Full time wholesalers
Flipper/Rehabber · Jacksonville, FL · Member since 2019 · 30 posts · 53 votes
Full time wholesalers
Most Popular Reply
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
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Derek Joyner:
@Matt Hatton
Hay it’s funny we’re talking about wholesaling. Bigger pockets business podcast just posted a podcast on a big wholesaler Max Maxwell. So if wholesaling is illegal bigger pockets is promoting us doing it.
BP also had Clayton Morris on a pod cast and he has fled the country.. NO dispersions against Mr. Maxwell of course.. just saying then there was another earlier pod cast were the guy had a alias and was wanted in the Philippines etc etc. And this is entertainment purposes .. BP does not figure out if something is legal or not.. they just need people to listen to the pod casts..
- Real Estate Agent · Houston, TX · Member since 2018 · 65 posts · 49 votes7y
"Well 1st thing I need to tell you all is that Wholesaling as it's taught is a myth. You need a license to Broker real estate. That's all wholesaling is, it's brokering real estate"
First response to this thread from @James Wise
- Rental Property Investor · Atlanta, GA · Member since 2017 · 221 posts · 188 votes7y
@James Wise Hey buddy, there's a saying that goes like this - How people treat you is their Karma, how you react is yours! In anything you do, be straight forward and honest. The fact you can boldly write that you go around someone who brought you a "deal"....theres no integrity in that action and you as an individual. Its wrong, in itself unethical, EVEN IF WHOLESALING was illegal. So, guess what your "Karmas" are???
Im guessing you didn't think before you wrote. Slow down, think then respond accordingly.
- Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes7y
Originally posted by @Austin Smither Langley:
If you read through this entire thread you can see that I'm not trying to to defend any model. I'm responding to false legal statements and attempting to stop the confusion that they cause for new members - they are who I'm standing up for here. There was no debate here until people came in saying it's wholesaling is illegal...I'm just trying to stay positive and provide accurate information here for beginners.
@Jay Hinrichs you have previously defined wholesaling to me and others as illegal, but you are correct that there are many ways to do it and it's not well defined (at least in legal terms in some states). You are also correct that being an agent and/or wholesaling is not for everyone. Not every occupation is a good fit for everyone and not everyone's experience is the same, but that doesn't mean we should discourage people from learning about them on this site like you did to me when I was getting my license and you told me that wholesaling is illegal in any state. Just my two cents for what it's worth.
What would really help out the new members more than debating the intricacies of allegedly false legal statements is a solid definition of wholesaling. You are just the guy to give it to us; you work for a large wholesaler and have a RE license. That gives you a unique perceptive into both worlds that few other people have on BP.
From an outsiders perspective, the camp you claim rode in like a marauding Mongol horde to decimate the poor peaceful wholesaling villagers have at least brought with them articulate-able facts like state laws and communications from regulators. From the pro wholesaling village all I've seen is statements such as "wholesaling isn't illegal if done right" without any verifiable facts to back up the assertions, save the occasional vague allusion to a lawyer saying its ok and talk about double closing.
So have at it Austin and lets get this thread back in a positive direction. Help me and all the new members by giving a clear definition of wholesaling so we have a solid foundation of accurate information to continue to learn about wholesaling from experts such as yourself.
- Realtor · Tempe, AZ · Member since 2017 · 541 posts · 442 votes7y
I'll take a stab at that one. I would define wholesaling as securing a property and then reselling that property to someone else without doing anything to it.
So if you buy it with cash and then immediately resell it within a week, that's wholesaling IMO
If you have it under contract (With full intent to close) and then decide to assign it to someone else for a fee, that's wholesaling IMO
I think you need intent or ability to close
So the people that go around and get properties under contract with no ability to close, put down $10 earnest money, and then just string the seller along for 30 days, I would not consider those people wholesalers.
