Full time wholesalers
Flipper/Rehabber · Jacksonville, FL · Member since 2019 · 30 posts · 53 votes
Full time wholesalers
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Wholesaler · Mansfield, TX · Member since 2015 · 216 posts · 146 votes
7yI tend to scroll through BP when I’m laying my son down but rarely post. This discussion spurred me to make a rare exception.
Wholesaleing is not illegal or at least not in Texas. I’ve closed 8 deals in 2017, 21 in 2018, and 9 so far this year. Why only 9, because I’ve graduated to the next stage and involved in 2 flips. Wholesaleing has been and always will be my baseline to find deals for whatever strategy I want to pursue ( rehabs, rentals, owner finance, etc).
On to the seller side of things. Most of these properties need a ton of work and most agents won’t touch them without a cleanup and work done to them that costs money that the seller doesn’t have. They are distressed and need someone with knowledge to help them. That’s where I come in and I am compensated well for it.
EVERY one of my sellers have said thank you when it’s all said and done with many testimonials.
Heck I can confidently say I know more about the market as a wholesaler than probably 90% of the realtors in my markets. How??? Because I talk to 20-30 sellers per month and run mls based comps and submit offers to almost all the sellers I talk to. Why would I want to settle for 3% commission with the knowledge I have and the time and energy I spend helping the seller? There is nothing wrong with getting paid well for knowledge and your time.
The key thing I will say is to know what your doing and don’t lock up the property if your not confident you have a buyer for it at the contracted price. That just gets the sellers hopes up and they come crashing down when you back out. No one deserves to be treated like that. At a minimum pay a reasonable earnest money deposit fee if you do need to back out as that’s doing the right thing which I have done on the very few properties I was unable to close on.
Anyway just my thoughts.
216 Replies
- Realtor · Tempe, AZ · Member since 2017 · 541 posts · 442 votes7y
Originally posted by @James Wise:
Originally posted by @Dustin P.:
I don't understand how it seems like every post like this seems to degenerate to name calling ("scabs" whatever that is, doesn't sound nice) and that the thread is typically derailed. If wholesaling, or buying and then immediately reselling properties, was not ethical, why would Bigger Pockets have an entire sub-forum dedicated to it? Maybe your beef should be with them to remove it?
Also, I didn't like the idea that if someone had a property under contract that you were interested in that you would just try to cut them out and go directly to the seller. That's shady in my opinion. Especially if that person has a contract that they are capable of closing and plan on closing.
I like @Michael Ealy's taken on it personally, that closely mirrors how I feel about it. The grey area stuff I would advice people to just speak with a real estate attorney.
Contacting me and trying to assign the contract to me is pretty clear proof that they do not intend to close on the contract.
So let's say they were a licensed individual. They knew you liked properties in that area. They got a great deal on a property - One they fully intended on closing (They had plenty of clash) but would be ok with making a quick profit on it. To save on closing costs of having to do a double close, they reached out to you, and said they do have the ability to assign the contract. If not, no biggy, they'd just close on it and do whatever they wanted as the new owner.
Is there an issue?
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Originally posted by @Dustin P.:
Originally posted by @James Wise:
Originally posted by @Dustin P.:
I don't understand how it seems like every post like this seems to degenerate to name calling ("scabs" whatever that is, doesn't sound nice) and that the thread is typically derailed. If wholesaling, or buying and then immediately reselling properties, was not ethical, why would Bigger Pockets have an entire sub-forum dedicated to it? Maybe your beef should be with them to remove it?
Also, I didn't like the idea that if someone had a property under contract that you were interested in that you would just try to cut them out and go directly to the seller. That's shady in my opinion. Especially if that person has a contract that they are capable of closing and plan on closing.
I like @Michael Ealy's taken on it personally, that closely mirrors how I feel about it. The grey area stuff I would advice people to just speak with a real estate attorney.
Contacting me and trying to assign the contract to me is pretty clear proof that they do not intend to close on the contract.
So let's say they were a licensed individual. They knew you liked properties in that area. They got a great deal on a property - One they fully intended on closing (They had plenty of clash) but would be ok with making a quick profit on it. To save on closing costs of having to do a double close, they reached out to you, and said they do have the ability to assign the contract. If not, no biggy, they'd just close on it and do whatever they wanted as the new owner.
Is there an issue?
