Are you a reputable wholesaler?

Question

We just published the following article on the BiggerPockets Blog and I thought it was important to discuss the topic of reputation and credibility as it pertains tho doing wholesale deals.

Check out the article at:
Real Estate Wholesalers: Tarnish Your Reputation by Using This Strategy

Do  you see the wholesaler in this case doing anything shady as Clay Huber believes?

Have you seen anything like this?

What are your thoughts on these tactics?

Feel free to leave your feedback here or below the article and jump in on the discussion!

Braden C. · Answer

I don't think it's shady at all, but certainly not a business practice that I would condone. If another wholesaler approaches me about selling a deal for them, I know it's not a deal, if it was, they would just sell it themselves. Vice-versa, I don't let other wholesalers market my deals because I know my deals will sell. Why would I want to pay them?

The reason wholesaling in general has such a bad reputation is because the barrier of entry is made to seem extremely low. This attracts individuals who think they can get rich quick without any education, real estate license, training, experience, business plan, or start-up capital. Ultimately, they don't know what they're doing so they put out poor deals that don't sell and eventually fail. Those who have spent any time on these boards know that every few days a new "wholesaler" introduces themselves and it's always the same pitch.

Sometimes I wish there were more blunt conversations on the site directed towards those who call themselves wholesalers. I am not saying we shouldn't be encouraging but at the same time it doesn't hurt to be honest. As a community it would be really helpful to have a consistent and encouraging message to those getting started. That message being that it isn't as easy as you've been made to believe and there are steps, just like in any other business, that you need to take prior to getting started.

I know this rant is off the original topic but I wanted to get it in before the wholesaler bashing got started. I have been very fortunate to have a lot of success wholesaling and make a good living doing it. A lot of that has to do with who I am but also that I approached it as a business and treated it like one from the first day. I had the education, capital, and an extremely detailed business plan to do it the right way.

Sharon Vornholt · Answer

@Josh Dorkin and @Rachel H. This topic came alon right as I was trying to figure out what to write about today. I did an article on my site linking back to the original BP article.

Sharon

Steve Babiak · Answer

Here is some info on a wholesaler who also does lease options:

http://abclocal.go.com/wpvi/story?section=news/consumer&id=8860669

http://homeequitytheft-cases-articles.blogspot.com/2012/10/would-be-homeowner-victimized-in-rent.html

Sharon Vornholt · Answer

Rachel  H. I am happy to respond. Joshua Dorkin it's always good to have your input.

I agree with Braden  C.  and Nathan Paisley that it seems to be primarily a "newbie" problem.

The real problem is that they don't know what a good deal looks like. They see a property, don't understand that it is already priced correctly (ie not underpriced), then they put it under contract at a higher price and try to sell it.

There is nothing but experience and possibly a stern conversation with a seasoned investor that will cure this problem. Unfortunately, it makes the rest of us look bad. I'm not sure there is a solution to this problem.

Rachel H. · Answer

Sounds like a pretty weird practice Joshua Dorkin. My first guess reading the article was that the other wholesalers involved were flipping their contracts with the original wholesaler. Though, the end paragraph with the original wholesaler stating the home was still available at the original price did not make it the case.

My understanding when multiple wholesalers are involved is the situation I mentioned above or that the original wholesaler would be open to working with other wholesalers who would bring in a buyer where in turn they would split the assignment fee, not raising the original price.

During the situation mentioned in the article, it sounds kind of confusing with the price being raised by multiple wholesalers and the original wholesaler stating the property was still available at the original price. My gut would tell me something is wrong.

In my own experience, if a deal sounds too complicated I tend to walk away. It would be interesting to hear Sharon Vornholt's thoughts on this topic as wholesaling is her main area of focus. :)

Joshua Dorkin · Answer

Braden  C. - I believe those blunt conversations happen in almost every thread about wholesaling.  Many of the experienced investors on the site will typically jump into threads about wholesaling and enlighten the newbs about the challenges that come with that strategy.

That said, I think your post is a fair extension of my original topic.  The goal of this thread is to get conversation going about practices that surround wholesaling.  Thanks for the feedback.

Nathan Paisley - I agree.

Ultimately, I believe that it is our duty to better educate the new investors who try to take up 'wholesaling.' After all, I truly believe that your reputation is everything, and I can't tell you how many real estate investors I'd never consider working with because of practices like these and others that are typically encouraged by the guru crowd for the new wholesalers.

What other "shady" practices have you come across from wholesalers?

Nathan Paisley · Answer

I def. think it's shady!  Last week I had my first encounter with this. He was a wholesaler/bird dog. He called me up and asked me to do a flex option and I agreed but I said don't go over what I'm asking and I needed X to complete the deal.

Situations like clay's happen all the time and usually stem from lazy/newbie/desperate people. Most people like that prob don't last that long in any business.

Are you a reputable wholesaler?

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