The ones that get a wholesale deal and then tack on $5k and try to "daisy chain" the property, I wouldn't consider that wholesaling either IMO
- Real Estate Agent · Houston, TX · Member since 2018 · 65 posts · 49 votes7y
Originally posted by @Bill F.:
Originally posted by @Austin Smither Langley:
If you read through this entire thread you can see that I'm not trying to to defend any model. I'm responding to false legal statements and attempting to stop the confusion that they cause for new members - they are who I'm standing up for here. There was no debate here until people came in saying it's wholesaling is illegal...I'm just trying to stay positive and provide accurate information here for beginners.
@Jay Hinrichs you have previously defined wholesaling to me and others as illegal, but you are correct that there are many ways to do it and it's not well defined (at least in legal terms in some states). You are also correct that being an agent and/or wholesaling is not for everyone. Not every occupation is a good fit for everyone and not everyone's experience is the same, but that doesn't mean we should discourage people from learning about them on this site like you did to me when I was getting my license and you told me that wholesaling is illegal in any state. Just my two cents for what it's worth.
What would really help out the new members more than debating the intricacies of allegedly false legal statements is a solid definition of wholesaling. You are just the guy to give it to us; you work for a large wholesaler and have a RE license. That gives you a unique perceptive into both worlds that few other people have on BP.
From an outsiders perspective, the camp you claim rode in like a marauding Mongol horde to decimate the poor peaceful wholesaling villagers have at least brought with them articulate-able facts like state laws and communications from regulators. From the pro wholesaling village all I've seen is statements such as "wholesaling isn't illegal if done right" without any verifiable facts to back up the assertions, save the occasional vague allusion to a lawyer saying its ok and talk about double closing.
So have at it Austin and lets get this thread back in a positive direction. Help me and all the new members by giving a clear definition of wholesaling so we have a solid foundation of accurate information to continue to learn about wholesaling from experts such as yourself.
Wholesaling, as we've discussed, can be done in numerous ways and may depend on state law. In general though, I would define wholesaling as getting a home under contract and finding a real estate investor willing to buy the property or the contract at a higher price. The wholesaler makes the difference for their efforts marketing and finding the deal. Regulations can vary by state so it can be hard to generalize strategies, methods, and technicalities for the entire country.
- Specialist · Salt Lake City, UT · Member since 2019 · 61 posts · 14 votes7y
@Barry Pekin
Thank you for this very well written response!
- Real Estate Investor · FL · Member since 2011 · 586 posts · 360 votes7y
If you got a mortgage around 2006 you know that basically all you needed was a pulse, getting a real estate license is just a tad bit harder, but not much. Just get the stupid license, disclose to sellers you have a license, act ethically and within the laws, and make money. There are always going to be shady realtors, slumlords, cut corners flippers, predatory lenders, and crooked wholesalers.
This thread is a lot like talking politics at a party. We have the extremists on opposite sides who are the loudest, most obnoxious and the middle of the road people trying to be logical and see both sides. Lets all take 30 seconds for some self-reflection...
- Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes7y
@Dustin P. and @Austin Smither Langley Thank for giving this the old college try, they are both great starting points for a constructive discussion.
A few questions for you guys to help me understand your positions a bit better if you don't mind.
Dustin: In your definition you need either the intent OR ability to close, not both?
So if I have $100m in the bank, get a house under contract with no intention to close and plan to bail on the contract if I can't find a buyer, I'm good?
Why not ability AND intent as the test?
Austin: For the sake of argument say the state we are in has a clear prohibition against marketing a property that you don't hold title to and if you advertise even the address of the property in any form (Like a picture of the contact's first page) you violate the law and go to jail for 20yrs. How do you get buyers interested?
Fro your experience what strategy works in the most number of states? What strategy would you use if you only planned to wholesale in Texas?
- Rental Property Investor · Orlando, FL · Member since 2017 · 207 posts · 125 votes7y
Not licensed and don't wholesale, so no dog in this fight. Also not an attorney. BUT I will agree with @Jay Hinrichs that in many if not most states "One thing is certain no one has defined wholesaling.. what I know to be true at least in the states I operate in which is 12 that to market a home you do not own requires a license and a listing.."
