I've seen it on both sides so lets settle this here and now.
*Slides weapons across the floor*
One side says if you offer them options of what you're planning on doing that keeps you in the clear. Something like "Buy and Hold, or Flip or Sell to an investor I work with". The other side says to just be honest. That would be something like "I work with an investment group who are looking for deals like yours."
First of all, which do you lean toward? The option approach or the get all the cards on the table approach?
Second, GET THOSE WEAPONS OUTTA HERE!
It seems like wholesalers get a bad rep. As soon as you make an offer they go "Are you one of those Wholesalers?"
So BP fam. Drop some jewels, I'm tired to searching for threads from 10 years ago with 2 responses. Give me what you got!
Developer · Chicago, IL · Member since 2013 · 434 posts · 357 votes
6y
Tough crowd... Unfortunately, BP generally looks at wholesalers with the same disdain that society has for Realtors. It's always comical to see the Realtors jump on with their holier than thou attitude only to log off and talk one of their clients into purchasing an overpriced house so they can get a bigger commission check.
Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
6y
Just to take this out of the realm of wholesaler vs agent, I think wholesaling is, for the most part, unethical and meant to steal equity from uneducated sellers.
For those wholesalers who offer the seller a agent contact and tell them they will get better $$$ with the same close time with an agent, good for you.
My guess is wholesaling will become illegal across the entire country as it is seen as consumer fraud and that means the feds will eventually get involved.
@Dean Carter contrary to wholesalers beliefs, realtors can offer sellers quick and fast closing to investor clients off market too
Yes, anybody can "offer" quick and fast closings, but can you guarantee it? Will you hand the seller $5k nonrefundable on the spot to back up your claim? That's the difference I'm referring to.
I rarely is ever see wholesalers who do this. The majority (not all) are new to REI and have no money. They can't guarantee anything. Most offer $0-100 EMD, not $5000 (just look through forum posts on the subject).
The larger outfits probably can, but I see more people discussing clauses to get out of wholesale deals, than ways to close if they can’t find a buyer.
I’m not saying everyone should go realtor verse wholesaler, as it seems most wholesale deals the seller wasn’t even a seller until contacted, and that to me is where the wholesaler stands out (marketing to potential leads). I just don’t agree the wholesaler “will” sell the house in instances a realtor won’t. In the market we are in, deals get tons of offers from flippers/buy and holders.
People call themselves wholesalers without ever completing a deal. I can say that I'm an Astronaut, it doesn't make it true. Nor would it make sense for someone to judge all Astronauts based on my claim to be one.
I really think the disconnect here is that most of the claims against wholesalers are based off of what you're reading on this site. You have to keep in mind that this is one of the first places new people come to learn and the term wholesaler is the easiest title to give yourself in the investment community.
@Jerryll Noorden I understand that everything is situational, but the specific numbers he provided gave no context and was specifically constructed to make realtors look bad. I'm not saying that all of his points aren't valid, I was only trying to show that that one specific point was not constructed well, there are certainly situations where those numbers hold to be true and I can't refute that. But offering those numbers up as a "this is always true" statement is inherently false. I even acknowledged that in my original post, that there are situations where using a wholesaler may cost the initial seller less.
The benefit of providing an unbiased argument (even if you yourself are biased) is it allows others to see how you think and the real benefits of using your way of things with as much of the necessary information as possible. Giving a flat statement like that is misleading because there is no possible way that those numbers always hold true.
On a separate note, your use of condescending language tells me that you've only come to defend your friend instead of providing something useful to the conversation. I would really appreciate it if you would refrain from treating me and other people on the internet like some monkey with a keyboard because we have a slight disagreement. Especially given this is a networking forum where many people expect the respect and professionalism that you would expect from other industry professionals.
@Mike Cumbie I appreciate the respect. Like I said (and have said in other previous posts), I am a newbie to all of this and am still learning. It was my basic understanding that Realtors commision is 3% for the buyers agent and 3% for the sellers agent. If that is untrue then if you don't mind how do you generally calculate what your cut is? Because learning that very much changes the way that all of the math I had been putting together in my head is calculated.
