Buyers asking about my assignment fee?
Cincinnati, OH · Member since 2013 · 90 posts · 89 votes
Buyers asking about my assignment fee?
Most Popular Reply
Property Manager · Allen, TX · Member since 2015 · 190 posts · 160 votes
8yIt’s questions like this that make me doubt the wholesale profession as a whole. The only way wholesalers make money is by convincing a seller to sell for less than their property is worth or convincing a buyer to pay more than a property is worth. If you can’t conduct your business and be completely honest with the people you are dealing with, then you shouldn’t be in this business at all.
151 Replies
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Chris Turner:
@Jay Hinrichs I never asked you to be on my buyers list. Thank you for the advice though. I wish you nothing but continued success.
thank you.. been a good ride..
- Flipper/Rehabber · Sacramento, CA · Member since 2016 · 807 posts · 815 votes8y
To answer your question......I double close all my deals that I choose to wholesale. I'm never asked what I'm making and my buyers don't care anyway. They are happy that they are getting a deal that works for them. If they really want to know, I don't mind telling them after we agree on a price.
I feel like you've interacted with too many unethical wholesalers and because of it, have a bad impression of it. Yes, the way I make money on a property whether I'm keeping it or wholesaling it is by getting it under market value (a good deal).
I do not represent the seller in any way and am not connecting anyone. I simply make an offer at a price/terms that makes sense to me and they have the option of taking it or leaving it. I always let the seller know that I don't know for sure what I'll do with the property...I may sell it to another investor, list it, rent it, flip it. They never care as long as I stick to the terms of the contract.
Also I NEVER say I have all the cash. I say I will be using other people's money to fund all of my deals (both flips and wholesales).
Although I don't do assignments, assignment is actually legal. It's in the CAR contract, paragraph 26 I think. It says assignment isn't allowed unless the seller signs an addendum. There's also a CAR assignment form.
_____________________________
I find it funny when people talk about what a wholesaler "should" make in a transaction. No one is going to say "well a flipper should only make 30k per deal, they don't deserve more". What a person makes on a deal is up to how well they market and negotiate.That being said, wholesaling is really difficult since finding a good deal is very difficult these days. Like Jay said, chances of success are much higher by positioning yourself as a realtor who picks up commissions in this hot market.
- Property Manager · Allen, TX · Member since 2015 · 190 posts · 160 votes8y
I would say that if you aren't doing assignments then you aren't really wholesaling and my comments probably don't apply to you. If you're putting the property in your name and then deciding to sell it, rent it or flip it, then more power to you on making the best deal possible.
What I have a problem with is wholesalers (and I am absolutely convinced that a very high percentage of them do this on a regular basis) going to a seller and convincing them that their property is only worth X while knowing the whole time that they will be able to turn around and market it to their buyer list at X + assignment fee. This is dishonest. Wholesaling is not a profession, it is a scam predicated on an ability get some sucker to sell for less than what their property is really worth.
- Property Manager · Allen, TX · Member since 2015 · 190 posts · 160 votes8y
Also, just because something is legal doesn't necessarily mean it is ethical. If there is an ethical wholesaler who is upfront with a seller and tells them before signing a contract that they won't be actually closing on the property and that even though they are only offering X, they really believe the property is worth Y, then I wouldn't have a problem with it.
I do not believe this happens very often if at all. What seller would agree with that after being told they could make more by marketing to buyers directly??
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @David Hines:
Also, just because something is legal doesn't necessarily mean it is ethical. If there is an ethical wholesaler who is upfront with a seller and tells them before signing a contract that they won't be actually closing on the property and that even though they are only offering X, they really believe the property is worth Y, then I wouldn't have a problem with it.
I do not believe this happens very often if at all. What seller would agree with that after being told they could make more by marketing to buyers directly??
How do we think this presentation would go to a seller IE full disclosure.
HI mr. seller I am Jay.. I have no ability to close this deal on my own as I don't have enough money to buy it.
However I do have buyers that will buy highly distressed assets.. but there needs to be enough margin in it for them and then enough for me to make a profit..
although I might tell you I may keep it or its subject to my partner ( who does not exist) approval.. the reality is I am just trying to make a middle man fee.
