Are wholesalers dishonest? Illegal?

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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

I'm looking at wholesaler contracts and they appear to be dishonest, possibly even illegal. Am I missing something?

I'm talking to someone that is interested in wholesaling. I'm reading up on it and trying to refresh my memory because the whole thing appears shady, manipulative, in many cases dishonest, and possibly even illegal. I think many people get away with it simply because the crime is private and nobody bothers to complain.

I've looked at a couple contracts from people claiming to be big-time wholesalers with 10+ years in the business and training programs on YouTube and private websites. The contracts they use are fairly standard purchase contracts, probably lifted from the internet and dumbed down to 1-2 pages. Although they do mention "assigning" the contract, it's literally only 1-2 words conveniently hidden in the contract. Unless they explain what is happening in detail, the contract gives the impression the wholesaler is actually buying the property. But the wholesaler has no intention of buying the property and - in the vast majority of cases - they don't even have the ability to purchase the property. Then the wholesaler is marketing the property to potential buyers, which is illegal because they can't sell something they don't own.

It seems the proper, honest, legal way to do it is this:

Have an honest contract with the Seller stating what price and terms the Seller is willing to accept, and that you are not buying the home but you will work to find buyers willing to purchase the property under those terms
Market the terms (not the property) to potential buyers
When you find an interested buyer, sign a separate contract says they will pay your fee upon the successful purchase of the property
Introduce the Buyer and Seller and monitor

Am I wrong?

Question #2: I have someone that is wanting to find the deals and bring them to me and my potential buyers. More of a bird dog than a wholesaler. I can't legally compensate someone that is unlicensed. How can I incentivize him without violating the law? Can I tell potential buyers that the property is available for $100,000 and include the bird dog fee in the purchase price, to be paid directly to the bird dog?

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Jerryll Noorden

Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes

Are guns evil?

I see so many people killed by guns.

A wholesaler: Someone that puts a property under contract and then sells their equitable rights/ or contract to a back-end buyer at a profit.

There is nothing honest or dishonest about that.

A lot of wholesalers go about it wrong, yes. But don't generalize asking if wholesalers are dishonest. That is not fair.

I blame the gurus that COMPLETELY butcher what and how wholesaling is supposed to be done!

But yes, I do feel your pain. Try not to blame people that do wholesaling in general though. Some do it right, some are pricks and most just don't know any better because that is what their mentor has taught them.

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Josh Caldwell
Investor · Dallas TX, United States · Member since 2014 · 1k+ posts · 1k+ votes
6y
@Nathan Gesner - Great question. the short answer is both yes and no.

Some wholesalers are dirt bags. Others are fine upstanding business people who add value to the process of buying and selling a house. Also, you can wholesale legally or illegally depending on how exactly you do it. There are wholesalers out there who will try and sell a property that they do not have under contract, that is pretty much illegal everywhere, and a somewhat common practice. I have even seen seasoned wholesalers do this, although, most of the offenders are untrained newbies.

Your 4 point are a pretty darn good template to stay out of trouble.

I would add one more Have a local real estate attorney look over your process and see if you missed anything. In my state of PA, we can't legally assign a contract, but that is not the only way to wholesale. A local real estate attorney will know the proper legal way to conduct a wholesale transaction. Sadly a lot of non investors/agents have been told that wholesaling is illegal. Your attorney can dispel that myth for you.
Part #2 - Again, talk to your local RE attorney. There will be a legal way to incentivize a bird dog. It might be a consulting fee, or some non cash payment, but there is almost always a way The smart lawyers can usually find a legal work around. It is usually in the exemptions to the law that are written at the bottom of the statute. With knowledge of the exemptions, you can then take steps to make yourself exempt. The obvious example here is speed limits. If you want to drive faster than the posted speed limit without getting into trouble, all you need is a job as an ambulance driver. The real estate world works the same way ,there is always a legal exemption.
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Steve Morris
Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
6y
Well, I guess you could make them legal and in some states (like OR) they don't allow them. My issues:

1) BIGGEST ONE - Disclosure that you prob aren't the buyer and don't know who it is at M/A

2) Finding someone vulnerable that doesn't know FMV and then offering them >20% less. Licensed agents are supposed to have their clients interest paramount to their commission (I know there are smarmy agents)

3) Tying up a property with $0, then turning around and telling their buyer they want non-refundable money NOW.