Figuring commissions are part of the process of listing (or buying). I have to determine what it is going to take me to sell that property. For instance a house we are going to list at 400K, that is vacant, they let me put an electronic lockbox up, a highly desirable neighborhood, they have Gardners and snow plow people handling everything. House is priced right and beautiful.
Vs
House that is way overpriced at 140K and they won't come down. I have to go to every showing, they need to remove dogs every showing and for some reason I have to go pick up the daughter from school and take her to get a snack if a showing is happening that day. They don't keep it clean, the 4 houses around it have a tarp on the roof, there are 8 other houses on the street in better condition at 110K.
I have my work cut out on one that at 3% will be $4200 (pre everything) and will most likely never sell. The other would be $12,000 (pre everything). So we sit down and discuss and come up with a number on both of those. If you give me an easy to sell priced right, vacant home yeah we will have a conversation and work something out. If you want me picking up kids and letting dogs out at lunch, time is money. There are plenty of people who can only wrap their head around 3% each side like it is a law or something. Which is the farthest thing from the truth. States may even start investigating you if you say it's "standard" or anything like that. Commissions are negotiated between the parties. So I don't have a formula that I can just say "I do it for this". I look at the work ahead of me and make an educated guess on how long it will sit, how many flyers I need, how many Open houses, how many showings, how many Ads, how many trips to stage things etc. Hope it helps
@Jerryll Noorden I understand that everything is situational, but the specific numbers he provided gave no context and was specifically constructed to make realtors look bad. I'm not saying that all of his points aren't valid, I was only trying to show that that one specific point was not constructed well, there are certainly situations where those numbers hold to be true and I can't refute that. But offering those numbers up as a "this is always true" statement is inherently false. I even acknowledged that in my original post, that there are situations where using a wholesaler may cost the initial seller less.
The benefit of providing an unbiased argument (even if you yourself are biased) is it allows others to see how you think and the real benefits of using your way of things with as much of the necessary information as possible. Giving a flat statement like that is misleading because there is no possible way that those numbers always hold true.
On a separate note, your use of condescending language tells me that you've only come to defend your friend instead of providing something useful to the conversation. I would really appreciate it if you would refrain from treating me and other people on the internet like some monkey with a keyboard because we have a slight disagreement. Especially given this is a networking forum where many people expect the respect and professionalism that you would expect from other industry professionals.
No, I asked about one specific example, I never said it was the case in every situation.
Further, this thread is the first time I've ever seen Jerryl on the site.
@Jerryll Noorden I understand that everything is situational, but the specific numbers he provided gave no context and was specifically constructed to make realtors look bad. I'm not saying that all of his points aren't valid, I was only trying to show that that one specific point was not constructed well, there are certainly situations where those numbers hold to be true and I can't refute that. But offering those numbers up as a "this is always true" statement is inherently false. I even acknowledged that in my original post, that there are situations where using a wholesaler may cost the initial seller less.
The benefit of providing an unbiased argument (even if you yourself are biased) is it allows others to see how you think and the real benefits of using your way of things with as much of the necessary information as possible. Giving a flat statement like that is misleading because there is no possible way that those numbers always hold true.
On a separate note, your use of condescending language tells me that you've only come to defend your friend instead of providing something useful to the conversation. I would really appreciate it if you would refrain from treating me and other people on the internet like some monkey with a keyboard because we have a slight disagreement. Especially given this is a networking forum where many people expect the respect and professionalism that you would expect from other industry professionals.
He is not my friend. I don't even know him.
I just find that his answers actually contain some level of IQ. I appreciate and value that.
The use of condescending language is indeed bad. I know. I just cant stand ignorance and it just aggravates me.
Take that how you want.. I simply and honestly do not care how you take that. This simply is how my character is. What can I say. And now I am done with this stupid war between wholesalers and realtors. Just let it be man seriously. It is not that important to start something out of it.