So yes your house is worth 200k but for my buyer to buy it they need it for 160k and I need to make 10k profit.. so we can solve your problem for the purchase price of 150k.. or you can list it with a broker in this uber hot market for say 190k and expect multiple offers.
which would you prefer to do .
now you do have some weirdos out there that are afraid of realtors for whatever reason.. and for sure you have hoarder houses.
and so on and so forth.. but if the facts were laid out as to exactly how 99% of wholesalers work I would think most people would realize this is not in their best interest.. but some even with all the facts may do that..
for sure the rougher the house the more motivated.. and less likely to work with the RE community.
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @David Hines:
Also, just because something is legal doesn't necessarily mean it is ethical. If there is an ethical wholesaler who is upfront with a seller and tells them before signing a contract that they won't be actually closing on the property and that even though they are only offering X, they really believe the property is worth Y, then I wouldn't have a problem with it.
I do not believe this happens very often if at all. What seller would agree with that after being told they could make more by marketing to buyers directly??
I personally get hammered with direct mail and some even get my number ..
Here is what every single wholesaler direct mail says or some variant.
HI,, I am Jay I want to buy your house.
I have cash and I can close in as little as 14 days or on the DAY of YOUR Choosing.. (I like that one day of your choosing)
some go into more flowery detail but that's the gist of it.
many are on yellow letters many are post cards.. a lot are in handwriting with handwriting machines..
and the public frankly they fall for it.. but most of these folks are just not familiar with how things work in the industry.
. If the yellow letter or direct mail said.
Hey I am jay I do not really have any money.. my sole purpose is to make a middle man fee.. I will only close if I can get this at a steep discount and then sell to someone else who actually has money.. ( which is full transparency.. ) how many folks do you think respond to those letters.. ???
Any way.. not going to solve it here.. but I do believe that the day of wholesaling in many west coast markets and other markets is about done.. at least for the majority.. I know the big wholesalers who used to feed my clients deals in Orlando closed shop.
But as long as there are \guru's on the internet doing the MLM sales pitch.
IE use non of your own money.. make 20k a month in your sleep .. simply do this .. people fall for it and start everyday.. but 95% fail as its far harder than it looks and you do need substantial amount of money to market. and you need some pretty Mad sales skills to talk people into selling their houses for far less than they are really worth..
- Realtor · Orlando, FL · Member since 2018 · 56 posts · 28 votes8y
Glad to have read all the comments regarding wholesaling. I'm an active Orlando realtor and want to start investing. I thought wholesaling might be an easy way to start, but not sounding like the right fit, especially if success depends upon departure from doing the right thing.
I'll gladly share deals I find with investors, gratefully earn commission- and work towards my 1st flip.
- Flipper/Rehabber · Sacramento, CA · Member since 2016 · 807 posts · 815 votes8y
Originally posted by @David Hines:
Also, just because something is legal doesn't necessarily mean it is ethical. If there is an ethical wholesaler who is upfront with a seller and tells them before signing a contract that they won't be actually closing on the property and that even though they are only offering X, they really believe the property is worth Y, then I wouldn't have a problem with it.
I do not believe this happens very often if at all. What seller would agree with that after being told they could make more by marketing to buyers directly??
Comon David, do you really expect the buyer to say "hey I know I'm offering X, but I think market value is Y"?? Is the buyer supposed to represent the seller or something? You have this notion that the buyer has to inform the seller of market value, etc. Just make your damn offer and move on!
If I paid market value for every flip/wholesale I would have lost a ton of money by now because the numbers would never work.
It's obvious you have some very strong feelings against wholesaling. Just consider that there is a right way and wrong way to do it. Just like being a broker. For example, I think it's kind of shady/unethical for brokers to have "pocket listings". They have the fiduciary duty to market their client's property for max exposure. Instead they don't list it and take it to their buddy buyers for the full commission?? Maybe I'm missing something as I'm not involved in the broker world.
Damn we really beat the crap out of this dead horse huh? :D
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Courtney Bass:
Glad to have read all the comments regarding wholesaling. I'm an active Orlando realtor and want to start investing. I thought wholesaling might be an easy way to start, but not sounding like the right fit, especially if success depends upon departure from doing the right thing.