4) Expecting a fee from the sale of real estate without having a license. If the guy actually took title, I guess I could say he bought it, but they go out of their way NOT to take title like with BS dual escrows.

My suggestion to all the REAs, do NOT allow assignment at closing unless it is an entity controlled by the offeror.
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Darius Ogloza
Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes
6y
If there is no intent on the part of the buyer to buy the property, a contract for the purchase and sale of the property is not a binding contract. This is true even if consideration passes. You need both consideration and contractual intent to form a contract. Black letter law. Yet, I bet the fact that the "contract" is nonbinding is never disclosed to the seller. Otherwise, what is the point in having the seller sign? There is no legal end run around this core fact. The entire wholesaling enterprise is based in this fundamental deception. You might find a shyster who can give you some plausible explanation but the explanation will not stand up in any court that does not have a kangaroo as its official seal.
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Steve Morris
Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
6y
Originally posted by @Josh Caldwell:
@Nathan Gesner - Great question. the short answer is both yes and no.

Others are fine upstanding business people who add value to the process of buying and selling a house.
Explain how they do that exactly when a listing would likely get the seller the best price?
The wholesaler is looking for people that don't know FMV of their property and wants to exploit that for his margin.
BTW - Legal and ethical are not the same.

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Account Closed
Investor · Columbus, OH · Member since 2017 · 861 posts · 1k+ votes
6y
In Ohio they are illegal. The dept that regulates real estate put out a video with their attorneys explaining the only time you can broker out an assignable contract is when you bona fide intended to close but something went wrong, and it should be a rare thing. The wholesalers point to the video showing its totally fine to make a business about it.

Also i know this is my "angry old man" hill to die on, but every day i see posts here from wholesalers trying to figure out text blasting spam ringless voicemail and using dialers . These are all illegal and could get them sued under the TCPA. I get so many of these calls its nuts. I am about to start suing them myself.

Oh yeah and the time one of the wholesaler maketing services (sms spam iirc) set up a fake profile using the stolen identity of an nyc veterinarian on this website and lied through their teeth until they got caught, at which time biggerpockets deleted the whole thread. Whole side of that industry is just a festering pit of scumbaggery.
4 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
6y
In a state your familiar with here is the response from the OR DRE and i suspect its the same in most all states. I got tired of the is this legal or not so just sent it in to the department for clarification.. this person got a case opened got a cease and desist and is now licensed. So i would really start there. Just because a Lawyer interprets the code one way the state could take a completely different view..
Hello Jay,

Thank you for getting back to me. The advertising copy you attached to your email came out perfectly and will be very helpful. Thanks!

The Agency is well aware that unlicensed “wholesalers” are rampant in our jurisdiction. Addressing the problems is like trying to put out small individual fires in a forest that is burning. The Agency’s investigations are complaint driven, so we rely heavily on the public, and our licensees to bring these individuals to our attention.

Thank you again for the information, if I have further questions for you during the investigation I will certainly reach out.

Best regards,

Frances Hlawatsch | Financial Investigator

State of Oregon - Real Estate Agency
You cannot pay unlicensed agents in any matter we all know that..
they cant take a fee or market a property etc they don't own
Other wise why even have a real estate license or license laws.. everyone could just do business through assignments etc.
keep in mind there is huge money in training those who think wholesaling is the first step to real estate richs !!!
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
6y
Originally posted by @Steve Morris:
Originally posted by @Josh Caldwell:
@Nathan Gesner - Great question. the short answer is both yes and no.

Others are fine upstanding business people who add value to the process of buying and selling a house.
Explain how they do that exactly when a listing would likely get the seller the best price?
The wholesaler is looking for people that don't know FMV of their property and wants to exploit that for his margin.
BTW - Legal and ethical are not the same.