@Mike B. I apologize for the assumption that I had made, if I'm being perfectly honest I was frustrated with the way he addressed me and I didn't mean to put the two of you in the same boat.
That being said though, looking back at the context under which you gave those numbers, I don't see any specific example that you were responding to. Which is what makes that specific argument you gave seem like a blanket statement. While I now understand that it isn't as cut and dry as I had initially thought, the numbers you gave seem to be vastly over simplifying the situation.
I do also understand that there can be merits to wholesaling and that you do have valid arguments, I was only refuting that one point because I felt there wasn't enough context surrounding those numbers.
@Jerryll Noorden I don't necessarily think this is some "stupid war" and I'll admit that I was ignorant in that I am still new to all of this. I was just hoping to keep the merit of the arguments used here at a high level so that I can continue to learn. I do also understand that some people are more abrupt than others but it makes interacting with you feel like I should be holding on to my questions and hoping someone else asks them instead of actively seeking the information that I'm looking for, which is not a position I enjoy being in.
I appreciate all of your perspectives on the differences between realtors and wholesalers.
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
6y
Generalizing any group of people based on the actions of some is dangerous. That being said, even wholesalers will agree there are bad actors out there wholesaling. Some of them are making false claims to get deals.
Part of what makes wholesaling different than other professions is low barrier to entry. I can wake up one morning and say, "I am a wholesaler". I download a contract from the internet, start knocking on doors and I am in business. There is no training required and no certification process.
So you have a mixed bag. You have people being honest, following the laws and even many who are well funded. You also have liars who disregard the law and have no money. So like anything, the bad apples drag down the good ones.
To answer the original question - tell the truth. If you only pass deals to investors, don't tell them you plan to buy the deal yourself. One lie leads to another, leads to another. You can be honest and wholesale. I know several people responding in this thread are above board, so that is proof you can make it work honestly.
Specialist · Cleveland, OH · Member since 2018 · 1k+ posts · 666 votes
6y
@Tony Roberts Well 1st off some " guru " made up the term wholesaling at some seminar and it went viral . All you are doing is flipping a contact . Back in the day it was called, FLIPPING A CONTRACT LOL . Now every Tom ,Dick and Harry calls themselves a wholesaler. Reality is many are nothing. They search online for properties, mark it up, send it out to a " buyers " list they created by posting, " where are my cash buyers," none are vetted so its really a BS list , but they hope to get lucky . Then when you ask ( many of them ) about the area they do not have a clue! Many have it overvalued and WAY overpriced .Just last night some " experienced buyer " said he was interested in one of my props, I asked what is your offer. " I have to run comps " REALLY!! If you are experienced in my market, why do you need to run comps. ? You should know the value within a few bux in 5 seconds, I know I can . I told him I understand the whole " fake it till you make it" but you really need to have some " game " if you do want to fake it.. This guy was clueless, have not heard back from him , as suspected .
Ok back to the topic. I have had wholesalers call me, Bob I have a great deal, gives me the address. ok are you direct with the owner, yes of course, really A HOLE, its my property!! They cant hang up fast enough. So those are a couple reasons wholesalers have a bad rap . I even pull up the owners name, it only takes 20 seconds. I ask so you are dealing direct with so and so, um no I do not know who that is , ITS THE OWNER @#@#@#@ HOLE lol.....
Honesty is the best. Tell me you are new, tell me this is your 1st deal. I will respect you more and help guide you .
@Jerryll Noorden I don't necessarily think this is some "stupid war" and I'll admit that I was ignorant in that I am still new to all of this. I was just hoping to keep the merit of the arguments used here at a high level so that I can continue to learn. I do also understand that some people are more abrupt than others but it makes interacting with you feel like I should be holding on to my questions and hoping someone else asks them instead of actively seeking the information that I'm looking for, which is not a position I enjoy being in.
I appreciate all of your perspectives on the differences between realtors and wholesalers.
Don't apologize.
My bad. I just assumed you were hell bent on talking bad about wholesalers and I just assumed the worst. (Some people here just have an issue against wholesalers and although that is fine, and you have all the right to an opinion, as long as you don't make stuff up to prove a point ... something you did not do)
My bad my dude.