I'll gladly share deals I find with investors, gratefully earn commission- and work towards my 1st flip.
when I was funding Orlando deals.. the big wholesaler there was Altura .. they have disbanded .. simply not enough distressed assets to keep them going.. does not mean one off would not work.
however same energy put into a real estate career will take you farther is my bet..
to make wholesaling a viable repeatable business you do need a few things working for you.
1. lots of distressed assets either financial or functional.. this ship sailed in Orlando on the financial side.
2. works well in Urban core transitional area where owner occs left because of neighborhood conditions crime etc. those are usually motivated sellers that are under served by the RE community.. Plus a basic lack of trust to professionals.
3. areas with large amounts of vacant homes. Like Philly Balt Detroit Indy those are areas were a wholesaler can do well.. you have the inventory sitting there waiting for you.
In your market your not going to drive down the street and see 10 boards ups .. or one or two for that matter like you do in these other areas.. those are the province for most wholesalers.
I was just in Cinnci.. that train left the station there as well. that's a very tough market.. as well. but up in middle part of the state of ohio and going north still lots of distressed homes.. Ohio was one of the hardest hit states along with MI .. and not just the GFC like what happened to FLA NV AZ parts of CA.. these areas of Ohio simply have been bleeding with folks leaving the state over time and more homes than bodies to put in them.
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Pratik P.:
Originally posted by @David Hines:
Also, just because something is legal doesn't necessarily mean it is ethical. If there is an ethical wholesaler who is upfront with a seller and tells them before signing a contract that they won't be actually closing on the property and that even though they are only offering X, they really believe the property is worth Y, then I wouldn't have a problem with it.
I do not believe this happens very often if at all. What seller would agree with that after being told they could make more by marketing to buyers directly??
Comon David, do you really expect the buyer to say "hey I know I'm offering X, but I think market value is Y"?? Is the buyer supposed to represent the seller or something? You have this notion that the buyer has to inform the seller of market value, etc. Just make your damn offer and move on!
If I paid market value for every flip/wholesale I would have lost a ton of money by now because the numbers would never work.
It's obvious you have some very strong feelings against wholesaling. Just consider that there is a right way and wrong way to do it. Just like being a broker. For example, I think it's kind of shady/unethical for brokers to have "pocket listings". They have the fiduciary duty to market their client's property for max exposure. Instead they don't list it and take it to their buddy buyers for the full commission?? Maybe I'm missing something as I'm not involved in the broker world.
Damn we really beat the crap out of this dead horse huh? :D
actually there is different kinds of listings and if the seller is OK with the type were the broker does not share on MLS that's perfectly fine.. but its not fine to tell them its going on MLS and not put it there.
what I see happening now for brokers who try to double end.. is they will put in our market a coming soon sign.. seller agrees to it.
the brokers goal there is to get leads before its on the market..
and believe me commercial brokers selling apartments only share a listing if they cant sell it to one of their clients that's S O P in that part of the industry..
there is just no denying that there is a ton of abuse through wholesaling.. and that is why real estate licensing and standards were created in the first place to bring some sort of regulation and protection to the public.. wholesalers who act exactly like brokers circumvent those standards and its a free for all with a lot of bad things happening to buyers and sellers.. in Texas its acute.. I know I have experienced it in that state.. its the wild west down there..
but even though wholesaling is totally illegal in Oregon IE advertising on any public medium a property you don't own. it happens every day.. the state only enforces when you get a complaint against you .. and they will enforce..
I talked to the state I got tired of is this legal is it not.. I got a flyer ( mail chimp that's some kind of on line flyer) and forwarded it to the state I had title run a date down the company selling or advertising this did not own it so it was clearly brokering without a license
see below the states response.. so even though many do it does not make it right or legal. and the rules are the same in CA by the way I am a CA real estate broker since 1975.. and if we could just all broker properties without a license there would be no need for a real estate industry at all.. it could be like China which has no real estate industry its wide open.. there is a tab right on the first page of the CA DRE s website that says.. if you suspect unlicensed activity file a complaint here .. but you know with 40 million plus people no way they can chase this stuff down.. but if you do get tagged its a bummer.. I have a few bird dogs that bring me deals in Oregon for this exact reasons they got turned in .. and got fined and cease and desist they do it again its a felony.. so we buy close then resell.
