Investor · Portland, OR · Member since 2015 · 18 posts · 2 votes
Hello BP!
I'm a new real estate agent based in Portland, OR. I've been with my brokerage firm for 3 months now. My goal is to learn the basic process of retail deals, I've completed just one deal and have a few others in the pipe. I can already tell being a buyers agent is not what I want to do. I'm willing to do it to learn the ropes, but my business strategy is to find wholesale deals (land and rehab) with list back. I did some wholesaling before I became a RE agent and that's what I really enjoy doing.
My principal broker says wholesaling is too risky and doesn't fit their business model. Is this true??
Does anyone have a recommendation of a brokerage firm in Portland, OR that would support my goals?
I'm a wholesaler. Sometimes I close on the properties other times I assign my interests. What I have never done is trick a seller to sell me their property. My offer to the seller is that I'm offering you an avenue to sell your property quickly without having to deal with realtors and unwanted guests in your home. Most of my sellers know the value of their property and they also know that the current shape of their property will not get them the full market value. Most of the properties that I acquire need at least $7K in repairs or more. Sellers understand they have to discount their property to sell them in "AS-IS" conditions without repairs.
The adage that wholesalers have to cheat little old ladies is as bad as all tenants call you at 3am for toilet overflows. It sounds great in saying but it never or rarely happens. Just had to give my two cents.
You can now get back to bashing wholesalers as evil, unethical individuals who are ripping off old ladies. Thank you.
@Dustin Miller Are you splitting your wholesale fees with your broker? Whether it is too risky or doesn't fit business goals is up to your broker. If that's how they feel, that's how they feel. No truth or untruth to it.
Your brokers Errors and Omissions Insurance doesn't cover wholesaling, which is what they mean by risk. If you mess something up, there's no coverage for it and everybody's butt is on the line - yours and your employing broker - if they are allowing this and especially if they are taking a commission cut on it. (There's no way for them to say they didn't know....)
Didn't the ethics section of your exam cover this?
I just heard a radio ad today from a well known agent at Keller-Williams here in Portland that they are now doing a "direct buy" service which seems tantamount to wholesaling.
A broker doesn't wholesale, she/he can assume the role of the seller's agent, which won't bring in as much as a wholesale deal, but she/he can then request the list-back, from the investor, to double end the transaction. Disclosure is everything, make sure that you inform both parties that you are a real estate broker and you'll then need to negotiate a commission with the seller.
What you can do as a broker is to purchase a distressed property and then rehab and resell, no issues there unless you don't treat the seller fairly and ethically. There are many options available to the broker, but wholesaling will invite trouble.
Most people don't realize this but you can wholesale deals that you close. Buy it at a cheap price, actually close it, then you can do whatever you want with it, including marketing to your investor list or even slap it on the mls to invite the most traffic from investors. Most investors believe it or not are still buying on the mls.
@Nicholas Novak, This is true, but the thing is, if you can make a profit just by turning around a property you just purchased, then you did your client a disservice by not getting them market value for their property.
@Dustin Miller If you are an agent who is trying to wholesale properties are you really looking out for the best interest of the seller, who would normally be your client? As a realtor you are held to a higher standard when dealing with the general public. It can be viewed that you have inside knowledge of the property value that you are not sharing with the seller and you are taking advantage of this.
This is one reason I generally dont like wholesalers. And..... newbies like this after the golden ticket, not concerned about their clients, give agents abad rep too
Dustin Miller This is my two cents. If you are straight forward which my wife and I are then you should have no problem. We direct market a number of leads one of which is a motivated sellers list. Our broker has no problem with what we do so this is your first step. I would look at your local REIA for investor brokers. We tell every person that we offer to buy from what we think they could sell at by listing it with us and we also offer to purchase from them at a much lower price. Based on market most of leads are being converted to RE listings but we give the sellers the option to pull the listing at anytime and sell to us minus a buyers agent commission. Those who say wholesalers give others a bad name are the ones that give everybody a bad name because competition and options are always good for seller. You could easily say an agent that charges 3 percent on a property that sells just by being listed on the MLS in 24 hours and makes them 10,000 is a ripoff to the seller. If the house is rough and they need to sell fast then we push the seller to sell to us now because of risk of the risk of time. If the seller wants to maximize how much they make and property will qualify for conventional financing it obviously makes sense to list in more cases. If a seller does not want neighbors to know they are listing for whatever reason because of divorce, financial problems or whatever then we simply work with what meets their needs, but let them know that their request may not optimize their sales price.