Yup and we all know the laws are interpreted.. and a Lawyer can interpret them one way and the state another.. WE see how Oregon interprets them no Lawyer is going to get you around the states position.. Of course your free to go to administrative law court for a 50 to 100k legal bill to argue your case LOL

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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
6y
I don't understand wholesaling, but my take is they convince a homeowner that they are going to buy the property (for less than market value) and then simply sell the sales contract for a higher price pocketing the profit. A very different take on selling with a realtor (and by no means am I implying realtors and wholesalers are the same as they are NOT) where they sell the property and get a commission. The big difference being the realtor sells for market value and the commission is clear at the start.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
6y
Originally posted by @Theresa Harris:
I don't understand wholesaling, but my take is they convince a homeowner that they are going to buy the property (for less than market value) and then simply sell the sales contract for a higher price pocketing the profit. A very different take on selling with a realtor (and by no means am I implying realtors and wholesalers are the same as they are NOT) where they sell the property and get a commission. The big difference being the realtor sells for market value and the commission is clear at the start.
Not to mention its illegal in many many states in the US to market a property you dont already own.. its a violation that is regulated by the real estate commission.

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Jerryll Noorden
Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes
6y
Are guns evil?
I see so many people killed by guns.
A wholesaler: Someone that puts a property under contract and then sells their equitable rights/ or contract to a back-end buyer at a profit.
There is nothing honest or dishonest about that.
A lot of wholesalers go about it wrong, yes. But don't generalize asking if wholesalers are dishonest. That is not fair.
I blame the gurus that COMPLETELY butcher what and how wholesaling is supposed to be done!
But yes, I do feel your pain. Try not to blame people that do wholesaling in general though. Some do it right, some are pricks and most just don't know any better because that is what their mentor has taught them.
8 Reply
Remington LymanBusiness Member
Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
6y
Originally posted by @Account Closed:
In Ohio they are illegal. The dept that regulates real estate put out a video with their attorneys explaining the only time you can broker out an assignable contract is when you bona fide intended to close but something went wrong, and it should be a rare thing. The wholesalers point to the video showing its totally fine to make a business about it.

Also i know this is my "angry old man" hill to die on, but every day i see posts here from wholesalers trying to figure out text blasting spam ringless voicemail and using dialers . These are all illegal and could get them sued under the TCPA. I get so many of these calls its nuts. I am about to start suing them myself.

Oh yeah and the time one of the wholesaler maketing services (sms spam iirc) set up a fake profile using the stolen identity of an nyc veterinarian on this website and lied through their teeth until they got caught, at which time biggerpockets deleted the whole thread. Whole side of that industry is just a festering pit of scumbaggery.

I know a lot of successful wholesalers that work with their legal team to get the correct disclosures upfront from the seller here in Ohio.

In an ideal world, wholesalers would not be allowed to operate anywhere, but that will never happen. There are a bunch of deals being brokered off-market and I do not want to miss out on them.
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Nathan GesnerBusiness Member
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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
6y
What's the secret? I know people do it, and I know some people that are good, moral people doing it. I just can't wrap my head around "how" they are doing it without violating the law.
You don't need a REALTOR or attorney to purchase your own property, but you do require a real estate license or law license if you want to sell on behalf of others. Wholesalers are marketing property they do not own to the public, which means they are selling real estate and should be subject to real estate law. I just don't see any way around it. The more I read, the murkier it gets and the less interested I am in working with someone that does this.
I also struggle with buying things below market value from owners that don't understand the real value. I've purchased several homes off-market, but I've always told the seller what the property was worth on the open market first, then I told them what I was willing to pay for it. Telling someone you'll pay $100,000 for their property when they don't realize it's actually worth $175,000 doesn't seem like the honest thing to do.

