New Wholesaler: Dilemma and Thoughts

New Wholesaler: Dilemma and Thoughts

Toledo, OH · Member since 2017 · 18 posts · 8 votes

Hello. I'm new to the forum but not particularly to Bigger Pockets. I have been lurking but have decided to get involved because of me and my wife's desire to begin real estate investing. My focus will be wholesaling and it is a focus. I do not and have no desire to buy and hold and I'm not particularly interested in doing fix and flips at this time. Wholesaling works better for my long term goals.

However, the one thing I'm seeing is almost an aversion to wholesaling. There is a sense that it's not that great or more it's like the red-headed step-child of real estate investing. To be honest, that's one reason I want to get into it; to figure out the ethical, honorable, and lawful way to do it and do it successfully. To be “that guy” that does it right through and through.

I live in Toledo, Ohio. In my research, I found that Ohio is cracking down and I can understand why. I'm convinced that to wholesale correctly, lawfully and ethically, it's better to get a real estate license, especially in my state. There are other reasons I have listed. I wanted to get around that by legitimately getting my real estate license before I do anything but now I'm betwixt two. I don't know if I can wholesale without splitting everything with my broker. I can't become a broker out the box but the reason for getting my license was to do wholesaling so I can disclose upfront what kind of agent I am, not to list homes in the traditional way or to represent myself as a buyer when, in fact, I'm not. However, you have to have a broker sponsor you in order to get your license. 

My question is do I, in fact, have to split my wholesale fee with the broker? Is this on a broker by broker basis which each broker having different criteria (I'm assuming it is)? Anyone a real estate broker or real estate agent who would have an answer to these questions?

Thanks ahead of time. God bless.

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y

@David Washington worrying about broker split means U have not researched broker splits.

one of our BP members has a REal estate company in Toledo called List and Sell real estate.

he charges flat fee of 199 a month and you keep 100% of what U make.. how can that be too expensive to be in the industry licensed and legal.

@Tim West no disrespect but wholesaling is NOT a profession.. its simply the wild west with all sorts of actors .. from really bad to nice and good. No one monitors them .. no associations.. no peer presure to do the right thing  actually the opposite.

some of the tidbits I see from wholesalers offer this kind of advice.

1. Ghost ads to build buyer list

2. Never disclosing your not acutally the buyer ( biggest fraud on the planet in my mind)

3. Subject to your partners approval  partner being your Labrador retriever.

4. Setting up inspections that are really potential buyers.. ( again just flat lying to sellers)

this is why this is such a stain on the whole real estate industry.. these are the techniques taught to folks who either lack moral compass or just plain don't care and its all about the benjimans to them.

as you know in your state working with anyone is foreclosure the laws are intense on who and what you can do.. does that stop people no..

advertising a home bed bath etc that yoiu do not own is basically illegal in all states period. Just read the regs.  friend of mine in Oregon got a big fine and cease and desist doing this.. Neighbor turned them in..

See this reply in the discussion

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  • New York City, NY · Member since 2016 · 420 posts · 172 votes
    9y
    Ohio is so cheap man just buy a multifamily and rent it out. Skip the wholesaling...
  • Toledo, OH · Member since 2017 · 18 posts · 8 votes
    9y
    Originally posted by @Account Closed:

    Ohio is so cheap man just buy a multifamily and rent it out. Skip the wholesaling...

     This simply does not fit into my personal goals and plans. Wholesaling is a perfect fit for me. Just need to know about the real estate license and how the broker affects me.

    Thanks.

  • Real Estate Investor · Shelton, WA · Member since 2013 · 369 posts · 639 votes
    9y

    @David Washington Aside from Ohio being one of the toughest states on "wholesalers", to do so with a license is a 'net listing' which is either illegal or highly discouraged in most states, and i would be willing to bet Ohio is one of them. You can go around asking brokers in your area if they'll allow it, most of them are not only going to say no, but now you've put yourself on their radar as someone who likes to do shady business. 