However, what about selling the contract you have to purchase a property? Contract law is NOT the same as real estate law.
Also, whether they are licensed or not, there are good and bad "wholesalers" here in Orlando. Some I would never buy from even if they had the deal of a lifetime.
- Real Estate Agent · Houston, TX · Member since 2018 · 65 posts · 49 votes7y
Originally posted by @Bill F.:
@Dustin P. and @Austin Smither Langley Thank for giving this the old college try, they are both great starting points for a constructive discussion.
A few questions for you guys to help me understand your positions a bit better if you don't mind.
Dustin: In your definition you need either the intent OR ability to close, not both?
So if I have $100m in the bank, get a house under contract with no intention to close and plan to bail on the contract if I can't find a buyer, I'm good?
Why not ability AND intent as the test?
Austin: For the sake of argument say the state we are in has a clear prohibition against marketing a property that you don't hold title to and if you advertise even the address of the property in any form (Like a picture of the contact's first page) you violate the law and go to jail for 20yrs. How do you get buyers interested?
Fro your experience what strategy works in the most number of states? What strategy would you use if you only planned to wholesale in Texas?
I'm not going to speak to a hypothetical situation or state, but in Texas and many other states only having a property under contract can give you an equitable or contractual interest in the title and a right to the property. If a wholesaler does not have a property under contract and markets it to buyers, that is a big no no - they must have at least equitable/contractual interest and a right to the property which in Texas means you at least have it under contract.
It's actually quite straight-forward: Don't market something you don't have the legal right to market and disclose all information to all parties. This can vary based on state law.
If people like act like @James Wise and go around a wholesaler to steal the deal from them, the wholesaler (in Texas and many other states) could file a memo on the property because they have the legal right to do so and prevent the title from being conveyed to people doing what James does. The seller has defaulted on their contract with the original buyer and there can be repercussions for that. There are actual legal protections for buyers in an attempt prevent sellers from backing out of a contract for a new buyer because the original buyer has spent time, money, and signed a contract for a right to the property. That is an example of how even though you don't completely own the property, you can have rights to it by having it under contract.
In Texas contractual interest in a property can be marketable if everything is disclosed and done correctly. Here are the Texas Real Estate Commission's comments to clarify this: https://www.texasrealestate.com/members/posts/further-clarification-about-trecs-new-equitable-interest-rule/
- Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes7y
@Austin Smither Langley Fair enough, hypotheticals aren't your jam.
From the link you posted for everyone's edification:
So if you and are a friends and I get 123 Main St under contract and over a beer say " Austin I got a smoking good deal, you wan it?", I now have to tell you I have an interest in in the property. That makes sense.
I don't have TREC CE so could you help me understand how this interfaces with the definition of a broker? Why now would anyone bother becoming a broker if I can get a property under contract and market it? I could bake my commission into the offer price and call it a day.
What does TREC define as marketing and do they put any limits on how one can market a property under the new equitable interest rule?
- Real Estate Agent · Houston, TX · Member since 2018 · 65 posts · 49 votes7y
Originally posted by @Bill F.:
@Austin Smither Langley Fair enough, hypotheticals aren't your jam.
From the link you posted for everyone's edification:
So if you and are a friends and I get 123 Main St under contract and over a beer say " Austin I got a smoking good deal, you wan it?", I now have to tell you I have an interest in in the property. That makes sense.
I don't have TREC CE so could you help me understand how this interfaces with the definition of a broker? Why now would anyone bother becoming a broker if I can get a property under contract and market it? I could bake my commission into the offer price and call it a day.
What does TREC define as marketing and do they put any limits on how one can market a property under the new equitable interest rule?
A broker is an agent who conducts negotiations for and on behalf of a principal (person or entity that they represent). They aren't the buyer or seller, they represent them.