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Remington LymanBusiness Member
Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
6y
Originally posted by @Nathan Gesner:
What's the secret? I know people do it, and I know some people that are good, moral people doing it. I just can't wrap my head around "how" they are doing it without violating the law.
You don't need a REALTOR or attorney to purchase your own property, but you do require a real estate license or law license if you want to sell on behalf of others. Wholesalers are marketing property they do not own to the public, which means they are selling real estate and should be subject to real estate law. I just don't see any way around it. The more I read, the murkier it gets and the less interested I am in working with someone that does this.
I also struggle with buying things below market value from owners that don't understand the real value. I've purchased several homes off-market, but I've always told the seller what the property was worth on the open market first, then I told them what I was willing to pay for it. Telling someone you'll pay $100,000 for their property when they don't realize it's actually worth $175,000 doesn't seem like the honest thing to do.

You are right. They are not doing it legally but no one is doing anything about it. It seems like it is similar to speeding. If you do it carefully you can get away with it. The Division of Real Estate in Ohio does not seem to want to enforce their rules against wholesalers
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Jonathan Hasan
Member since 2019 · 57 posts · 25 votes
6y
@Nathan Gesner

Hello Nathan,

Sounds like you have also been confused by the legalities of wholesale like me. I had a post that transformed into a discourse on wholesale ethics. I have talked with people on both sides who each have their own evidence to support their conclusions.

My thinking was if I state those four points for the legal, honest way as you have in your original post then I would be able to be doing these sorts of deals ethically, keeping all parties interests at heart. I also heard from a wholesaler that I talked with yesterday that she asks people in off market deals why they don't go to the MLS and that they could probably get more money by working with a listing agent. Many of her clients had reasons for not going. I am not sure if they were good reasons or not though. Things like being ashamed at the condition of their house or being distrustful of agents. Emotion was a large factor. I guess behavioral economics is a real thing.

However, I have heard horror stories from other people saying that there were wholesalers who swindle unsuspecting home sellers out of their well deserved money. One story I heard was there was a couple in Massachussets who was selling a ranch home, three bed and two bath if i recall correctly. The wholesalers used the couples lack of knowledge to basically convince them that no one was going to be able to pay more than 220K dollars for that house when really it was worth 315K. The real estate agent I talked to managed to save the couple in time by listing the house and netting them the 310K that the house sold for. Thank god for that guy.

I honestly want to try and start in wholesale but there seems to be so much evidence for both sides that I am kind of crippled in terms of making a decision. People like Nicky and Steve make good points about spamming, lack of fiduciary responsibilities, swindling and scumbaggery in general that bolster the position that wholesalers are bad. On the flip side there are people I have met at REIA meetings who have helped sellers with their wholesale activities. The sellers were very relieved after letting go of their distressed assets and some even cried, if what she said is to be believed.

However, I am new to real estate in general and just sharing my thoughts and evidence that I have collected. I intend to do more research.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
6y
Originally posted by @Jonathan Hasan:
@Nathan Gesner

Hello Nathan,

Sounds like you have also been confused by the legalities of wholesale like me. I had a post that transformed into a discourse on wholesale ethics. I have talked with people on both sides who each have their own evidence to support their conclusions.

My thinking was if I state those four points for the legal, honest way as you have in your original post then I would be able to be doing these sorts of deals ethically, keeping all parties interests at heart. I also heard from a wholesaler that I talked with yesterday that she asks people in off market deals why they don't go to the MLS and that they could probably get more money by working with a listing agent. Many of her clients had reasons for not going. I am not sure if they were good reasons or not though. Things like being ashamed at the condition of their house or being distrustful of agents. Emotion was a large factor. I guess behavioral economics is a real thing.

However, I have heard horror stories from other people saying that there were wholesalers who swindle unsuspecting home sellers out of their well deserved money. One story I heard was there was a couple in Massachussets who was selling a ranch home, three bed and two bath if i recall correctly. The wholesalers used the couples lack of knowledge to basically convince them that no one was going to be able to pay more than 220K dollars for that house when really it was worth 315K. The real estate agent I talked to managed to save the couple in time by listing the house and netting them the 310K that the house sold for. Thank god for that guy.

I honestly want to try and start in wholesale but there seems to be so much evidence for both sides that I am kind of crippled in terms of making a decision. People like Nicky and Steve make good points about spamming, lack of fiduciary responsibilities, swindling and scumbaggery in general that bolster the position that wholesalers are bad. On the flip side there are people I have met at REIA meetings who have helped sellers with their wholesale activities. The sellers were very relieved after letting go of their distressed assets and some even cried, if what she said is to be believed.

