Why do seasoned real estate investors and seasoned real estate brokers/associate brokers hate wholesalers?

71 Replies

Oh yes I loved working for them as well, I just meant used car sales as a whole has a bad rep, where as I felt like I was genuinely helping the consumer while I worked there. 

@Stephen Rogers

Here is what I found on the Realtor.com site


For MS only...

MREC list of activities that cannot be conducted by an unlicensed
personal assistant.
Guidelines for an Unlicensed Personal Assistant
An “Unlicensed Personal Assistant” who works exclusively for a
licensee will ordinarily be an employee rather than an independent
contractor under Mississippi and Federal tax, unemployment and
workers’ compensation law. The licensee must follow all applicable
laws. The licensee may pay an employee based on a predetermined
rate that is agreeable to both parties as long as the assistant’s
compensation is NOT in any way related to listings or buyers solicited
or obtained by the assistant.
The Mississippi Real Estate Commission (MREC) has created a list
of activities that cannot be conducted by an unlicensed personal
assistant. The list is NOT inclusive and is intended to serve as a
Unlicensed Assistants may NOT:
1. Independently show properties that are for rent or sale.
2. Host an open house, kiosk, home show booth, fair, or hand out
materials at such functions UNLESS a licensee is present at all times.
3. Preview, inspect, or determine (measure) the square footage of
any property unless accompanied by a licensee.
4. Prepare promotional materials or advertising without the review
and approval of a licensee and the principal broker.
5. Negotiate, discuss or explain a contract, listing, lease or any other
real estate document with anyone outside the brokerage firm.
6. Answer questions concerning properties listed with the firm,
EXCEPT to confirm that a property is listed, to identify the listing
broker or sales agent, and to provide such information as would
normally appear in a simple, classified newspaper advertisement
(location and/or address).
7. Negotiate the amount of rent, security deposit, or other lease
provisions in connection with rental property.
8. Open properties for viewing by prospective purchasers, appraisers,
home inspectors, or other professionals.
9. Attend pre-closing walk-through or real estate closings unless
accompanied by a licensee.
10. Place calls that would require a license such as cold calling,
soliciting listings, contacting sellers, buyers or tenants in person or by
phone, contacting expired listings, placing marketing calls, or
extending open house invitations.
11. Represent themselves as being a licensee or as being engaged
in the business of buying, selling, exchanging, renting, leasing,
managing, auctioning, or dealing with options on any real estate or
the improvement thereon for others.
Typically, unlicensed assistants MAY:
1. Provide “general” information about listed properties such as
location, availability, and address (without any solicitation on behalf of
the assistant).
2. Perform clerical duties, which may include answering the
telephone and forwarding calls.
3. Complete and submit listings and changes to a multiple listing
service, type contract forms for approval by the licensee and the
principal broker, pick-up and deliver paperwork to other brokers and
salespersons, obtain status reports on a loan’s progress, assemble
closing documents and obtain required public information from
governmental entities.
4. Write advertising and promotion materials for approval by the
licensee and the principal broker, and arrange to place the
5. Have keys made for listings and place signs on a listed property.
6. Gather information required for a Broker Price Opinion or a
Comparative Marketing Analysis.
7. Schedule appointments for the licensee to show a listed property.
8. May be compensated for their work at a predetermined rate that is
not contingent upon the occurrence of a real estate transaction.
Licensees may NOT share commissions with unlicensed persons
who have assisted in transactions by performing any service with
respect to a real estate closing.

Just read it, So at this point should I cancel my contract and just let the actual buyer and seller work it out and just ask for a referral fee for a lesser amount? I definitely do not want to break the law. 

@Brian Gibbons

@Stephen Rogers

On this one  with Stephen I have first hand knowledge.. I am a broker in MS  ( currently in active but was active for a number of years)  I do  A LOT of my transactional funding in MS because my clients were getting cease and desists when they are caught flipping without a license  or wholesaling or however you want to couch it... Lots of it done there for sure.

I have also seen repeat offenders do some jail time in MS... and that is one place you do not want to spend 5 minutes in Jail.. much less on one of the work farms.. Think Cool Hand Luke   ... its the modern day version... I suspect many of our younger posters won't know what I am talking about  LOL...

MS  Depart of RE is very accessible I have been in there a few times and its actually were I took my test ... right there in Jackson. The staff is friendly and helpful and you can walk right up and usually talk to an investigator right over the counter...

You could buy it sub2, own it, get on title, and resell it.

Now you are acting as a principal owner

Oh ok, thanks guys! I was just talking to agent/buyer and he said that a double closing is probably what would have to take place. I will definitely be getting my license after this so I never run into these circumstances.