Why now would anyone bother becoming a broker if I can get a property under contract and market it? One might suspect that this is why some brokers/agents talk bad about wholesalers - it takes away business from them!
From what I know, disclosure and honesty of what you are doing is key to doing it correctly if you only have an interest in the property and don't own it yet. If you are selling a contractual interest to a buyer by selling them the contract, you need to disclose that you are selling the contractual interest, not the property itself.
- Rental Property Investor · TN · Member since 2019 · 62 posts · 13 votes7y
@Bob Daniels I understand what you are saying about Wholesaling but if its do illegal why are nobody going to jail for it but steady getting rich off of it, and posting YouTube Videos about it, and why the Title Companies are saying that they are Wholesale friendly
- New to Real Estate · Tampa & Orlando, FL · Member since 2019 · 1 post · 1 vote7y
Matt,
Last week I went to a REI meeting in Tampa, FL put together by Jason Brown (https://www.biggerpockets.com/users/Jason_Brown). His guest speaker of the month was attorney Shawn Yesner (https://www.biggerpockets.com/users/SMYesner#0) with the topic for laws in real estate investing and legal liabilities.
Among the items Shawn discussed, he brought up a section in the 2019 Florida Statute that are often overlooked and be of interest to folks looking to buy from a distressed seller here in Florida.This is in reference to Section 501.1377 - "Violations involving homeowners during the course of residential foreclosure proceedings". This applies Consumer Protection section applies to "who are in default on their mortgages, in foreclosure, or at risk of losing their homes due to nonpayment of taxes may be vulnerable to fraud, deception, and unfair dealings with foreclosure-rescue consultants or equity purchasers."
In that section he referenced "(4) FORECLOSURE-RELATED RESCUE SERVICES; WRITTEN AGREEMENT.—"(b) The homeowner has the right to cancel the written agreement without any penalty or obligation if the homeowner cancels the agreement within 3 business days after signing the written agreement. The right to cancel may not be waived by the homeowner or limited in any manner by the foreclosure-rescue consultant. If the homeowner cancels the agreement, any payments that have been given to the foreclosure-rescue consultant must be returned to the homeowner within 10 business days after receipt of the notice of cancellation.
Florida Statute Link: http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0500-0599/0501/Sections/0501.1377.html
Anyways, just wanted to relay the information. Many of you are well aware of this but some of you may be surprised that a distressed homeowner has the right to cancel the written agreement within 3 business days without any penalty.Keep that in mind when getting creative in your deals. Be aware to your risk exposure if doing repairs, paying back taxes, etc., before the time frame mentioned above.
Thanks,
Felipe
- Bakersfield, CA · Member since 2019 · 1 post · 0 votes7y
@Robert S. So do you have your real estate license? You said you get on mls and find deals..
- Specialist · El Paso, TX · Member since 2016 · 105 posts · 84 votes7y
@Austin Smither Langley "A broker is an agent who conducts negotiations for and on behalf of a principal (person or entity that they represent). They aren't the buyer or seller, they represent them." This is correct. When you do this as a wholesaler this will get you in trouble. This is illegal. You DO NOT present yourself as an agent. You are not working on a sellers behalf. When you market, you are only marketing a SIGNED contract. Which in Texas, you have interest as soon as its signed. If that house burns down. I get the insurance pay out, or I can exit the purchase agreement. I recommend going to your states real estate classes. You will get the info you need there. Than decide if you want to be an Agent or wholesaler. No one here is a real estate attorney and shouldn't be interpreting law. Especially when they hold a license as a real estate professional than need to google another states real estate laws. That in itself is illegal. Agents and brokers are taught not to interpret and practice law period. Provide new investors to this site good advice, motivation, and direct them to resources if you are not 100% sure.
- Rental Property Investor · Justin, TX · Member since 2017 · 134 posts · 57 votes7y
@James Wise
https://silblawfirm.com/real-estate-law/the-legality-of-wholesaling-real-estate-in-texas/
Pretty sure they outlawed it in Ohio, so you're right, but you can't just use your state's law and apply it to the whole country.