    If you want to be an agent, get your license and make money listing/selling homes. If you come across deals good enough to "wholesale", let the seller know you can list the home for X as their agent, or buy the home cash for Y. Then simply find the cash at your local REIA groups to buy it and turn around and sell it to a rehabber..also known as actual wholesaling.

  • Shawn AckermanPro Member
    Real Estate Entrepreneur · Mid West, East Coast · Member since 2015 · 3k+ posts · 1k+ votes
    9y

    @David Washington Do what you want to do man!!!  Never let anyone discourage you from following your path.  You may want to begin networking with a hard money lender and or transnational lender who would be willing to offer up the funds you need to close on your deal, then immediately sell it(double close).  Assuming you don't have the funds readily available to close on the property yourself. 

     I think if you can prove to a lender A. Property under contract, title cleared and ready to close and  B. A buyer who has provided proof of funds to you for the purchase then you should be ok.  One of the biggest factors involving wholesale deals are having a solid title Co. that understands the transaction, contractor(assuming your not a contractor), Attorney if they are required to write contracts in your market.

    Always remember to persist and you will WIN!!!

  • New York City, NY · Member since 2016 · 420 posts · 172 votes
    9y

    speak to a RE attorney in your state. 

  • Toledo, OH · Member since 2017 · 18 posts · 8 votes
    9y
    Originally posted by @Account Closed:

    @David Washington Aside from Ohio being one of the toughest states on "wholesalers", to do so with a license is a 'net listing' which is either illegal or highly discouraged in most states, and i would be willing to bet Ohio is one of them. You can go around asking brokers in your area if they'll allow it, most of them are not only going to say no, but now you've put yourself on their radar as someone who likes to do shady business. 

    If you want to be an agent, get your license and make money listing/selling homes. If you come across deals good enough to "wholesale", let the seller know you can list the home for X as their agent, or buy the home cash for Y. Then simply find the cash at your local REIA groups to buy it and turn around and sell it to a rehabber..also known as actual wholesaling.

     Thanks for your response.

    I did not know that it would be a net listing. I'd simply disclose from the beginning that I'm interested in finding an investor buyer for their property and that I would not be listing it per se but sending the house information to a list cash buyers. I specifically do NOT want to list properties as an agent and if I can't do it it legally, ethically, and in a way that fits my needs, no harm no foul. I'll look at other investment opportunities outside of real estate.

    Thanks again.

  • Toledo, OH · Member since 2017 · 18 posts · 8 votes
    9y
    Originally posted by @Shawn Ackerman:

    @David Washington Do what you want to do man!!!  Never let anyone discourage you from following your path.  You may want to begin networking with a hard money lender and or transnational lender who would be willing to offer up the funds you need to close on your deal, then immediately sell it(double close).  Assuming you don't have the funds readily available to close on the property yourself. 

     I think if you can prove to a lender A. Property under contract, title cleared and ready to close and  B. A buyer who has provided proof of funds to you for the purchase then you should be ok.  One of the biggest factors involving wholesale deals are having a solid title Co. that understands the transaction, contractor(assuming your not a contractor), Attorney if they are required to write contracts in your market.

    Always remember to persist and you will WIN!!!

    Thanks @Shawn Ackerman for the encouragement. 

    In my research, the problem is that people are doing two things that are wrong or illegal:

    1. Not disclosing that they are actually not interested in buying the property and disclosing that up front.

    2. Listing or advertising the property as if they have ownership or as an agent (taking pictures, videos, details, etc.). You can't do that unless you have a license or are an owner.

    My concern is that I would be stuck with a property that I don't want if the property doesn't close. I'm really not interested in holding and buying or fix and flips. Wholesaling seemed like a good fit but it may be that I'm not able to do it which would be fine. At least I didn't go in and find out the hard way. Better to do it right.

    Thanks again my man.

  • Toledo, OH · Member since 2017 · 18 posts · 8 votes
    9y
    Originally posted by @Account Closed:

    speak to a RE attorney in your state. 

    The information I researched was from a real estate attorney and he was interviewing two Ohio Department of Commerce leaders who were talking about wholesaling specifically. Think I have that covered.