If you take the time to actually learn real estate, the basics, you can learn how to circumvent many of the restrictive laws, and profit. The real issue is people are to freaking lazy to learn looking for a fast buck. For them, failure is inevitable and deserved! 

Only idiots follow snake oil salesmen. been that way for over a hundred years, it's okay by me for some to learn the hard way. The poor will always be with us! And, there will always be those who take advantage of the poor. Wise up, or suffer! :) 

yes sir and that's what I want! I've been working since I was really young so I don't shy away from hard work and look forward to everything involved in real estate! thanks for the advice.

I for one don't list anything with a Realtor that gets full commision.  I list with really huge and popular discount Brokers they charge a fee of 500 dollars and on a deal of 300k that could mean a savings of oh 10k.  I like discount Brokers they can work out any kind of deal you want save you a load in fees. 

I think there have been some very valid points made here pertaining to wholesalers, and a common theme that I have seen in this thread is that maybe some dealings with one or two "bad" wholesalers have really caused some people to be completely biased against "any" person identifying themselves as a wholesaler or has anything to do with wholesaling. I think those one or two (or several) run-ins with the "bad" wholesaler has made some people very angry, and from reading some of the stories they have good reason to be. My thing is this, that can be the case with a contractor, but I'm sure you're not going to vow to hate every contractor you meet. That could be the case with a bad car mechanic, but can you really hate every car mechanic, especially the ones you never met??? There will be people in any field, any industry, that are good at what they do, and there will always be those who are not so good at what they do, if not terrible at it-I'm sure we can all agree on that. My point is that everyone deserves a fair shot, you cannot let a bad experience with one individual cause you to be close-minded to everyone else who is involved in what that individual is involved in. Use the bad experience to teach you, and make you more aware in dealing people in the future so you prevent from having your time wasted, losing money on deals, etc. As was mentioned previously in the thread by @Brian Burke , he has gotten several good deals from wholesalers, its just about knowing how to distinguish between those who are good at what they do and those who are not so good. I do have a bias here since I have wholesaling incorporated into my business, so I know firsthand why there are people who are passionate in their views towards wholesalers. Just give people a fair shot, hey if they do business in a way that doesn't appeal to you don't do business with them. Just know that maybe, just maybe, you may find some of those wholesalers that are good at what they do and they may be a very useful addition to your business. Thats just my opinion though.....

@Larmon Cummings Jr

  I close 2 to 10 deals a week in my business. I would say 50% of the huds I see have a wholesaler attached to them..  so yes they bring deals.  IN the Timber business we used to call them Timber Pimps.. guys with no money that tied up a timber patch LOL.

but I disagree with our thought that is just a few bad apples.. I think its the opposite. IN my Dallas closings we are dealing with one of the top wholesalers .. what I see is there are a few good ones and thousands of wanna bee's that try it give up and move on.. or bugger up deals.

My concern with wholesalers is that they are not regulated or licensed. As a New Jersey licensed Real Estate professional, I pay a lot of money each year for my license, E&O insurance, NJMLS fees, NAR, NJAR and EBCBOR member dues, in addittion to Ethics training and Continuing Education Courses. Yet wholesalers can undermine licensed professionals by, in effect, SELLING real estate that they don't own, without a license. They can give the Real Estate industry a bad reputation.

Well yes, I guess the language I used did sort of downplay the number of "bad apples", so yes I must say that I agree with you on that @Jay Hinrichs . There are a lot of programs that pitch wholesaling as the get rich quick route to making tons of money in real estate, so naturally lots of people with little to no money try that route in hopes of becoming these big time amazing real estate investors. The reality though as we have seen is that a lot of the unscrupulous tactics that they are  being taught to use have a very low success rate, so you see a lot of people come and go in that field, and lots of times never to be seen again. In addition to that,  they leave a bad taste in a lot of peoples mouths that they have done wrong to, and they really scar the trade in general.  I think some of the more successful wholesalers are not just doing wholesaling by itself in hopes of making tons of money doing just that. The more successful ones do wholesaling as one route to generate short term cash flow, in addition to rehabbing and flipping properties, all the while building a long term rental portfolio of properties. Now I am sure not all wholesalers will agree with me on that, but I am sure if you look at some of the top guys what I am saying has some truth to it. Its a formula that I am using myself, and over the long haul I am sure it will be beneficial. 