Nothing is your state's laws prevent a licensee from earning a fee or commission from the brokering of real estate. No, no problem. Unless NET listings are an issue in your state. That I am unsure of. - Northern New Jersey · Member since 2019 · 13 posts · 11 votes7y
Originally posted by @James Wise:
Originally posted by @Damarius Gilbert:
@James Wise You have already been reported. Pretty Sure you didn't see where I posted I went to TREC Classes. "ignorance" I know the people who use those type of words when speaking about people of color. A little dog whistle. Have a good night and God Bless You.
The information disproving your theory is on the TREC website. I have also pasted it below. 1101.002. DEFINITIONS. In this chapter: (1) "Broker" (A) means a person who, in exchange for a commission or other valuable consideration or with the expectation of receiving a commission or other valuable consideration, performs for another person one of the following acts: (i) sells, exchanges, purchases, or leases real estate; (ii) offers to sell, exchange, purchase, or lease real estate; (iii) negotiates or attempts to negotiate the listing, sale, exchange, purchase, or lease of real estate; (iv) lists or offers, attempts, or agrees to list real estate for sale, lease, or exchange; (v) auctions or offers, attempts, or agrees to auction real estate; (vi) deals in options on real estate, including a lease to purchase or buying, selling, or offering to buy or sell options on real estate; (vii) aids or offers or attempts to aid in locating or obtaining real estate for purchase or lease; (viii) procures or assists in procuring a prospect to effect the sale, exchange, or lease of real estate; (ix) procures or assists in procuring property to effect the sale, exchange, or lease of real estate; (x) controls the acceptance or deposit of rent from a resident of a single-family residential real property unit; (xi) provides a written analysis, opinion, or conclusion relating to the estimated price of real property if the analysis, opinion, or conclusion: (a) is not referred to as an appraisal; (b) is provided in the ordinary course of the person's business; (c) is related to the actual or potential management, acquisition, disposition, or encumbrance of an interest in real property; (xii) advises or offers advice to an owner of real estate concerning the negotiation or completion of a short sale; (B) includes a person who: (i) is employed by or for an owner of real estate to sell any portion of the real estate; (ii) engages in the business of charging an advance fee or contracting to collect a fee under a contract that requires the person primarily to promote the sale of real estate by: (a) listing the real estate in a publication primarily used for listing real estate; (b) referring information about the real estate to brokers.
James as a former guest of BiggerPockets and Pro Member you should tag Brandon in this discussion Then demand to appear on an upcoming show telling the BP community your thoughts on wholesaling.
Show Title: “Wholesaling is illegal - Stop Breaking the law”
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Originally posted by @Michael Christopher Clark:
Originally posted by @James Wise:
Originally posted by @Damarius Gilbert:
@James Wise You have already been reported. Pretty Sure you didn't see where I posted I went to TREC Classes. "ignorance" I know the people who use those type of words when speaking about people of color. A little dog whistle. Have a good night and God Bless You.
The information disproving your theory is on the TREC website. I have also pasted it below. 1101.002. DEFINITIONS. In this chapter: (1) "Broker" (A) means a person who, in exchange for a commission or other valuable consideration or with the expectation of receiving a commission or other valuable consideration, performs for another person one of the following acts: (i) sells, exchanges, purchases, or leases real estate; (ii) offers to sell, exchange, purchase, or lease real estate; (iii) negotiates or attempts to negotiate the listing, sale, exchange, purchase, or lease of real estate; (iv) lists or offers, attempts, or agrees to list real estate for sale, lease, or exchange; (v) auctions or offers, attempts, or agrees to auction real estate; (vi) deals in options on real estate, including a lease to purchase or buying, selling, or offering to buy or sell options on real estate; (vii) aids or offers or attempts to aid in locating or obtaining real estate for purchase or lease; (viii) procures or assists in procuring a prospect to effect the sale, exchange, or lease of real estate; (ix) procures or assists in procuring property to effect the sale, exchange, or lease of real estate; (x) controls the acceptance or deposit of rent from a resident of a single-family residential real property unit; (xi) provides a written analysis, opinion, or conclusion relating to the estimated price of real property if the analysis, opinion, or conclusion: (a) is not referred to as an appraisal; (b) is provided in the ordinary course of the person's business; (c) is related to the actual or potential management, acquisition, disposition, or encumbrance of an interest in real property; (xii) advises or offers advice to an owner of real estate concerning the negotiation or completion of a short sale; (B) includes a person who: (i) is employed by or for an owner of real estate to sell any portion of the real estate; (ii) engages in the business of charging an advance fee or contracting to collect a fee under a contract that requires the person primarily to promote the sale of real estate by: (a) listing the real estate in a publication primarily used for listing real estate; (b) referring information about the real estate to brokers.
James as a former guest of BiggerPockets and Pro Member you should tag Brandon in this discussion Then demand to appear on an upcoming show telling the BP community your thoughts on wholesaling.
