorney's it's like their so opposed to it for some reason.. just my experience.

    1Reply
  • Account Closed
    OP
    Investor · Wood Dale, IL · Member since 2014 · 65 posts · 3 votes
    11y

    @Account Closed What I'm wondering is when you explain the process clearly to real estate agents or attorney's it's like their so opposed to it for some reason.. just my experience.

    I believe the reason is because they recognize the possibility of the deal not closing in which case they won't get paid, and also the immoral aspect of deceiving the seller into believing you as the wholesaler will close. I was told these exact responses from attorneys who drew no interest in doing business with me. 

    0Reply
  • Account Closed
    Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
    11y

    I dont know about all wholesalers but there is a subset that is definitely slimy. I suspect these are mostly newbie graduates from the latest guru course convinced they will be millionaires in a week with no money down. I have sat through teaser presentations of the "We buy houses" type of seminars and they describe "sitting across the kitchen table with grandma", pretending to be interested in her life so she will "sell" you her house for pennies on the dollar. Not really sell you of course cause you dont have two nickles, but she thinks she is selling it to you, the nice young man who asked about her grand kids and played with her cat. EWWW. I needed to have a shower just after being in the same room as that guy.

    3Reply
  • Account Closed
    OP
    Investor · Wood Dale, IL · Member since 2014 · 65 posts · 3 votes
    11y

    @Account Closed

    Great example. The more I read into it and see experienced perspectives, the more immoral the whole idea of it seems. If someone can convince me otherwise, I'm going to steer away from the wholesaling "strategy" all together. 

    0Reply
  • Account Closed
    Kalamazoo, MI · Member since 2014 · 224 posts · 129 votes
    11y
    Ever trade in a car? What's the difference. The dealer isn't going to keep it. Attorneys working by the hour should not care if the deal falls through. If they give you that line just say oh I'm sorry I'm looking for a real estate attorney.
    1Reply
  • Account Closed
    Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
    11y

    @Account Closed

     The dealer actually pays you for your car. What he does with it afterwords in not relevant. And everyone knows that when you sell a car to a dealer you sell at wholesale and he resells retail. In the RE wholesaler, they dont fork over any cash at all to seller. BIG difference. If the wholesaler took possession of the house and resold it, I would have no problem with that.

    6Reply
  • Keegan Burkholder
    Tacoma, WA · Member since 2014 · 2 posts · 3 votes
    11y

    Here is how I see it. I care about the sellers, actually I care about everybody. I also care about my list of rehabbers and the buy and hold guys that I find properties for. I don't screw people over, I provide a service to people who don't have the connections to sell their run down house, and to investors who are looking for great deals. 

    Really, that is it.  

    I explain what I am doing to the seller, not necessarily all the details because if they understood the whole investment process they wouldn't be calling me in the first place, they would be doing it themselves. I also don't want to confuse them so I keep it in simple A+B+C= Deal.  I assure them that I am on their side, and not just tying up a house, and I AM ON THEIR SIDE. Both of our interests are the same, moving the property. Depending on the seller I even help them out if they need it. 

    Yes, wholesaling can be done in a slimy way, but if you actually care about people don't you want to help the old lady out of her predicament since you have the skill? 

    2Reply
  • Henry Howard
    Wholesaler · Birmingham, AL · Member since 2015 · 30 posts · 0 votes
    11y

    This was great I got hammered for asking a simple question,who gets the blueprints on a flip.

    0Reply
  • Ryan Dossey
    Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
    11y

    Some well worded reaponses. I think it really does come down to whether or not you care about people. I spent 3 hours talking to an older gentleman about his life and family. He got a call that his wife had two days to live before I got there. I hung around till his kids got there. He thanked me for my companY as did his kids. 

    Threat your properties as numbers. Don't get emotional about them. Treat your sellers as humans. 

    1Reply
  • Account Closed
    Investor · Member since 2015 · 40 posts · 6 votes
    11y

    @Account Closed

     Ahhh, it makes more sense now.

    0Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    11y
    Originally posted by @Account Closed:

    My subject is not direct, but a legitimate question.

    I recently got a prime follow up call for a prospect that could absolutely be wholesaled. Upon making an offer and coming to negotiating terms with the seller, I needed to find an attorney who is familiar with how wholesaling works. After reading a response to a forum posted by @Tyler O'Malley, apparently all RE attorneys are familiar with wholesaling or are able/willing to work with you. This is not the case at all. After several phone calls with attorneys, I have not gotten one single attorney who wants to deal with wholesaling because it is a "dishonest" thing to have the seller under the impression that YOU are going to close on the property and/or it is a waste of their time because "most of the time these assignments of contracts never work out". After giving it some serious thought, it does seem pretty dishonest to mislead the seller into believing YOU are going to close on the property and then worst case scenario ending up voiding it all together through a "weasel clause" and wasting everyones time. My question is can anyone convince me this is not a dishonest business and also is it possible to find an attorney willing to work with you wiyouthout actually being dishonest with him too.

    If you sign a contract AND CLOSE on the deal and then resell that is honest and truly makes you an investor. Recently there were two threads from people "wholesaling" where it was apparent neither one intended to buy the property. More than likely, both were using BS "inspection periods" as time to try and market the properties. When the time runs out, and they have no buyers, they LIE to the seller and state the property did not meet their inspection requirements. That is the problem. Go find the thread posted by Ana Garcia about other wholesalers "on HER property". In that thread, I asked a few simple questions which she chose not to answer. Another thread was by some guys out of Orlando and that "wholesaler" chose to ignore a couple questions: did they plan to close on the deal, and was the "inspection period" a ruse to trick the seller. In most instances they are. I am all for making money in an honest manner. Buy the property, resell for more! However, misleading sellers and using BS tactics to back out is nothing more than being dishonest, and IMO, a scam artist.

    2Reply
  • Tim G.
    Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
    11y

    With bigger pockets newest book having the phrase "no money down" in its title Id say get used to newbies appearing asking such questions.

    1Reply
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