Jay Hinrichs
From:
530 Center Street NE, Suite 100, Salem, OR 97301
State of Oregon - Real Estate Agency
Frances Hlawatsch | Financial Investigator
Best regards,
Thank you again for the information, if I have further questions for you during the investigation I will certainly reach out.
The Agency is well aware that unlicensed “wholesalers” are rampant in our jurisdiction. Addressing the problems is like trying to put out small individual fires in a forest that is burning. The Agency’s investigations are complaint driven, so we rely heavily on the public, and our licensees to bring these individuals to our attention.
Thank you for getting back to me. The advertising copy you attached to your email came out perfectly and will be very helpful. Thanks!
Hello Jay,
- Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes8y
Originally posted by @Jay Hinrichs:
Originally posted by @Pratik P.:
Originally posted by @David Hines:
Also, just because something is legal doesn't necessarily mean it is ethical. If there is an ethical wholesaler who is upfront with a seller and tells them before signing a contract that they won't be actually closing on the property and that even though they are only offering X, they really believe the property is worth Y, then I wouldn't have a problem with it.
I do not believe this happens very often if at all. What seller would agree with that after being told they could make more by marketing to buyers directly??
Comon David, do you really expect the buyer to say "hey I know I'm offering X, but I think market value is Y"?? Is the buyer supposed to represent the seller or something? You have this notion that the buyer has to inform the seller of market value, etc. Just make your damn offer and move on!
If I paid market value for every flip/wholesale I would have lost a ton of money by now because the numbers would never work.
It's obvious you have some very strong feelings against wholesaling. Just consider that there is a right way and wrong way to do it. Just like being a broker. For example, I think it's kind of shady/unethical for brokers to have "pocket listings". They have the fiduciary duty to market their client's property for max exposure. Instead they don't list it and take it to their buddy buyers for the full commission?? Maybe I'm missing something as I'm not involved in the broker world.
Damn we really beat the crap out of this dead horse huh? :D
actually there is different kinds of listings and if the seller is OK with the type were the broker does not share on MLS that's perfectly fine.. but its not fine to tell them its going on MLS and not put it there.
what I see happening now for brokers who try to double end.. is they will put in our market a coming soon sign.. seller agrees to it.
the brokers goal there is to get leads before its on the market..
If a broker is trying to get a commercial client to sell for under market value so they can make double commission, that sure sounds fraudulent to me. Sounds worse than what wholesalers do, because the broker has a fiduciary duty. The wholesaler doesn't.
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Eric James:
Originally posted by @Jay Hinrichs:
Originally posted by @Pratik P.:
Originally posted by @David Hines:
Also, just because something is legal doesn't necessarily mean it is ethical. If there is an ethical wholesaler who is upfront with a seller and tells them before signing a contract that they won't be actually closing on the property and that even though they are only offering X, they really believe the property is worth Y, then I wouldn't have a problem with it.
I do not believe this happens very often if at all. What seller would agree with that after being told they could make more by marketing to buyers directly??
Comon David, do you really expect the buyer to say "hey I know I'm offering X, but I think market value is Y"?? Is the buyer supposed to represent the seller or something? You have this notion that the buyer has to inform the seller of market value, etc. Just make your damn offer and move on!
If I paid market value for every flip/wholesale I would have lost a ton of money by now because the numbers would never work.
It's obvious you have some very strong feelings against wholesaling. Just consider that there is a right way and wrong way to do it. Just like being a broker. For example, I think it's kind of shady/unethical for brokers to have "pocket listings". They have the fiduciary duty to market their client's property for max exposure. Instead they don't list it and take it to their buddy buyers for the full commission?? Maybe I'm missing something as I'm not involved in the broker world.
Damn we really beat the crap out of this dead horse huh? :D
actually there is different kinds of listings and if the seller is OK with the type were the broker does not share on MLS that's perfectly fine.. but its not fine to tell them its going on MLS and not put it there.
what I see happening now for brokers who try to double end.. is they will put in our market a coming soon sign.. seller agrees to it.
the brokers goal there is to get leads before its on the market..