Show Title: “Wholesaling is illegal - Stop Breaking the law”
I like your style.
- Trenton, NJ · Member since 2015 · 3 posts · 10 votes7y
@Duncan Hayes
But, to hear someone speak about ethics then openly admit to going behind another’s back to basically steal a deal is kinda ludicrous if you ask me.
>Thanks for pointing out the HYPOCRISY of the gentlemen speaking about ethnics but yet he himself was unethical.
Wholesaling isn’t illegal you’re not selling property but rather marketing your equitable interest. Just like with any profession some people function with limited or no integrity at all. It’s no different then a RE agent not properly disclosing if she/he are the buyers, seller or “dual agent”. Everyone talks being a fiduciary but there many cases where agents haven’t properly disclosed their relationship in the deal.
Stop allowing a one or two bad experiences be the metric or standard of Wholesaling. As, a wholesaler former RE agent and current REI Investor we all are looking and seeking the BEST deal and wholesaling is simply a strategy that aides in that process of RE Investing.
- Trenton, NJ · Member since 2015 · 3 posts · 10 votes7y
@James Wise
You seem a lil hurt as if someone took your date to the prom. Wholesaling is just another strategy in this vast ecosystem of REI. Bc you don't ascribe to it doesn't make it unethical or illegal. Show me a RE Commission that has sued and won a case against the strategy of wholesaling. If it's not your cup of tea stop sipping it.
- Specialist · El Paso, TX · Member since 2016 · 105 posts · 84 votes7y
- Phoenix, AZ · Member since 2017 · 135 posts · 294 votes7y
@Michael Ealy I would argue that if you are double closing then you aren't even wholesaling, that is an entirely different beast. You aren't assigning a contract at all. You are simply purchasing a property and then selling it 5 minutes later.
It still goes back to intent. If your intent from the beginning is to assign a contract, then that is illegal. If you are double closing then you have succeeded with intent because you have 100% fulfilled your obligation because you did in fact purchase the home just like you said you would in your offer to purchase. It doesn't matter if you turn around and sold it 5 minutes later or 50 years later. The bottom line is you bought it just like you said you would.
- Phoenix, AZ · Member since 2017 · 135 posts · 294 votes7y
Originally posted by @William Harris:
Show me a RE Commission that has sued and won a case against the strategy of wholesaling.
You want a case that was won against a wholesaler?
-Me, they got me
I had a property under contract for $100 EMD and ultimately I couldn't find a buyer for it and I walked away from the deal. The seller was upset and filed an official complaint. They found that I had successfully wholesaled several other properties, yet never actually closed on anything myself. They argued that I never had any intention of ever fulfilling my purchase agreement contract and was using that contract as a means to circumvent license law. They won, and I lost.
I paid a fine and had to rework my entire business strategy. I'm not proud of what happened, but getting tagged for wholesaling can and does happen. This is why I strongly caution people about wholesaling. Regardless if you have been doing it for years or are brand new to the game chances are you are doing something wrong.
Remember that you can do 100 things right, but if you do 1 little thing wrong then you are wrong and can get tagged. All it takes is one complaint from a customer, their family, a next door neighbor, or anyone for that matter for you to have serious problems on your hands.
- Specialist · Miami, FL · Member since 2019 · 63 posts · 10 votes7y
@James Wise "whenever a wholesaler contact me i go around them and cut them off". You'd be surprised at how many realtors would disagree with you right now. Shows your integrity and the kind of person you are. First and foremost I have great relationships with many realtors not only in FL but in Texas and Georgia as well and have worked successfully with them on many off market deals and on the flipside when we weren't able to come to an agreement with the seller on the price and they were looking more for market value we have referred them to our realtor partners and all still made money together. People like you are why some realtors and investor/wholesalers can't get along sometimes. Wholesalers(the good ones) are valuable assets to many investors out there. Just like there are many dishonest and shady realtors in this world there are also shady wholesalers/investors as well. You don't need to step on anyone elses toes just because you dont agree with their business
And for the record you don't need a license to be a successful and honest wholesaler.
- Flipper/Rehabber · Winston Salem, NC · Member since 2018 · 33 posts · 24 votes7y
@Bob Daniels
Bob I don’t agree with you. I have my brokers license and I’m in North Carolina and contracts here are one sided all the time with brokers. Who cares if they are one sided. People have problems and lose money in deals all the time. If investor is full of money and someone is in the gutter and dump there property then it’s there doing. In North Carolina we actually have name for deals that are not one sided. It’s called arm length transaction. Means deal was put on market with no real force or need to dump property. So no death, divorce, marriage, debt needing paid or anything crazy. It’s perfectly legal and fine. What govt takes someones right if they own there property free and clear and they get in a jam that they can’t let someone come in and one side a contract and dump a property? None.