Here in Texas, it is legal as long as you aren't marketing the property and only the equitable interest in the contract to buy it. (See link above)
- Rental Property Investor · St Augustine, FL · Member since 2019 · 74 posts · 47 votes7y
@Robert S. Amazing
- Specialist · Memphis, TN · Member since 2012 · 1k+ posts · 1k+ votes7y
@Jay Hinrichs, we need virtual popcorn Jay! James is the best stand up comedian I've seen in a long time :-).
- Flipper/Rehabber · Rochester, NY · Member since 2014 · 1k+ posts · 1k+ votes7y
Disclosure: I am not a wholesaler.
What gets me about this thread, is the notion that realtors are somehow more ethical than wholesalers. If you work in this business enough you realize that it is completely common for realtors to: do pocket deals, buy listings, not represent the their clients best interest etc.
I’ve worked with great realtors and great wholesalers. But there are a lot of unethical ones of each. too.
- Phoenix, AZ · Member since 2017 · 135 posts · 294 votes7y
Originally posted by @Quinton Bogle:
@Bob Daniels I understand what you are saying about Wholesaling but if its do illegal why are nobody going to jail for it but steady getting rich off of it, and posting YouTube Videos about it, and why the Title Companies are saying that they are Wholesale friendly
Why don't wholesalers go to jail? Because there is a difference between something being illegal, and something being a crime. It's a matter of is it a judicial matter, or a civil matter. Speeding down the interstate is illegal, but nobody has ever gone to jail for going 10mph over because its a civil fine, not a criminal matter. Secondly, selling dime bags of weed on the street corner is illegal, but cops tend not to care too much because it takes too much time and effort to track down each individual low level dealer. Similarly the RE Commission doesn't have the time or resources to go after every minor infraction, instead they pursue cases where a formal complaint is lodged against someone.
Why are title companies wholesale friendly? Because they are in the business of getting paid, they are not in the business of overseeing your every business move to ensure you are doing it ethically and honestly.
@Austin Smither Langley Wholesaling in general is legal if done perfectly, but I would argue that what guru's teach people, that wholesaling is a way to break into RE when you are flat broke is completely wrong and likely illegal.
I got a cease and desist order after my complaint was filed against me, I immediately called a RE lawyer and explained in detail what I was doing, he said I was fine. So I continued doing what I was doing, and that's when they brought the hammer. Just because a lawyer says you are fine doesn't necessarily mean they are right, remember every courtroom has two lawyers, both equally skilled in their profession and yet they have drastically different views on the current situation. The only opinion that matters is that of the Judge.
I'm not a lawyer, and this was several years ago so I don't remember the fine point details, but essentially they argued that I didn't have equitable interest because I had no intention of ever purchasing the home. I had never purchased a home, didn't have the funds to purchase it, never attempted to obtain financing, and had wholesaled several deals in the past indicating that I was using this purchase agreement as a way to circumvent license law.
They said that by signing an agreement to purchase the home, when I had no actual intention of purchasing the home was a willful misrepresentation of present fact, which is the basis of fraud.
And to be honest it just makes sense, both from a legal standpoint and based on common sense. Don't sign a contract that you don't have any intention of fulfilling. My hopes of later finding an end buyer to be order to fulfill my contractual obligations didn't cut it.
I don't have anything against wholesalers, and I'm not a 'hater', in fact I have since purchased a few properties from wholesalers. But it is my opinion that the overwhelming majority of wholesalers do at least one thing wrong and could easily get in hot water as soon as a complaint is filed against them. If people want to do it then I'm not going to stand in their way, but I do feel that it's great disservice to tell them that there are no risks involved and that everything is roses.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Originally posted by @Mark S.:
@Damarius Gilbert Yea I did that once - posted my profile pic. Too many colleague requests from the ladies 😊
🔥🔥🔥🔥🔥🔥🔥🔥🔥🔥
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