However, I am new to real estate in general and just sharing my thoughts and evidence that I have collected. I intend to do more research.
lets be realistic.. here.. sellers are embarrassed and dont want to talk to realtors.. OK I get that.. but they will talk to random wholesaler who is going to do exactly what a realtor does.. they will not be able to sell the house without their buyers walking through it and usually having their contractor as well.. an Agent will walk through with a buyer and a contractor also.. so whats the difference ??? End of the day the wholesaler is just a middle man and not the buyer .. the agent is a middle man and not the buyer.. plus an agent will almost always get the seller more money as you probably have heard from others.. so who is really doing the seller a service.
Keep in mind sellers just dont know what they dont know.. they thinking saving a RE commission is saving them money.. when in fact they are leaving tons on the table.. the wholesalers pitch is all the same..
1. NO commissions NOPE we just make money through your equity right they are not doing it for free. and most times its way more than a RE fee or they try to get more.. now if they did it for less than a RE fee then i could see the value to the seller anything else is just the wholesaler BS.
2. close when you want to.. is on their marketing.. Agents close when they want to as well.. so nothign special there.
3. buy in as is condition.. Agents sell all sorts of OREO or as is properties nothing special there..
its all about the sellers not really understanding and getting talked into thinking they are getting more or have to not be shamed..
REALLY ?? LOL.. Now I get the wholesalers business I have I guess been doing it for 40 years. I buy low and try to sell high.. But I buy and if I dont buy we list.. both legal not grey areas to flat out illegal.. And believe me all of us in the distressed space try to get the best deal we can. ton of risk and work in this game.

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Jonathan Hasan
Member since 2019 · 57 posts · 25 votes
6y
Originally posted by @Jay Hinrichs:
Originally posted by @Jonathan Hasan:
@Nathan Gesner

Hello Nathan,

Sounds like you have also been confused by the legalities of wholesale like me. I had a post that transformed into a discourse on wholesale ethics. I have talked with people on both sides who each have their own evidence to support their conclusions.

My thinking was if I state those four points for the legal, honest way as you have in your original post then I would be able to be doing these sorts of deals ethically, keeping all parties interests at heart. I also heard from a wholesaler that I talked with yesterday that she asks people in off market deals why they don't go to the MLS and that they could probably get more money by working with a listing agent. Many of her clients had reasons for not going. I am not sure if they were good reasons or not though. Things like being ashamed at the condition of their house or being distrustful of agents. Emotion was a large factor. I guess behavioral economics is a real thing.

However, I have heard horror stories from other people saying that there were wholesalers who swindle unsuspecting home sellers out of their well deserved money. One story I heard was there was a couple in Massachussets who was selling a ranch home, three bed and two bath if i recall correctly. The wholesalers used the couples lack of knowledge to basically convince them that no one was going to be able to pay more than 220K dollars for that house when really it was worth 315K. The real estate agent I talked to managed to save the couple in time by listing the house and netting them the 310K that the house sold for. Thank god for that guy.

I honestly want to try and start in wholesale but there seems to be so much evidence for both sides that I am kind of crippled in terms of making a decision. People like Nicky and Steve make good points about spamming, lack of fiduciary responsibilities, swindling and scumbaggery in general that bolster the position that wholesalers are bad. On the flip side there are people I have met at REIA meetings who have helped sellers with their wholesale activities. The sellers were very relieved after letting go of their distressed assets and some even cried, if what she said is to be believed.