    Thanks.

  • Investor · Philadelphia, PA · Member since 2010 · 739 posts · 372 votes
    9y

    @David Washington

    Wholesaling without a license is illegal. Getting caught twice is actually a felony.  

    Wholesaling with a license, any commissions need to be ran through your broker. So your broker needs to be in the loop on anything you're doing to make sure it's ethical/legal

  • Toledo, OH · Member since 2017 · 18 posts · 8 votes
    9y
    Originally posted by @Chris Purcell:

    @David Washington

    Wholesaling without a license is illegal. Getting caught twice is actually a felony.  

    Wholesaling with a license, any commissions need to be ran through your broker. So your broker needs to be in the loop on anything you're doing to make sure it's ethical/legal

     Actually, wholesaling without a license is legal. It is how you wholesale that is the issue which makes it legal or illegal.

  • Investor · Philadelphia, PA · Member since 2010 · 739 posts · 372 votes
    9y

    @David Washington

    You are incorrect.  But feel free to explain, I'll entertain your argument.

  • Real Estate Investor · Bonney Lake, WA - Washington · Member since 2016 · 58 posts · 35 votes
    9y

    @David Washington I am not familiar with Ohio when it comes to wholesaling, but I can tell you that there are plenty of us wholesalers out there doing things ethically and professionally. I am 100% honest with all of my clients, and it is so fulfilling to be able to help both the seller and the buyers who both are benefiting from what we do. I work with so many sellers that are in various "bad" situations that had no idea there were other options for them, and there are many buyers (both buy and hold and fix and flip) that are depending upon wholesalers to provide properties that have margins for profit in them.

    My advice to you is to get engaged with your local RE group and there will certainly be a wide array of RE investors that can help you navigate the local legal aspects, and my experience is that there is a large portion of these folks that are happy to help anyone in need. Wholesaling certainly has its fair share of people who tarnish the reputation of the profession, but you have that in every single profession. If you do things the right way and work with integrity, then you will find this work to be so fun, fulfilling and challenging that you'll be addicted to helping people. The wholesalers that are truly successful normally are the ones that focus on helping people solve their problems versus chasing money. Good luck, and let me know if I ever can be of assistance to you.

  • Toledo, OH · Member since 2017 · 18 posts · 8 votes
    9y

    Originally posted by @Chris Purcell:

    @David Washington

    You are incorrect. But feel free to explain, I'll entertain your argument.

    By all means, don't believe me. Believe the law as stated by a real estate attorney and the Department of Commerce Real Estate Division in Ohio:

    https://www.youtube.com/watch?v=9fi54S8nwUA

  • Toledo, OH · Member since 2017 · 18 posts · 8 votes
    9y
    Originally posted by @Tim West:

    @David Washington I am not familiar with Ohio when it comes to wholesaling, but I can tell you that there are plenty of us wholesalers out there doing things ethically and professionally. I am 100% honest with all of my clients, and it is so fulfilling to be able to help both the seller and the buyers who both are benefiting from what we do. I work with so many sellers that are in various "bad" situations that had no idea there were other options for them, and there are many buyers (both buy and hold and fix and flip) that are depending upon wholesalers to provide properties that have margins for profit in them.

    My advice to you is to get engaged with your local RE group and there will certainly be a wide array of RE investors that can help you navigate the local legal aspects, and my experience is that there is a large portion of these folks that are happy to help anyone in need. Wholesaling certainly has its fair share of people who tarnish the reputation of the profession, but you have that in every single profession. If you do things the right way and work with integrity, then you will find this work to be so fun, fulfilling and challenging that you'll be addicted to helping people. The wholesalers that are truly successful normally are the ones that focus on helping people solve their problems versus chasing money. Good luck, and let me know if I ever can be of assistance to you.

    Thanks Tim. 