If you are new here, keep checking on the forums, but never listen blindly to people. Think on your own. Best advise I can give for BP.
@Jerryll Noorden I'm not someone who takes anything at face value so I'm there with you. I appreciate the apology and will for sure keep learning while I keep saving for my first down payment.
Real Estate Consultant · Indianapolis, IN · Member since 2014 · 322 posts · 238 votes
6y
Hi @Tony Roberts. So, I have had several posts on this very topic. After completing more than 200 transactions (mostly wholesale deals) I would tell you to just be open and honest. It is amazing what happens when people realize you are just being honest but are able to provide them with solutions. I am working a deal right now where the seller answered a marketing piece I did over 3 years ago. He said yesterday when we met for the first time that something stuck in his head about me versus everyone else who was calling that I actually gave him valuable information that no one else gave him. I basically educated him on how the game really works with wholesalers/agents etc. That piece of knowledge helped him to realize that I could be trusted. He now calls me "Allstate" because he says he feels like he is in good hands. Which he is right. I am going to do everything in my power to ensure he gets a fair shake. There is just something to be said about being upfront and honest. It will get you far in this life (and in the next one-lol!).
China, ME · Member since 2014 · 3k+ posts · 4k+ votes
6y
This argument about Realtors tapping into the equity in the same way as a wholesaler is so disingenuous that it doesn't deserve a response - but for the intentionally obtuse, I'll offer a brief one anyway.
If a seller elects to use a licensed agent to market their home, commissions are negotiated and agreed to up front. It's a cost of the sale, just like your closing attorney, title company, tax stamps, etc. If the sale does not succeed, the seller's agent makes nothing. The agent provides the best chance of selling the house at the price and terms most favorable to the seller by exposing it to the largest number of possible buyers through an MLS listing, which is something that most wholesalers can't offer.
If you're licensed and wholesale, you've overcome the first illegality. Congrats. However, how are you going to distinguish marking up a contract and getting a wholesale fee from a net listing? There's no meaningful difference between the two, and net listings are illegal in almost every state. (I believe they're strongly discouraged, but legal in SC).
Further, when you cause the seller to enter into a contract that you know you can't perform to, how do you answer the charge of fraud in the inducement?
If someone complains, taking a net listing and engaging in fraud will get you fined and your real estate license suspended or even permanently revoked. That's because licensees are highly regulated and are held to legal and ethical standards, where unlicensed wholesalers are not.
I've personally witnessed clients nearly get screwed out of over $120,000 by a wholesaler. I have nothing but disgust for the way most do business.
Do it right. Close on the property then do with it as you wish. DON'T string an unsuspecting seller along while you try to mark up their contract, fail to do so and walk away leaving them to keep your $10.00 earnest money when they were counting on the sale to move on with their lives.
Getting a license isn't especially hard. I'm licensed in two states and I can tell you that the test in both was astonishingly easy - but you do have to learn the law to do so. That and you learn all about your duties to protect the consumer.
Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
6y
@Tony Roberts I am an out of state landlord. I get calls and texts and yellow letters and postcards all the time offering to "buy" my property. I have never been cold called.by a realtor. Thats the difference.
