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.
@Mary Mitchell so is buying the same house in order to flip it unethical and stealing equity as well?
Flip is a value add, the original seller could have more equity if he put in the hr+$$. Original Seller made a choice to sell property as-is and use his hours +$$ somewhere more worth while for them. So as per me, flip is not unethical and stealing equity.
Saint Joseph, MO · Member since 2018 · 401 posts · 244 votes
6y
@Raman Saka I agree, I don’t think wholesaling is stealing equity either though. I think anyone, wether it’s a realtor, wholesaler, flipper, buy and hold could all rip someone off, or they could also make a fair deal that both parties agree on.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
6y
Funny how wholesaling with honesty turns into wholesaler vs licensed real estate agent.
Most of the arguments and hypothetical responses are so far off the beaten path, they are useless.
Take for instance THE most argued point in favor of wholesalers: "Contrary to popular realtor belief, the wholesaler offers value. Quick close, no hassle just move out. Granted at a less than retail price. Let the seller decide if they want to wait a month or more and pay commissions or get out quick and easy for cash." - This argument is so silly, as if real estate agents do not have the ability to meet investor cash buyers and contact them when they lock up a listing agreement with a seller needing a quick all cash close. Any real estate agent can have the very same cash buyers list a wholesaler can AND they also have the entire MLS the un-licensed wholesaler does not.
I think everyone was in agreement that no matter if you are an unlicensed wholesaler, licensed agent, or licensed wholesaler/agent, honesty should be a priority.
Wholesalers get a bad rep simple because the super low barrier to entry and anyone can call themselves a wholesaler, they then go out and try to do a deal, they do it wrong, illegally, or immorally because that is how they were taught or what they read on some forum or from some guru seminar. That happens over and over and hence the bad rep continues. Even those who do it without lying still get the numbers so wrong and then they cant sell it so they have to use one of their BS escape clauses to get out so they can get their large $100 EMD back!
I also read someone posting how agents come on their high horse, then run off to convince their client to buy an overpriced home so they can make a higher commission. Again, these hypotheticals are so far off. We should all be able to agree that there are bad and VERY bad licensed agents out there too. Nobody should argue that point either unless you want to be wrong. But again, that is off topic for this thread.
If you are a wholesaler, you need to tell your seller exactly your intent and how you will be profiting. If you use BS escape clauses, tell them your "partners" (who are actually your potential cash buyers) need to see the property, if you have no means to close if you don't find a buyer, then you have added to the count of bad wholesalers and the bad reputations that go with them.
Wholesaling IS NOT REAL ESTATE INVESTING, it is a marketing business and an illegal one in most states if you do it in the manner in which most do, i.e. negotiate a price with a seller, market that property and/or contract to others, and receive a fee for it without a real estate sales license.
So, why not just get your license, learn how to do it legally, or learn how to become a real estate investor and buy and flip it or buy and hold it yourself! Getting a license is also a low barrier to entry, albeit a higher barrier than the "wholesaler".
@Anson Young. What is a double close? I’m new to all this and still learning the lingo.
No worries!! Double close is when I actually close on the property under my own name (or LLC name), and have a buyer lined up the same day to close on it again.
A - seller B - ME C - new buyer
A and B come to terms on the sale of A's house and get it under contract. B finds C who wants to buy it for more, and we write up a contract. Both contracts are submitted to title so they can work up title commitments and getting ready for closing.
Not to complicate this further, but with some title companies/states you can use C's funds to fund B's closing, and in other areas you have to bring your own cash or financing to fund the A to B transaction.
On closing day, we close at 10 am between A and B - at 2pm we have another closing between B and C. Thats a double closing in a nutshell. B is the true buyer, and never had to assign or sell the contract.
Developer · Chicago, IL · Member since 2013 · 434 posts · 357 votes
6y
Originally posted by @Account Closed:
@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.
Are you suggesting that Realtors don't market for new business?
@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.
Are you suggesting that Realtors don't market for new business?
Yes. But they market in their local market by sending postcards with their name and list of recently closed sales. They offer me some information that I always look at even if Im not interested. This compared to a yellow page written like a 6th grader saying they want to buy my house without knowing me or anything about the house. Realtors also don't cold call me at all hours or send me texts. And realtors know that most likely they will get business through referrals from satisfied customers.
@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.
My brokerage also buys properties cash so yes we can guarantee it. Also how many wholesalers put up nonrefundable deposits? Most wholesalers are undercapitalized and do whatever they can to back out if they can't find a buyer with there contingencies. Also, there are clients out there who will write noncontingent cash offers and pay my commission not sure how a wholesaler can beat that.
I hear what everyone is saying. SURE I'd like to be in the position to close on the home or tell them with 100% certainty that I will buy their home but If I'm being honest. No, I'm not. I'm using my connections and circle of people that I've worked to market their property for a higher price.
If I'm being honest I would tell them I'm "flipping a contract" (like someone else said) but that's not easy to explain and if you're explaining, you're losing. So, while telling them "Hey I want to secure your property at a discount and then sell my equitable interest" sounds awesome....as awesome as bamboo under the finger nails
It's all in how you say it. You can simply say that you work with a large network of buyers and that in the end, it's probably going to be someone else it my network that's actually going to complete the purchase.