If a broker is trying to get a commercial client to sell for under market value so they can make double commission, that sure sounds fraudulent to me. Sounds worse than what wholesalers do, because the broker has a fiduciary duty. The wholesaler doesn't.
you miss understood. commercial brokers are simply double ending no one is selling under market.. commercial sells at an established cap rate.. which currently is pretty hammered and the buyers are buying multi million dollar deals and sellers are selling multi million dollar deals..
we are not talking about ripping equity from some uneducated non accredited seller hwo has done 2 real estate transactions in there whole life..
there is no such thing right now of selling on the open market under value the only ones that do that are wholesalers who do not tell the truth about value and who have no licensing or fiducerary duty to do that.
are there bad realtors who do bad things.. of course.. there are folks doing surgery that are not licensed doctors as well. !!! :)
- Flipper/Rehabber · Sacramento, CA · Member since 2016 · 807 posts · 815 votes8y
@Jay Hinrichs But Jay isn't it still wrong to not list a commercial property when you are representing a seller? You should ensure that the product has as much exposure as possible. You can still take it to your favorite buyers but I don't see why you wouldn't list it. There might be someone willing to pay a lower cap rate than what the market says.
I'm not arguing btw, I really don't see how that's okay with CalBRE as an ethical practice.
- Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes8y
Originally posted by @Jay Hinrichs:
Originally posted by @Eric James:
Originally posted by @Jay Hinrichs:
Originally posted by @Pratik P.:
Originally posted by @David Hines:
Also, just because something is legal doesn't necessarily mean it is ethical. If there is an ethical wholesaler who is upfront with a seller and tells them before signing a contract that they won't be actually closing on the property and that even though they are only offering X, they really believe the property is worth Y, then I wouldn't have a problem with it.
I do not believe this happens very often if at all. What seller would agree with that after being told they could make more by marketing to buyers directly??
Comon David, do you really expect the buyer to say "hey I know I'm offering X, but I think market value is Y"?? Is the buyer supposed to represent the seller or something? You have this notion that the buyer has to inform the seller of market value, etc. Just make your damn offer and move on!
If I paid market value for every flip/wholesale I would have lost a ton of money by now because the numbers would never work.
It's obvious you have some very strong feelings against wholesaling. Just consider that there is a right way and wrong way to do it. Just like being a broker. For example, I think it's kind of shady/unethical for brokers to have "pocket listings". They have the fiduciary duty to market their client's property for max exposure. Instead they don't list it and take it to their buddy buyers for the full commission?? Maybe I'm missing something as I'm not involved in the broker world.
Damn we really beat the crap out of this dead horse huh? :D
actually there is different kinds of listings and if the seller is OK with the type were the broker does not share on MLS that's perfectly fine.. but its not fine to tell them its going on MLS and not put it there.
what I see happening now for brokers who try to double end.. is they will put in our market a coming soon sign.. seller agrees to it.
the brokers goal there is to get leads before its on the market..
If a broker is trying to get a commercial client to sell for under market value so they can make double commission, that sure sounds fraudulent to me. Sounds worse than what wholesalers do, because the broker has a fiduciary duty. The wholesaler doesn't.
you miss understood. commercial brokers are simply double ending no one is selling under market.. commercial sells at an established cap rate.. which currently is pretty hammered and the buyers are buying multi million dollar deals and sellers are selling multi million dollar deals..
we are not talking about ripping equity from some uneducated non accredited seller hwo has done 2 real estate transactions in there whole life..
there is no such thing right now of selling on the open market under value the only ones that do that are wholesalers who do not tell the truth about value and who have no licensing or fiducerary duty to do that.
are there bad realtors who do bad things.. of course.. there are folks doing surgery that are not licensed doctors as well. !!! :)
You dont think commercial property would likely sell for more on the open market IE being listed publicly? Even if doing so might 'possibly' lead to a better deal for the seller, I would think they should do so. But, maybe accredited investors like these sellers aren't afforded that type of protection like the general public.
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Eric James:
Originally posted by @Jay Hinrichs:
Originally posted by @Eric James:
Originally posted by @Jay Hinrichs:
Originally posted by @Pratik P.:
Originally posted by @David Hines:
Also, just because something is legal doesn't necessarily mean it is ethical. If there is an ethical wholesaler who is upfront with a seller and tells them before signing a contract that they won't be actually closing on the property and that even though they are only offering X, they really believe the property is worth Y, then I wouldn't have a problem with it.
I do not believe this happens very often if at all. What seller would agree with that after being told they could make more by marketing to buyers directly??