If I am not mistaken Redfin is a discount broker.  Back in the old days retail Real Estate agents used to pass by or boycott these discount brokers.  After the internet that has all changed they have so much business going there way now.  It almost doesn't make sense to list with anyone else than a discount Broker.  For a flat fee usually about 500 bucks. That saves you about 3.5 percent in commissions on the selling side.   Being a champion of the people with no self interest whatsoever.  lol.  If you live in a large city you can usually find one very easily.  Both sides of the deal and you save a whole lot.  With high dollar houses it makes sense not to use anyone but a discount broker.  Because the selling agent will definitely want one side  anyway and you save a bundle on the listing side. I could go on. Maybe later I'll make a thread. 

@George Allen

  there is a discount broker trying to take market share in Denver right now ... name escapes me but they are saying flat fee 3k buy and sell.. that's on a 1 million dollar home

you can imagine where that is going .. discount brokers have been with us since the days of " Help you SEll"  and yes I can get a broker to do a limited rep.  listing for 500 bucks no problem.

Yep there was the days of one guy in town and no agent would sell his listings thats all changed now I believe Redfin operates like that and gives a lot of service for it too.  I think its fair.  Realtors in my opinion especially listing agents never did all that much but list it.  The Selling agent does a lot of the work.  Real estate people in many cases think they are the princes in the deal.  Outside of the seller.  I don't like the way they push people around.  I'll try to do a thread and get a comprehensive list of discount brokers.  We have one here that is number one in the nation.  I mean 500 bucks it makes sense especially on the listing side.  I wouldn't list with a retail agent its a waste of money. 

@George Allen

  I know Redfin is there but I can honestly tell you I have yet to see ONE of my transactions where they were involved.. and I buy in 12 states and about 200 properties a year.

Originally posted by @Jay Hinrichs :

@George Allen

Lake Oswego is it?  They're doing really well in major markets and especially with high dollar homes.  They feature a lot of people are using it now.  

@George Allen

  I build new construction in Oregon my last Lake O house I built I sold for 650k which is the very bottom of our market

I know they are here but I have just not been a party to a transasaction that they were the procuring or selling broker.. does not mean they are not big time.. just me.. and my 200 escrows a year.. have not seen them on one hud...

Originally posted by @Jay Hinrichs :

@George Allen

  I build new construction in Oregon my last Lake O house I built I sold for 650k which is the very bottom of our market

I know they are here but I have just not been a party to a transasaction that they were the procuring or selling broker.. does not mean they are not big time.. just me.. and my 200 escrows a year.. have not seen them on one hud...

Huh that's really interesting because here discount brokers are burning down the town. Maybe not Redfin but maybe they aren't marketing where you are. Nobody used to pay attention to discount brokers they couldn't give a listing away now everyone is using them. It's due to the internet mostly. Like I say the marketing on the part of listing agents has always been slim. The MLS and that usually the biggest selling point anyway. For 500 bucks you get your house on there. To tell you the truth I never brought the subject up. Also a lot of investors are not using discount brokers they are so used to listing with retail agents I think it would be a good topic. They don't know the advantages of that.

In fact I think there was a big write up in the Wall Street Journal and on Marketwatch about discount brokers and Redfin how it was so much cheaper to sell a house these days because the internet has such a wide reach.  

Originally posted by @Jay Hinrichs :

@George Allen

  I build new construction in Oregon my last Lake O house I built I sold for 650k which is the very bottom of our market

I know they are here but I have just not been a party to a transasaction that they were the procuring or selling broker.. does not mean they are not big time.. just me.. and my 200 escrows a year.. have not seen them on one hud...

Another thing as a builder my guess would be you have no need for a Redfin.  Usually with that much construction I would not imagine you do spec houses as a rule.  You would have agents on site and a sales office just a guess.  To tell you the truth way its going that could all change in the future with builders.  I don't see them using anything but sales offices where I am.  Listing with them makes sense you make a lot of money that way.  Thats uh about the half of it anyway.  Lot of profit.  Not trying to gore anyones ox.

@George Allen

Nope we still MLS everything and most sales are brought from brokers.

Originally posted by :

Not trying to be provocative here, but many seasoned real estate investors and seasoned real estate brokers/associate brokers hate wholesalers.

Not just for breaking the law, acting as an agent for a fee, without being on title, but unprofessionalism, outright lying, misrepresenting, etc.

And there is no recourse for the poor home seller; if you were treated poorly, unethically, with a listing agent or a buyers agent, you have recourse.

There is a live thread:

Well-executed wholesale deals feel like well planned checkmate.

I would like anyone with 10 years experience in real estate to list of 3 to 10 reasons due to ACTUAL experience with terrible wholesaler behavior why he or she truly dislikes the average wholesaler.

Ex) wholesaler said he would definitely close with CASH PARTNER, there was no CASH PARTNER, wasted 3 months of prime summer home marketing.


