Wholesaling-how exactly does it work?
Contractor · Chicago, IL · Member since 2017 · 102 posts · 181 votes
@John Thedford You seem to talk so much about these “uneducated sellers” and how wholesalers are taking advantage of them, stealing their equity ect. I just want to point out a few things, because you seem to make a habit of posting in wholesaling forums...if you disagree with it or dont like it then why are you here in THIS forum? I am not a Trump supporter so you know what I dont do? Post my opinions in Pro-Trump forums/chats/facebook groups etc!
Secondly 99% of the sellers out there obviously know what the MLS is because Im pretty sure thats how they bought the home that they are selling in the first place! And they also probably used an agent to buy it! So the argument that these people are ignorant and uneducated doesnt hold up! They are making a conscious decision to not work with an agent. Perhaps they dont want to pay someone(and in some cases 2 someones) a percentage of their proceeds to sell a house that only an investor would buy anyway.
Yes I am aware that there are some bad apples that do some shady things and those individuals should be singled out and face consequences for their actions, but what you should NOT do is vilify an entire group because of the actions of a few. And because I am here to be part of the solution and not the problem I am here giving advice to newbies on how to do things properly and ethically!
I left the corporate world because I was tired of someone else telling me there was a ceiling on my income. Just because you chose to be bound by a 3% commission doesn’t mean that is the right decision for everyone. That doesn’t give you the right to come here and discourage people who are just starting out. Please go spew your venom elsewhere!
These people prey on uneducated owners, the elderly, people with poor english speaking capabilities. They put forth the rumor that they are providing a "service" while screwing people over. This is a perfect example.
The audience is always the motivated seller. The art of wholesaling is to find out the sellers motivation, and being capable of tapping into that motivation in order to get the home under contract. Motivation can come in many forms, such as... Retirement, moving to another state, medical issues, need cash for kids college, spouse died, inherited a distressed property, etc.
Many people will sell their home for a discount (wholesale price) in order to move on with their life. A good and seasoned whole-seller skillfully finds these people and are able to come to terms that benefit both parties.
Books
The Real Estate Wholesaling Bible ... Than Merrill
The Art of Wholesaling Properties ... Aram Shah
@Meryl McElwain Motivated sellers have various reasons for being motivated. People like @John Thedford seem to enjoy painting all wholesalers as unscrupulous vultures who take advantage of unsuspecting homeowners....which in my opinion is the same as saying that all police all racist murderers based on the actions of a few. But thats just my opinion.
Motivated sellers can be tired landlords, people who had nightmare tenants who trashed their property and just want someone to take it off their hands. People who have interited a property in another state who have no intention of occupying the property and just want to get rid of it. People in foreclosure who have waited too long to decide to sell and need a solution quickly. People who are getting divorced, people with IRS liens that have put them upside down. People with several years of delinquent property taxes. People who want to sell and dont want to pay agents and closing costs. There are several reasons/situations that would cause a person to sell a property for less than what it is worth, although these people are obviously the minority, most people sell their homes traditionally with a real estate agent. Hope this answers your question!
@Meryl McElwain I have a perfect example, a property that I have under contract right now. Has been vacant for 2 years. Owner is deceased, has reverse mortgage on the property, his 3 children are middle aged and none of them probated his estate because none of them wanted to have anything to do with the property because of its condition and because of the debt on it. I got in contact with the daughter and she said that if it didnt cost her anything she would be happy to sell to me. The reverse mortgage is serviced by Novad, had to get payoff from them. Payoff is more than the house is worth, so had to negotiate with them to get them to accept less. Taxes havent been paid since homeowner died so thats also a factor. The average agent would have no idea how to help this family.
Does this example help?
@Meryl McElwain The best deals are the most complicated ones. I cant remember the last time I came across a property that didnt have some kind of crazy issue going on. Dealing with reverse mortgage has been a long process, but they sent out an appraiser (at their expense) and the property appraised for a lot less than the payoff amount. Factoring in the unpaid taxes plus the fees etc the 3 siblings will each walk with about $2500. But its cost them nothing, they havent had to make any calls, sit on hold for 45 minutes or deal with any of the issues that have come up. Part of being a wholesaler, or an investor, is being a problem solver. The more complex the problem the greater the reward if you can solve it.
It is less likely that someone with a property that has a ton of equity will just sell it for half what its worth. Those people typically list the property with a realtor.
Whenever you buy a property for significantly under market value, do you feel like you are preying on that person because you are essentially "stealing" their equity?
@Dustin P. No one is forcing these people to sell, I never use any kind of high pressure sales tactics. I am never dishonest with the sellers, if the property is in good condition and could be listed I always suggest that as an option. I think that one of the reasons some sellers prefer investors is because the transactions can happen faster. Someone who needs money now would rather take a little less because they can get it sooner. It all depends on the situation. Any wholesaler who is ethical and honest should/would never feel like they are stealing from the homeowner.