Comon David, do you really expect the buyer to say "hey I know I'm offering X, but I think market value is Y"?? Is the buyer supposed to represent the seller or something? You have this notion that the buyer has to inform the seller of market value, etc. Just make your damn offer and move on!
If I paid market value for every flip/wholesale I would have lost a ton of money by now because the numbers would never work.
It's obvious you have some very strong feelings against wholesaling. Just consider that there is a right way and wrong way to do it. Just like being a broker. For example, I think it's kind of shady/unethical for brokers to have "pocket listings". They have the fiduciary duty to market their client's property for max exposure. Instead they don't list it and take it to their buddy buyers for the full commission?? Maybe I'm missing something as I'm not involved in the broker world.
Damn we really beat the crap out of this dead horse huh? :D
actually there is different kinds of listings and if the seller is OK with the type were the broker does not share on MLS that's perfectly fine.. but its not fine to tell them its going on MLS and not put it there.
what I see happening now for brokers who try to double end.. is they will put in our market a coming soon sign.. seller agrees to it.
the brokers goal there is to get leads before its on the market..
If a broker is trying to get a commercial client to sell for under market value so they can make double commission, that sure sounds fraudulent to me. Sounds worse than what wholesalers do, because the broker has a fiduciary duty. The wholesaler doesn't.
you miss understood. commercial brokers are simply double ending no one is selling under market.. commercial sells at an established cap rate.. which currently is pretty hammered and the buyers are buying multi million dollar deals and sellers are selling multi million dollar deals..
we are not talking about ripping equity from some uneducated non accredited seller hwo has done 2 real estate transactions in there whole life..
there is no such thing right now of selling on the open market under value the only ones that do that are wholesalers who do not tell the truth about value and who have no licensing or fiducerary duty to do that.
are there bad realtors who do bad things.. of course.. there are folks doing surgery that are not licensed doctors as well. !!! :)
You dont think commercial property would likely sell for more on the open market IE being listed publicly? Even if doing so might 'possibly' lead to a better deal for the seller, I would think they should do so. But, maybe accredited investors like these sellers aren't afforded that type of protection like the general public.
completely apples to Oranges accredited investors with muli million dollar properties are not unsophisticated average joe or jane who has no clue.. and owners of big commercial properties don't want to deal with unsophisticated buyers.. buyers have to prove they can buy.. not just say they can big difference.
- Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes8y
Originally posted by @Jay Hinrichs:
Originally posted by @Eric James:
Originally posted by @Jay Hinrichs:
Originally posted by @Eric James:
Originally posted by @Jay Hinrichs:
Originally posted by @Pratik P.:
Originally posted by @David Hines:
Also, just because something is legal doesn't necessarily mean it is ethical. If there is an ethical wholesaler who is upfront with a seller and tells them before signing a contract that they won't be actually closing on the property and that even though they are only offering X, they really believe the property is worth Y, then I wouldn't have a problem with it.
I do not believe this happens very often if at all. What seller would agree with that after being told they could make more by marketing to buyers directly??
Comon David, do you really expect the buyer to say "hey I know I'm offering X, but I think market value is Y"?? Is the buyer supposed to represent the seller or something? You have this notion that the buyer has to inform the seller of market value, etc. Just make your damn offer and move on!
If I paid market value for every flip/wholesale I would have lost a ton of money by now because the numbers would never work.
It's obvious you have some very strong feelings against wholesaling. Just consider that there is a right way and wrong way to do it. Just like being a broker. For example, I think it's kind of shady/unethical for brokers to have "pocket listings". They have the fiduciary duty to market their client's property for max exposure. Instead they don't list it and take it to their buddy buyers for the full commission?? Maybe I'm missing something as I'm not involved in the broker world.
Damn we really beat the crap out of this dead horse huh? :D
actually there is different kinds of listings and if the seller is OK with the type were the broker does not share on MLS that's perfectly fine.. but its not fine to tell them its going on MLS and not put it there.
what I see happening now for brokers who try to double end.. is they will put in our market a coming soon sign.. seller agrees to it.
the brokers goal there is to get leads before its on the market..