What's the point of this thread? Your first statement is absurd. Have you done a poll and that is how you came up with that data? And are you suddenly the chairman of the people's pity party? I've closed every deal I've made an offer on. Even ones that turned out to be complete duds. No recourse for the poor seller? A person makes an offer and doesn't close - you think that only applies to wholesalers? Guess you never listed a house in the MLS. As for recourse, do you always take the deposit of the buyer if they don't perform? Guess you haven't had one of your vacant houses vandalized YET. Give it time. Your day is coming.

Asking people, and then tagging people inviting.. forcing them to join in your negative protest is 100% unproductive. There is nothing to be learned from this. I've completely wasted my time even responding...

Aaron did do one good thing, he brought this thread back on topic! Let's not have ping-pong posts about discount brokers!

And, it's not about how many deals you do, it's about how deals are done. 

Any time you transact business of any kind and you circumvent rules, laws, expected and accepted practice, you're going to have issues with the rest of those in that industry. 

Wholesalers have many legal hurdles to clear.

Not having the intention and ability to perform, is not dealing in good faith, the contract is invalid.

A contract made for the purpose of facilitating an illegal act is not valid, if you have no intention of buying, don't have the ability to buy, the contract is only made to establish an agency relationship or allow activities that are otherwise restricted or not allowed, the purpose of the contract is questioned. Contracts made that contradict statute, policy or the public good can be invalid. See the Fair Trade Practices Act, 1974.

Tying up a property, restraining an owner from the ability to sell with a bogus sale contract is restrictive trade. 

Your opinion of your ability to perform as you intend is irrelevant. Your intentions are irrelevant, good intentions pave the road to jail. Like saying I robbed the bank to pay for granny's operation.

So, in reality, all these "iron glad" contracts devised by wholesalers is nothing but a leaky bucket, eye wash to get a seller to closing.   Your contract is made in bad faith as to you buying as stipulated in the contract, your intention is to circumvent agency law, your intention is to circumvent licensing laws, your intention is to net a profit from the owner's equity, all against the public interest. 

What solves those issues is having the ability to buy and close as agreed, use a transactional lender, problem solved. 

Taking title also gets you out of dipping into an owner's equity, at least legally, you can buy a house for $100 and sell it for $10,000! You had a closed sale, you own it and you can sell it. When the owner sells to an end buyer and you take money for "services" you are taking equity out of that sale transaction. That is an issue as to law and ethical dealing as your compensation is then based on services rather than as being an owner.

Conditions of a contract fall into three categories, major terms being conditions, minor terms being warranties and miscellaneous items that are not conditions or warranties. 

While most investors believe they can avoid warranties in a contract, you really can't avoid all implied warranties of expectations to perform. Implied terms can't override expressed terms, but you really don't have a sale contract if you avoid the obligation to buy. 

An implied contract is one where the circumstances imply that the parties have reached an agreement even if they did not expressly agree or if they have not executed an obligation. These are "quasi-contracts".

Now, here's a kicker for wholesalers; When you assign a contract, which can be done, you are deviating from the contract, you agreed that you would buy, now, you're not and want to let Joe buy it. An implied term can not change an expressed term, parties to contracts must perform as specified unless the parties agree to changes or the party who does not deviate ratifies the change by actions or by not objecting or by inaction. 

Does the assignment deviate the end result of the intended outcome, if it does the party who deviates has "breached" contract. If it does not, the deviation is not significant then the contract holds. 

The point is, an owner can object, if they do, you may have a valid contract but, the entire contract and the circumstances of your transaction can be brought to light. That takes us back up to your inability to buy, your intentions in executing the contract, circumventing related laws and practices. Do you really want to go there? 

In other words, your seller can walk away and kill the deal and in  the end, you'll have little recourse. 

What might avoid all this? Disclosure of your intentions!

I think "wholesaling" is actually the misuse or wrong application of law allowing assignments of contracts, and the method of dealing in bad faith and the underlying purpose to evade an agency relationship is not valid. When it's all said and done, the scales tip toward an agency (not a real estate agency, the laws of agency) and from that point, you violate your responsibilities to your principle when taking excess equity for your services. 

Lastly, the point made by a Realtor on page 2, agents and other professionals have expenses in this business, it takes money to act in real estate responsibly, ethically and lawfully. When they see others acting contrary to public policy, to accepted practice and circumventing laws, they are going to get ticked off. That puts wholesalers at the bottom of the food chain along with grubs. It's not so much about you, it's about what you do. :) 


It's not a matter of hate I don't think. There are some very good wholesalers who I do enjoy working with from time to time. But you do have to sift through a lot of garbage in the process. It seems there are a handful of wholesalers who just spam you with overpriced, warzone properties in need of a gut job. It gets rather tiring...

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