    One of the things that attracted me to wholesaling was the “win-win-win” that it brings to the table for everyone involved. I'm a stickler for ethics, law, and integrity. Of course, the law is different in each state. Michigan is literally a hop, skip and a jump away from where I am. I suppose I could start there with Detroit and the surrounding suburbs being 45 minutes to an hour away for most of the area.

    I just attended a REIA this past Tuesday. The COO of REIA was there giving an update on the national law, what was going on in D.C. and so forth. Informative.

    I would have no problem getting a license if need be. That's not the problem. The problem is getting clearance from a broker and possibly having to split a fee with them. I'm not sure if this is what would happen or how that process works so I'm putting out feelers and continuing to research the issue in depth. 

    Thanks for your offer of support. I'll certainly keep you in mind.

  • Investor · Philadelphia, PA · Member since 2010 · 739 posts · 372 votes
    9y
    Originally posted by @David Washington:

    Originally posted by @Chris Purcell:

    @David Washington

    You are incorrect. But feel free to explain, I'll entertain your argument.

    By all means, don't believe me. Believe the law as stated by a real estate attorney and the Department of Commerce Real Estate Division in Ohio:

    https://www.youtube.com/watch?v=9fi54S8nwUA

    Ok so one attorney's opinion will hold up in court?  The only way to find out is to be reported to the Commission, have to plead your case, and it's up to them whether you were brokering a deal without a license or not.  Feel free to try it and report back.

  • Investor · Moorpark, CA · Member since 2016 · 248 posts · 191 votes
    9y
    Originally posted by @Chris Purcell:

    @David Washington

    Wholesaling without a license is illegal. Getting caught twice is actually a felony.  

    Wholesaling with a license, any commissions need to be ran through your broker. So your broker needs to be in the loop on anything you're doing to make sure it's ethical/legal

     Licensing requirements vary from state to state. There is no federal requirement for real estate wholesalers to have a real estate license. But I would not be surprised if a license is required in various states, since you could be creating an agency relationship ostensibly depending on the state's laws. 

  • Chesterfield, SC · Member since 2017 · 142 posts · 73 votes
    9y

    Wholesaling is totally legal done the right way. If it were me I would find a attorney or title company to double close. The assignment is what they question and double escrow eliminates that. Honestly no offense but this is not a very friendly wholesaler fourm. 

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @David Washington worrying about broker split means U have not researched broker splits.

    one of our BP members has a REal estate company in Toledo called List and Sell real estate.

    he charges flat fee of 199 a month and you keep 100% of what U make.. how can that be too expensive to be in the industry licensed and legal.

    @Tim West no disrespect but wholesaling is NOT a profession.. its simply the wild west with all sorts of actors .. from really bad to nice and good. No one monitors them .. no associations.. no peer presure to do the right thing  actually the opposite.

    some of the tidbits I see from wholesalers offer this kind of advice.

    1. Ghost ads to build buyer list

    2. Never disclosing your not acutally the buyer ( biggest fraud on the planet in my mind)

    3. Subject to your partners approval  partner being your Labrador retriever.

    4. Setting up inspections that are really potential buyers.. ( again just flat lying to sellers)

    this is why this is such a stain on the whole real estate industry.. these are the techniques taught to folks who either lack moral compass or just plain don't care and its all about the benjimans to them.

    as you know in your state working with anyone is foreclosure the laws are intense on who and what you can do.. does that stop people no..

    advertising a home bed bath etc that yoiu do not own is basically illegal in all states period. Just read the regs.  friend of mine in Oregon got a big fine and cease and desist doing this.. Neighbor turned them in..

  • Real Estate Investor · Bonney Lake, WA - Washington · Member since 2016 · 58 posts · 35 votes
    9y

    @Jay Hinrichs You certainly have a strong opinion about this, but it's not the first time all of those things have been said. The techniques you mention are not how to do business; luckily there are many of us that do not need trickery or deception to achieve success. I always try to use caution before painting with such broad strokes. I have many people that I have done business with that can attest to the positive experience of working with a wholesaler that has integrity. Often, you just have to deal with the right people, just as with anything else. Again, if you put helping people ahead of anything else, success comes your way.