These unlicensed brokers love to paint a picture of how they are "problem solvers". They are brokering real estate just as a licensee does. Licensees can perform the same service, and in this case for a much lower fee than in your post. Look for the post about CO and the announcement by their real estate regulatory agency concerning these ripoffs. They have a vested interest in only putting forth a story that makes them look legitimate, etc. If it was a bonafide service, they would be licensed. I had a nice talk with the State of FL investigators and they refer to these people as VICTIMS that get ripped off by these unlicensed broker FRAUDS AND SCAMMERS. Don't be fooled by their propaganda. Ask any local agents what a typical cost would be to sell a 32K house. It isn't over 20 GRAND. In the CO announcement, they noted an agent that screwed someone out of a LOT of money and the case was referred for prosecution. These unlicensed broker FRAUDS AND SCAMMERS have no accountability. People that "hire" these types don't realize what is happening and that their equity is being stolen by some fast talking con.
Check out the CO thread. The state went after the agent with CRIMINAL charges for ripping off the owner.
Check out the CO thread. The state went after the agent with CRIMINAL charges for ripping off the owner.
For sure... But you should not ve an agent and wholesaler. An agent is fiduciary, and wholesaler is not. by any means haha.
Check out the CO thread. The state went after the agent with CRIMINAL charges for ripping off the owner.
For sure... But you should not ve an agent and wholesaler. An agent is fiduciary, and wholesaler is not. by any means haha.
We see LOTS of agents wanting to "wholesale" because it is a blind transaction and the seller has little or no idea what they are paying for the "service". One of the top ten reasons agents get sued is misrepresentation of value. No doubt many agents are now playing these games and it is good to see states such as CO going after them. There is nothing wrong with buying under market from an EDUCATED seller. Buying under market is NOT the same as playing middle-man and ripping off sellers for over 20K on this deal. $1000 bet says the seller would not be happy if they knew EXACTLY what happened on this deal:)
Check out the CO thread. The state went after the agent with CRIMINAL charges for ripping off the owner.
For sure... But you should not ve an agent and wholesaler. An agent is fiduciary, and wholesaler is not. by any means haha.
We see LOTS of agents wanting to "wholesale" because it is a blind transaction and the seller has little or no idea what they are paying for the "service". One of the top ten reasons agents get sued is misrepresentation of value. No doubt many agents are now playing these games and it is good to see states such as CO going after them. There is nothing wrong with buying under market from an EDUCATED seller. Buying under market is NOT the same as playing middle-man and ripping off sellers for over 20K on this deal. $1000 bet says the seller would not be happy if they knew EXACTLY what happened on this deal:)
I think we need more goverment control on this. For example, no transaction can be made without a seller being educated. Maybe signing some kind of disclosure forms in advance. To my understanding the wholesalers claim that they have some kind of miraculous set of buyer that they can push the property to cery fast. Many of the sellers buy this kind of nonsense. I just moved to Austin and surprised to see that there are many wholesalers here created companies and having websites. They even have properties in nice areas. Many of the properties are picked up from MLS. I guess the agents that alloweded them to put the property under contract risk a lot in this case.
What I don't understand is Bigger Pockets encouraging this kind of thing. Seems not a smart thing to do.....
Having had two elderly parents that in the end were not 100% clear in their minds, I can see how easily it would of been for someone to steal their equity. Happily that didn't happen but I am sure it happens far too often.
Do you think that the majority of people on this site, who are encouraged to buy well below market value, are buying properties at 50% of market value from educated sellers? What's the difference between an educated seller and a non-educated seller? If I explain to them that I am purchasing their house at well below market value with the intent to make a profit, are they now educated? Where are you drawing the line?
It seems like you're getting hot and bothered over something that seems to be the backbone of real estate investing. Buying something at full market value doesn't really work very well as an investment.
@Lydia T. how can you negotiate with a bank if your not on the title? Just curious and wondering if confidentiality comes into play.
@John Thedford You seem to talk so much about these “uneducated sellers” and how wholesalers are taking advantage of them, stealing their equity ect. I just want to point out a few things, because you seem to make a habit of posting in wholesaling forums...if you disagree with it or dont like it then why are you here in THIS forum? I am not a Trump supporter so you know what I dont do? Post my opinions in Pro-Trump forums/chats/facebook groups etc!
Secondly 99% of the sellers out there obviously know what the MLS is because Im pretty sure thats how they bought the home that they are selling in the first place! And they also probably used an agent to buy it! So the argument that these people are ignorant and uneducated doesnt hold up! They are making a conscious decision to not work with an agent. Perhaps they dont want to pay someone(and in some cases 2 someones) a percentage of their proceeds to sell a house that only an investor would buy anyway.
Yes I am aware that there are some bad apples that do some shady things and those individuals should be singled out and face consequences for their actions, but what you should NOT do is vilify an entire group because of the actions of a few. And because I am here to be part of the solution and not the problem I am here giving advice to newbies on how to do things properly and ethically!
I left the corporate world because I was tired of someone else telling me there was a ceiling on my income. Just because you chose to be bound by a 3% commission doesn’t mean that is the right decision for everyone. That doesn’t give you the right to come here and discourage people who are just starting out. Please go spew your venom elsewhere!
State of FL investigators stated the typical VICTIMS of these scammers are the elderly, uneducated, and people with little/no grasp of the english language. Why does the state refer to them as VICTIMS? Why are states like CO cracking down on these FRAUDS AND SCAMMERS? Why is FL cracking down? You have failed to disprove anything I posted. I will continue to educate and speak out. Don't like that? Who cares? Not me:)
I have gotten several shut down with cease and desist letters. I guess their "services" weren't needed LOL