Assigning a contract is not brokering a deal. If someone signs a contract and there’s this paragraph in it that they can assign it and it might happen and seller signs that it’s ok we’ll then it’s ok. Go ahead.
I think a lot of people here are speaking on opinion and not what law says. Funny though how all of us have real estate license and probably none of us have law degree.
Also I’m in deed state. So closings are done by attorneys and not title companies. Attorneys here close wholesale deals all day. You think they would do that if it was illegal? Nope!
- Flipper/Rehabber · Winston Salem, NC · Member since 2018 · 33 posts · 24 votes7y
@James Wise
Well according to that definition of a broker any house sold without a broker involved is illegal. Every FSBO and lucky person who just ran up on a person wanting to buy there house should of never sold and should of ran to a broker and paid a commission to not do the deal without a broker. All the attorneys are breaking the law to go with the deal and close them without a broker involved. A big part of America and all real estate attorneys are going to jail.
- Flipper/Rehabber · Winston Salem, NC · Member since 2018 · 33 posts · 24 votes7y
@James Wise
Having a license doesn’t guard you from endless liability. It can put you in a tighter situation sometimes. Why do you think a lot of investors and developers don’t have license? They don’t want the liability. A lot of people will get there license and let them go if they get into flipping, developing or investing. Some keep them but some don’t and it’s not because of the little yearly fee they pay to keep them, it’s because of liability.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Dustin P.:
I don't understand how it seems like every post like this seems to degenerate to name calling ("scabs" whatever that is, doesn't sound nice) and that the thread is typically derailed. If wholesaling, or buying and then immediately reselling properties, was not ethical, why would Bigger Pockets have an entire sub-forum dedicated to it? Maybe your beef should be with them to remove it?
Also, I didn't like the idea that if someone had a property under contract that you were interested in that you would just try to cut them out and go directly to the seller. That's shady in my opinion. Especially if that person has a contract that they are capable of closing and plan on closing.
I like @Michael Ealy's taken on it personally, that closely mirrors how I feel about it. The grey area stuff I would advice people to just speak with a real estate attorney.
Back up offers happen all the time.. we have a field for it on our MLS that says bumpable.. and knowledgeable agents would never let their seller get into contract with a buyer who's sole purpose is to sell the contract and if they cant they cant close and will walk. I mean when the wholesaler is taught the 50 ways to get out of a contract and the seller is a civilian just leads to a lot of confusion and frankly some damage.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Originally posted by @Derek Joyner:
@James Wise
Well according to that definition of a broker any house sold without a broker involved is illegal. Every FSBO and lucky person who just ran up on a person wanting to buy there house should of never sold and should of ran to a broker and paid a commission to not do the deal without a broker. All the attorneys are breaking the law to go with the deal and close them without a broker involved. A big part of America and all real estate attorneys are going to jail.
You misunderstood what I have been saying. Selling a property you own is not brokering. Selling a property you do not own is.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Originally posted by @Derek Joyner:
@Bob Daniels
Bob I don’t agree with you. I have my brokers license and I’m in North Carolina and contracts here are one sided all the time with brokers. Who cares if they are one sided. People have problems and lose money in deals all the time. If investor is full of money and someone is in the gutter and dump there property then it’s there doing. In North Carolina we actually have name for deals that are not one sided. It’s called arm length transaction. Means deal was put on market with no real force or need to dump property. So no death, divorce, marriage, debt needing paid or anything crazy. It’s perfectly legal and fine. What govt takes someones right if they own there property free and clear and they get in a jam that they can’t let someone come in and one side a contract and dump a property? None.
Assigning a contract is not brokering a deal. If someone signs a contract and there’s this paragraph in it that they can assign it and it might happen and seller signs that it’s ok we’ll then it’s ok. Go ahead.
I think a lot of people here are speaking on opinion and not what law says. Funny though how all of us have real estate license and probably none of us have law degree.
Also I’m in deed state. So closings are done by attorneys and not title companies. Attorneys here close wholesale deals all day. You think they would do that if it was illegal? Nope!