However, I am new to real estate in general and just sharing my thoughts and evidence that I have collected. I intend to do more research.
lets be realistic.. here.. sellers are embarrassed and dont want to talk to realtors.. OK I get that.. but they will talk to random wholesaler who is going to do exactly what a realtor does.. they will not be able to sell the house without their buyers walking through it and usually having their contractor as well.. an Agent will walk through with a buyer and a contractor also.. so whats the difference ??? End of the day the wholesaler is just a middle man and not the buyer .. the agent is a middle man and not the buyer.. plus an agent will almost always get the seller more money as you probably have heard from others.. so who is really doing the seller a service.
Keep in mind sellers just dont know what they dont know.. they thinking saving a RE commission is saving them money.. when in fact they are leaving tons on the table.. the wholesalers pitch is all the same..
1. NO commissions NOPE we just make money through your equity right they are not doing it for free. and most times its way more than a RE fee or they try to get more.. now if they did it for less than a RE fee then i could see the value to the seller anything else is just the wholesaler BS.
2. close when you want to.. is on their marketing.. Agents close when they want to as well.. so nothign special there.
3. buy in as is condition.. Agents sell all sorts of OREO or as is properties nothing special there..
its all about the sellers not really understanding and getting talked into thinking they are getting more or have to not be shamed..
REALLY ?? LOL.. Now I get the wholesalers business I have I guess been doing it for 40 years. I buy low and try to sell high.. But I buy and if I dont buy we list.. both legal not grey areas to flat out illegal.. And believe me all of us in the distressed space try to get the best deal we can. ton of risk and work in this game.

Jay,

Thank you for your response.

Please keep in mind that I am not trying to start arguments with anyone. Maybe I am misinterpreting the tone of your passage and if that's the case I apologize. I am just trying to share what I learned with him.

The wholesaler I talk to does full disclosure. She asks people why they don't go to the MLS because normally they would get more money if they had the assistance of a listing agent. Again, for the reasons I stated above (I guess you could say dumb reasons) they don't go find a listing agent. She says most if not all the sellers she has helped were grateful for her services. However, she is just one example. I am still learning about what benefits a seller might get from people like her.

I know I might be a bit repetitive at times but I am trying to get the full story. You do make good points though. A seller for the most part benefits more from the listing agent then a wholesaler. I still have to find counter evidence for that point and maybe there is none.

Thank you again for the discourse.

Sincerely,

Jonathan Hasan

3 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
6y
Originally posted by @Jonathan Hasan:
Originally posted by @Jay Hinrichs:
Originally posted by @Jonathan Hasan:
@Nathan Gesner

Hello Nathan,

Sounds like you have also been confused by the legalities of wholesale like me. I had a post that transformed into a discourse on wholesale ethics. I have talked with people on both sides who each have their own evidence to support their conclusions.

My thinking was if I state those four points for the legal, honest way as you have in your original post then I would be able to be doing these sorts of deals ethically, keeping all parties interests at heart. I also heard from a wholesaler that I talked with yesterday that she asks people in off market deals why they don't go to the MLS and that they could probably get more money by working with a listing agent. Many of her clients had reasons for not going. I am not sure if they were good reasons or not though. Things like being ashamed at the condition of their house or being distrustful of agents. Emotion was a large factor. I guess behavioral economics is a real thing.

However, I have heard horror stories from other people saying that there were wholesalers who swindle unsuspecting home sellers out of their well deserved money. One story I heard was there was a couple in Massachussets who was selling a ranch home, three bed and two bath if i recall correctly. The wholesalers used the couples lack of knowledge to basically convince them that no one was going to be able to pay more than 220K dollars for that house when really it was worth 315K. The real estate agent I talked to managed to save the couple in time by listing the house and netting them the 310K that the house sold for. Thank god for that guy.

I honestly want to try and start in wholesale but there seems to be so much evidence for both sides that I am kind of crippled in terms of making a decision. People like Nicky and Steve make good points about spamming, lack of fiduciary responsibilities, swindling and scumbaggery in general that bolster the position that wholesalers are bad. On the flip side there are people I have met at REIA meetings who have helped sellers with their wholesale activities. The sellers were very relieved after letting go of their distressed assets and some even cried, if what she said is to be believed.