If a broker is trying to get a commercial client to sell for under market value so they can make double commission, that sure sounds fraudulent to me. Sounds worse than what wholesalers do, because the broker has a fiduciary duty. The wholesaler doesn't.
you miss understood. commercial brokers are simply double ending no one is selling under market.. commercial sells at an established cap rate.. which currently is pretty hammered and the buyers are buying multi million dollar deals and sellers are selling multi million dollar deals..
we are not talking about ripping equity from some uneducated non accredited seller hwo has done 2 real estate transactions in there whole life..
there is no such thing right now of selling on the open market under value the only ones that do that are wholesalers who do not tell the truth about value and who have no licensing or fiducerary duty to do that.
are there bad realtors who do bad things.. of course.. there are folks doing surgery that are not licensed doctors as well. !!! :)
You dont think commercial property would likely sell for more on the open market IE being listed publicly? Even if doing so might 'possibly' lead to a better deal for the seller, I would think they should do so. But, maybe accredited investors like these sellers aren't afforded that type of protection like the general public.
completely apples to Oranges accredited investors with muli million dollar properties are not unsophisticated average joe or jane who has no clue.. and owners of big commercial properties don't want to deal with unsophisticated buyers.. buyers have to prove they can buy.. not just say they can big difference.
Interesting topic I would like to hear more about but I won't derail the thread further.
- Rental Property Investor · Boston, MA · Member since 2017 · 241 posts · 135 votes8y
If you are so concerned about disclosing information to your buyer just use a "double close" on your deals. You are essentially buying the deal and reselling it that way you wont have to disclose certain information to the buyer. Otherwise its good practice to disclose all information upfront and build a good relationship with your buyers.
Relationships are more valuable than money. Refer to this article as a start https://www.biggerpockets.com/renewsblog/2012/12/10/double-closing-part-1/
- Property Manager · Allen, TX · Member since 2015 · 190 posts · 160 votes8y
Originally posted by @Pratik P.:
Originally posted by @David Hines:
Also, just because something is legal doesn't necessarily mean it is ethical. If there is an ethical wholesaler who is upfront with a seller and tells them before signing a contract that they won't be actually closing on the property and that even though they are only offering X, they really believe the property is worth Y, then I wouldn't have a problem with it.
I do not believe this happens very often if at all. What seller would agree with that after being told they could make more by marketing to buyers directly??
Comon David, do you really expect the buyer to say "hey I know I'm offering X, but I think market value is Y"?? Is the buyer supposed to represent the seller or something? You have this notion that the buyer has to inform the seller of market value, etc. Just make your damn offer and move on!
If I paid market value for every flip/wholesale I would have lost a ton of money by now because the numbers would never work.
It's obvious you have some very strong feelings against wholesaling. Just consider that there is a right way and wrong way to do it. Just like being a broker. For example, I think it's kind of shady/unethical for brokers to have "pocket listings". They have the fiduciary duty to market their client's property for max exposure. Instead they don't list it and take it to their buddy buyers for the full commission?? Maybe I'm missing something as I'm not involved in the broker world.
Damn we really beat the crap out of this dead horse huh? :D
Yes, that is exactly what I would expect of a wholesaler to consider them to have acted ethically. As I said before, this doesn't apply to a flipper or investor trying to get the best deal possible. A wholesaler is different because they bring nothing of value to the transaction, they are just middle men trying to make a buck. All to often, the only way to make that buck is by deception. Just look at the question from the OP for a prime example...
- Property Manager · Allen, TX · Member since 2015 · 190 posts · 160 votes8y
Originally posted by @Pratik P.:
Originally posted by @David Hines:
Also, just because something is legal doesn't necessarily mean it is ethical. If there is an ethical wholesaler who is upfront with a seller and tells them before signing a contract that they won't be actually closing on the property and that even though they are only offering X, they really believe the property is worth Y, then I wouldn't have a problem with it.
I do not believe this happens very often if at all. What seller would agree with that after being told they could make more by marketing to buyers directly??
Comon David, do you really expect the buyer to say "hey I know I'm offering X, but I think market value is Y"?? Is the buyer supposed to represent the seller or something? You have this notion that the buyer has to inform the seller of market value, etc. Just make your damn offer and move on!
If I paid market value for every flip/wholesale I would have lost a ton of money by now because the numbers would never work.