  • Toledo, OH · Member since 2017 · 18 posts · 8 votes
    9y
    Originally posted by @Chris Purcell:
    Originally posted by @David Washington:

    Originally posted by @Chris Purcell:

    @David Washington

    You are incorrect. But feel free to explain, I'll entertain your argument.

    By all means, don't believe me. Believe the law as stated by a real estate attorney and the Department of Commerce Real Estate Division in Ohio:

    https://www.youtube.com/watch?v=9fi54S8nwUA

    Ok so one attorney's opinion will hold up in court?  The only way to find out is to be reported to the Commission, have to plead your case, and it's up to them whether you were brokering a deal without a license or not.  Feel free to try it and report back.

     Thank you for that. I see that you successfully did a whole lot of nothing in looking at the reference. I see absolutely nothing you've said that's constructive in any way so consider our exchange done.

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Tim West  yes you could say that... but I am right though. those techniques are taught and taught right here on BP... 

    but this is so rampant because for some reason people have it pounded into their head the way to raise money is to wholesale.. IE takes little to no money.. which I am sure you know is simply not true it takes some money and to be a big time player it takes a LOT of money. 

  • Toledo, OH · Member since 2017 · 18 posts · 8 votes
    9y

    I think the question I posited has been lost as people try to push forth some kind of biased opinion or agenda on the act of wholesaling and then coloring everyone that's in the business in that vein. I agree with @Jonathan Damon. I just got here and to have something like this get thrown out of wack so quickly doesn't do much for my opinion about the forums. Maybe it was better to stay a lurker. 

    So let me restate: I have no problem getting a license (and I know it is not illegal without one. Not even in the stringent state of Ohio). I said that at the very beginning. I'm not trying to be rude but people aren't paying attention and actually reading the thread but want to be quick to add their opinion. 

    My question was about the broker and what they expect as I don't have any experience there and was looking for feedback on how that works so I can make an informed decision. I'm not “worried” about anything when it comes to brokers. I didn't say it was too much to pay them. I'm wondering how the split works as a wholesaler with a license and not being a real estate agent in the traditional sense.

    Thanks.

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @David Washington  read my response.. I gave you the name of a broker in TOLEDO that will let you work for 199 a month.. I am sure that is not too big of a cut.. to be licensed and legal. so you asked and I answered.

  • Toledo, OH · Member since 2017 · 18 posts · 8 votes
    9y
    Originally posted by @Jay Hinrichs:

    @David Washington  read my response.. I gave you the name of a broker in TOLEDO that will let you work for 199 a month.. I am sure that is not too big of a cut.. to be licensed and legal. so you asked and I answered.

    I saw that. Thanks for addressing it though there was some unfounded assumptions in your response that weren't relevant which is what I addressed in my last post. 

    Are you familiar if this is a standard or is it different with each broker? I'm assuming different brokers have different criteria.

    Thanks again.

  • Real Estate Consultant · Springfield, MA · Member since 2016 · 31 posts · 25 votes
    9y
    Originally posted by @David Washington:

    However, the one thing I'm seeing is almost an aversion to wholesaling. There is a sense that it's not that great or more it's like the red-headed step-child of real estate investing. 

    That's because, well, it isn't real estate investing. Investing would indicate you were putting some type of equity into the property, and if you're truly wholesaling, you aren't doing that. I'd consider yourself a "Marketer" long before an "Investor." 

    But, there's nothing wrong with that, if that's what you want to do. A lot of the issues on these forums come from shady wholesalers. There is a way to do this without being shady, and that's by (at the very least) telling the seller your intentions and communicating. Almost every dilemma on this forum is a product of NOT communicating. In my experience, most sellers don't care if you're a wholesaler as long as they understand what you're going to do for them.

    Ohio is a wholesaling dumpster fire right now, as you might have discovered. That being the case, I'd suggest the following three steps

    1. Consult your attorney
    2. Consult your attorney
    3. Consult your attorney one last time.

    Your attorney is going to tell you things you really don't like. But at least you'll hear them.

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