Bob,
Thanks for sharing your story. There are many out there like yours and will continue to be more as responses like this don't seem to end. You told a story how the real estate commission went after you for illegally wholesaling and they won.....Response is "Bob I don't agree with you." Lol. Madness.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Originally posted by @Derek Joyner:
@James Wise
Having a license doesn’t guard you from endless liability. It can put you in a tighter situation sometimes. Why do you think a lot of investors and developers don’t have license? They don’t want the liability. A lot of people will get there license and let them go if they get into flipping, developing or investing. Some keep them but some don’t and it’s not because of the little yearly fee they pay to keep them, it’s because of liability.
Yes I agree with you that flippers or those who want to buy low and sell high can and do avoid getting a license for liability reasons. Licensee's have been hammered for doing just that. But the fact still remains that a license is required to make money selling a property you do not own. Selling a property you do own does not. So if one was not licensed and bought properties at below market only to resell them at a higher cost there would be no legal issue. Nothing wrong with buying low and selling high. Thing is when you remove the buying part it becomes brokering. Brokering requires a license. Rather simple concept.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Derek Joyner:
@James Wise
Having a license doesn’t guard you from endless liability. It can put you in a tighter situation sometimes. Why do you think a lot of investors and developers don’t have license? They don’t want the liability. A lot of people will get there license and let them go if they get into flipping, developing or investing. Some keep them but some don’t and it’s not because of the little yearly fee they pay to keep them, it’s because of liability.
For me liability was and has never been and issue.. as long as you disclose.. I had this line in all my contracts as required by real estate law.
Buyer is a licensed broker in the state of (insert state) and buyer is buying for profit or loss.. that's it never once had a seller come back and that's all the disclosure U need.. most of the bigger players in our market flippers or builders all have licenses or own the brokerage
Commissions for builders and flippers are a huge part of the profit scenario.. This at least as it relates to building for retail consumption or flipping..
- Investor · Dallas TX · Member since 2018 · 26 posts · 5 votes7y
@James Wise
Hi James , your answer really surprised me.
Perhaps since I am a newB to RE.
I currently work with 2 wholesalers in Dallas area. As I understand they are both pretty straight forward with the seller and me the buyer. They "helping " him finding a buyer investor that would like to deal with his property and play as the middle man for.sure they are agents but their job is also finding the deals
Most of these properties are in very bad condition and most likley no privet buyer would want to deal with it.
Their fees are transparent to both seller and buyer.
As I see it from the investor point of view, the wholesaler job is to bring a good deal to the table.
Not.listed on the MLS.
If you are able to find a way finding good deals in your area so both seller and buyer are happy you will be successful!
If you do it with transparency for both sides you will get respect and grow honnorable business.
Good luck
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Originally posted by @Naor Biringer:
@James Wise
Hi James , your answer really surprised me.
Perhaps since I am a newB to RE.
I currently work with 2 wholesalers in Dallas area. As I understand they are both pretty straight forward with the seller and me the buyer. They "helping " him finding a buyer investor that would like to deal with his property and play as the middle man for.sure they are agents but their job is also finding the deals
Most of these properties are in very bad condition and most likley no privet buyer would want to deal with it.
Their fees are transparent to both seller and buyer.
As I see it from the investor point of view, the wholesaler job is to bring a good deal to the table.
Not.listed on the MLS.
If you are able to find a way finding good deals in your area so both seller and buyer are happy you will be successful!
If you do it with transparency for both sides you will get respect and grow honnorable business.
Good luck
What you described above requires a license in the USA.
- Investor · FL · Member since 2017 · 266 posts · 220 votes7y
@Matt Hatton
Its a dirty business and if you grow in it even if you are ethical your team will do shady stuff. If an fbi agent listened in on your conversation with your title agent will you be comfortable abd feel its all on the up and up? There are many open investigations here in Miami on these wholesalers.
The guys Ive met that are succesful have pivoted to becoming HMLs , successful brokers, etc.
Now i dont agree with just contacting a seller directly if a deal comes across my table from a wholesaler. That doesnt sit well with me either.
Whatever the wholesalers intentions he did work to get that deal.
Ive assigned contracts before. Honestly what I see from wholesalers that is the best asset is the marketing skills and contacts created. I’d get out of it and do the deals directly. Giving an end buyer 25-100k in profit to make 7-10k? Why? Scared to scale ?
- Investor · FL · Member since 2017 · 266 posts · 220 votes7y
@Javier D.
Oh and dont get me started on wholesaler’s comps. Comps at 650k! Where? Two miles away... thanks for makibg me spend 10 minutes analyzing a deal that id barely break even on if that because the comps stated are bs. That is preying on uninformed newbie investors. I think these posts are going to attract a little frustration lol.
Anyways hope you guys are succesful and find your niche. Send me the good deals :). Love you xoxo.
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