It's obvious you have some very strong feelings against wholesaling. Just consider that there is a right way and wrong way to do it. Just like being a broker. For example, I think it's kind of shady/unethical for brokers to have "pocket listings". They have the fiduciary duty to market their client's property for max exposure. Instead they don't list it and take it to their buddy buyers for the full commission?? Maybe I'm missing something as I'm not involved in the broker world.
Damn we really beat the crap out of this dead horse huh? :D
I agree with what Jay had to say about this. The only thing I would add is that, at least in my experience, a pocket listing is at the discretion of the seller. As a broker I am always in favor of the largest possible market seeing a property, but there are some sellers who request that the property not be placed on the MLS. Think of the owner of a multi-million dollar property who doesn't want a ton of people just coming to look at the house who have no ability to buy it. It makes complete sense to me that that seller may want a broker to only market the property to verified buyers.
- Flipper/Rehabber · Sacramento, CA · Member since 2016 · 807 posts · 815 votes8y
@David Hines So tell me if I'm understanding this correctly. Let's say I negotiate to purchase a fixer for 100k with the idea that I'll spend another 50k to fix it up and sell it at 200k...for a 50k profit. But I decide to wholesale it for 125k to another investor because maybe I have a better deal or something. Does that make me a bad guy?
Sounds like you're saying the moment I decide to wholesale something instead of keep it, it makes me unethical.
- Property Manager · Allen, TX · Member since 2015 · 190 posts · 160 votes8y
Originally posted by @Pratik P.:
@David Hines So tell me if I'm understanding this correctly. Let's say I negotiate to purchase a fixer for 100k with the idea that I'll spend another 50k to fix it up and sell it at 200k...for a 50k profit. But I decide to wholesale it for 125k to another investor because maybe I have a better deal or something. Does that make me a bad guy?
Sounds like you're saying the moment I decide to wholesale something instead of keep it, it makes me unethical.
No, I would say that at the time you negotiated the contract and made the purchase you were a flipper and planned to actually add value to the transaction by A) Being able to actually close on the transaction and B) making improvements to the property. If at a later time you decide to sell for a profit without actually doing the improvements that is fine, you haven't had to deceive the seller to get them interested in the transaction.
Using your numbers, imagine a wholesaler who has no plans to improve the property and no ability to close the transaction. Instead they find a distressed property that is worth 125k, but are able to convince the seller that it is really only worth 100k. They then assign the contract to someone from their buyers list and walk away with the profit. That end buyer is fine they are making a profit on flipping the property. But I would say that the wholesaler was acting unethically to deceive the original seller of the property. I think this is an all too common occurrence with wholesalers. It is my experience that most wholesalers do not have the financial ability to close on a transaction. They may have been to a guru seminar and are looking for a way to make an easy buck, you know the type, all excited to get in on this real estate game without any money of their own.
If your hypothetical describes your activities, I would call you a flipper and not a wholesaler...
- Flipper/Rehabber · Sacramento, CA · Member since 2016 · 807 posts · 815 votes8y
@David Hines Honestly, I don't even know what to call myself when people ask me what I do. I just see all these strategies (wholesale, flip, rent, listing, etc) as tools to make money with buildings. I think if I'm making the proper disclosures, stick to the contract and stay honest, we're all happy.
Thanks for the interesting discussion
- Property Manager · Allen, TX · Member since 2015 · 190 posts · 160 votes8y
Thank you as well sir, its been enlightening.
- Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes8y
If you as a wholesaler have to hide anything from the buyer or seller then isn't that by definition shady? If you go into a deal with the guise that you are an actual cash buyer planning to purchase and all you are doing is assigning to someone else, it's more or less lying to the seller. I'm all for a wholesaler doing it honestly and ethically... the majority of the ones I have seen do not do it ethically. It is all based on lies.
- Bow, NH · Member since 2018 · 12 posts · 4 votes8y
I bought my very first deal as a wholesale from an investor that I actually was a contractor for. I trusted his advice and never thought to ask about his fee. I paid $50K and found out at closing that he was making $10k. I was a bit surprised at the time, and it bothered me more when I realized my $10k in repairs we discussed it need was actually $30k. I'm not making excuses for my poor due diligence and total inexperience, I was young and didn't know what I didn't know, but I do know if he had told me he was making $10k for doing so little, I would of hesitated to purchase.
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