Wholesaler · Jacksonville, FL · Member since 2019 · 55 posts · 47 votes
6y
Many wholesalers get a bad rep because of their lack of commitment to what they tell the seller. Since wholesaling can be practiced without a license (excluding IL), the barrier of entry is very low. What ends up happening is "newbie" wholesales who are hungry for their first deal end up getting a property under contract at a price that it typically too high for the market. In addition to this, many of these first time wholesalers have little to no cash buyers lined up to purchase this property. Since they are brand new to the business, they treat this deal like GOLD and try their hardest to get it assigned. They drag the seller on for a while until they finally decide to ghost the seller or come back to them with a substantial price reduction based on the feedback they received about their "GREAT DEAL". Both of these scenarios can do damage to the seller especially if they are counting on that money to relocate or pay for other expenses. Being a wholesaler doesn't have to be "do it this way or the other way." As long as you can back what you say and make sure you communicate with the seller from start to finish, there shouldn't be an issue with your actions. Now, if the seller sees the HUD statement at closing and notices how much you're making on the assignment fee, they may feel "some type of way." However, this surprise can be mitigated if you are up front with letting them know that you will be working with an investor partner and be paid a fee for bringing them the property. Or you could double close, either way, it's all about transparency. Communicate with the seller, don't make false promises, and don't lie about what you are doing with their property. Real estate is a people business, and what you say and how you act matter. People will only want to do business with you if you have a sound track record and can earn their trust and are confident you will do what you say. SO DO WHAT YOU SAY! This way wholesalers wont get such a bad rep! :)
Rental Property Investor · Houston, TX · Member since 2018 · 15 posts · 2 votes
6y
@Tony Roberts Whoa buddy, You stirred the pot here.... bahaha.
For the most part, I think everyone is actually in agreement, Honesty! (There is only one definition for that word, the world is not grey when it comes to this) I've wholesaled, whole-tailed, flipped, owner financed, BRRR'd and more. While my experience, and that is all I can offer, has left me with an overall thought that agents and wholesalers generally (yes not all) don't listen to the sellers needs and greed is at the highest. Countless times I have sat with elderly person or children of parents recently deceased, who just want to get the value of their family's time, effort and generally, a person's legacy. Only to hear one story after another how they spent 2, 6, sometimes more than a year getting the run around from agents and wholesalers. I will specify, Agents who actually own and invest in property are generally better. Currently, I am working with a woman who got talked into making an owner finance note, The "investor" wrote the note at zero down payment and zero % interest!!! That's absolute criminal! The "investor" even went so far as to write out on the note "zero percent", because in a long legal document and signing page after page that will get lost to the seller where 0% would stand out on the page. So, every day I am interested to see what I haven't seen before..;-)
Unfortunately, greed seems to always rise atop in our society so for me, I look forward and encourage the time when wholesaling is outlawed/banned. Then we will just have to work with agents who act like the gate keepers or something.... ha!
Wow , Great conversation. Let me add my prospective as a real cash out of state investor to show how addition of wholesalers complicates things and drags investors back to analysis paralysis mode. That is BAD for everybody but the wholesalers.
I have an OK buyer’s agent and we did 3-4 deals with him in 2019. With each deal I learnt about the gaps in my on-the-ground due diligence which just can not be done on internet. I knew how much my buyer’s agent was making on each deal and I generally felt that he deserved that money for his time spent and the insights he was providing.
Then late last year I got introduced to 2 whole sellers. Right at the onset they mentioned that all retail deals on redfin and zillow were suckers deals – meant mostly to trick out-of-state investors. Then one started finding faults with the other wholesaler and vice versa, both kept telling me that there are consequences of sharing their precious deals with anybody else. With both of them I knew what they are doing, they are buying properties at unknown amount and just leaving enough discount to make this deal better than a corresponding retail deal. But unlike the retail deals there is no time to check and you are buying unknown risks at a slightly lesser price. As a cash buyer I am thinking that I should be the one taking the biggest profit since I have most skin on the game and I am taking most risk. And yes the house equity does belong to the seller. But the reality may be that the middle men are making the most profit – even if not the most profit, the issue is that its an undisclosed amount of money ( hence smells like dishonest/ double dealing behavior). For the last few months I have been trying to learn their game and find ways so I can not be tricked. That’s not what I want to do, I want to buy houses at the best honest price with transparency about the all parties and their profits involved. Now the situation is that I am cross examining their deals and I am hesitant to make offers on retail deals thinking that may be one of these days I actually get a deal with manageable risk to actually proceed. It used to be easier and simpler earlier 😊
Saint Joseph, MO · Member since 2018 · 401 posts · 244 votes
6y
@Anish Tolia this is exactly what I was thinking. There are folks out there that are in positions that wholesalers find through marketing. If they received a post card from a realtor, perhaps they would call them instead.