I recently took the real estate licence exam and this exact scenario was one of the questions. States differ but in my state this could lead to an agent losing their license. You have a fiduciary responsibility to your client so if you know the property is worth more, then you have to sell it for your client for more. It's just like @Randy Johnston said above. Aren't you doing your client a disservice by not getting them top dollar for their property? I think you have to pick one or the other. You can't be a wholesaler and an agent because the goals of each job are different and conflicting in some cases. Just my two cents.
You would be doing your client a disservice if you are acting as an agent. They would not be a client if they do not want to sell on market and you are making an offer to purchase. If you are buying on market you would obviously be the buyer.
Dustin Miller For whatever it's worth, brand matters. If you have 10 agents working in a community and they are all wholesaling it will get around. Now, let's say I'm working at another agency and I know this. When I show up to a listing appointment the first thing out of my mouth is: "I'm not a wholesaler, I'm an agent, I'm not trying to make money on my commission and reselling your property for a margin." The implicit (if not explicit) message is: "Agents/Brokers at ______ will say they are buying your property when, in reality, they are just trying to get you under contract at a low price to resell it before it closes." Taking ethics out of it, taking your sellers best interest out of it, there is just a plain practical aspect here. Not to mention, if I know you're a wholesaler at heart and my home doesn't get offers, the paranoid side of me is going to wonder if you're not marketing my property well because you hope it goes stale so I'll bow to a wholesale contract and you can get your margin and commission. Again, taking fairness and paranoia out of it, there are practical implications for a business.
@Steve B. I know a lot of brokers/agents and they are good people who truly do have their client's best interest at heart. I'll take your comment as someone who is completely unaware of the ethics that the majority of brokers/agents exhibit.
@Nicholas Novak If a homeowner does not want to sell their property on the open market and you cannot negotiate a deal that will be beneficial/fair to the homeowner and yourself, then you, as a broker/agent, move on.
Wholesaling in general has a bad name. If your goal is to trick grandma into selling you her house for less than market and doing a simultaneous closing through assignment, you would deserve the bad reputation. You're also repressing something for sale that is not yours or have the owners approval. This is a sticky area, which is why the broker does not want to deal with it. If you find a broker that is interested in you doing this, they are most likely shady and you will eventually get burned by them.
If on the other hand you find a great deal, buy it and resell it or add value (reno, find a renter), then you are on to something. There is no get rich quick in this business and cheating people is not going to get you there any faster.
I'm a wholesaler. Sometimes I close on the properties other times I assign my interests. What I have never done is trick a seller to sell me their property. My offer to the seller is that I'm offering you an avenue to sell your property quickly without having to deal with realtors and unwanted guests in your home. Most of my sellers know the value of their property and they also know that the current shape of their property will not get them the full market value. Most of the properties that I acquire need at least $7K in repairs or more. Sellers understand they have to discount their property to sell them in "AS-IS" conditions without repairs.
The adage that wholesalers have to cheat little old ladies is as bad as all tenants call you at 3am for toilet overflows. It sounds great in saying but it never or rarely happens. Just had to give my two cents.
You can now get back to bashing wholesalers as evil, unethical individuals who are ripping off old ladies. Thank you.
@Dustin Miller wholesaling is a very nuanced tool (unfortunately some believe it is also a business model) that rarely gets commented on in a comprehensive manner. I saw that you found our RareBird Investor Network facebook page last week. Come to our meeting next Thursday as we are diving deep into "wholesaling" to discuss many of the perspectives mentioned in this thread. One post on a forum like this will rarely cover the wide range of perspectives this one topic can bring.