However, I am new to real estate in general and just sharing my thoughts and evidence that I have collected. I intend to do more research.
lets be realistic.. here.. sellers are embarrassed and dont want to talk to realtors.. OK I get that.. but they will talk to random wholesaler who is going to do exactly what a realtor does.. they will not be able to sell the house without their buyers walking through it and usually having their contractor as well.. an Agent will walk through with a buyer and a contractor also.. so whats the difference ??? End of the day the wholesaler is just a middle man and not the buyer .. the agent is a middle man and not the buyer.. plus an agent will almost always get the seller more money as you probably have heard from others.. so who is really doing the seller a service.
Keep in mind sellers just dont know what they dont know.. they thinking saving a RE commission is saving them money.. when in fact they are leaving tons on the table.. the wholesalers pitch is all the same..
1. NO commissions NOPE we just make money through your equity right they are not doing it for free. and most times its way more than a RE fee or they try to get more.. now if they did it for less than a RE fee then i could see the value to the seller anything else is just the wholesaler BS.
2. close when you want to.. is on their marketing.. Agents close when they want to as well.. so nothign special there.
3. buy in as is condition.. Agents sell all sorts of OREO or as is properties nothing special there..
its all about the sellers not really understanding and getting talked into thinking they are getting more or have to not be shamed..
REALLY ?? LOL.. Now I get the wholesalers business I have I guess been doing it for 40 years. I buy low and try to sell high.. But I buy and if I dont buy we list.. both legal not grey areas to flat out illegal.. And believe me all of us in the distressed space try to get the best deal we can. ton of risk and work in this game.

Jay,

Thank you for your response.

Please keep in mind that I am not trying to start arguments with anyone. Maybe I am misinterpreting the tone of your passage and if that's the case I apologize. I am just trying to share what I learned with him.

The wholesaler I talk to does full disclosure. She asks people why they don't go to the MLS because normally they would get more money if they had the assistance of a listing agent. Again, for the reasons I stated above (I guess you could say dumb reasons) they don't go find a listing agent. She says most if not all the sellers she has helped were grateful for her services. However, she is just one example. I am still learning about what benefits a seller might get from people like her.

I know I might be a bit repetitive at times but I am trying to get the full story. You do make good points though. A seller for the most part benefits more from the listing agent then a wholesaler. I still have to find counter evidence for that point and maybe there is none.

Thank you again for the discourse.

Sincerely,

Jonathan Hasan

we all have thankful clients.. its part of the bizzness.. I did foreclosure rescue for about a decade before it became illegal / or basically illegal here on the west coast.. sat with many a person 3 days from losing their home.. And I rescued it.. pulled it from the fire. Came up with 20 to 100k in cash in 24 hours to cure the default that type of thing.. situation they could never pull off or 97% of wholesalers out there and many times they were in dire straights because the wholesaler could not perform they had no money of their own.
I remember one where they showed me a deed the people actually deeded it to this wholesaler for 10 dollars.. I explained to them did you know you just signed your house away and of course they did not.. they gave me the ladys number I told her you get to the court house and deed it back by tomorrow at 12 or I am calling the DA and filing charges.. they deeded it back.. I can go on and on .. of all the weird crap that people with no experience in the business pull on folks.. And don't get me started on the out right thieves like this lady i just mentioned.

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2 Reply
Jonathan Hasan
Member since 2019 · 57 posts · 25 votes
6y
Originally posted by @Jay Hinrichs:
Originally posted by @Jonathan Hasan:
Originally posted by @Jay Hinrichs:
Originally posted by @Jonathan Hasan:
@Nathan Gesner

Hello Nathan,

Sounds like you have also been confused by the legalities of wholesale like me. I had a post that transformed into a discourse on wholesale ethics. I have talked with people on both sides who each have their own evidence to support their conclusions.

My thinking was if I state those four points for the legal, honest way as you have in your original post then I would be able to be doing these sorts of deals ethically, keeping all parties interests at heart. I also heard from a wholesaler that I talked with yesterday that she asks people in off market deals why they don't go to the MLS and that they could probably get more money by working with a listing agent. Many of her clients had reasons for not going. I am not sure if they were good reasons or not though. Things like being ashamed at the condition of their house or being distrustful of agents. Emotion was a large factor. I guess behavioral economics is a real thing.

However, I have heard horror stories from other people saying that there were wholesalers who swindle unsuspecting home sellers out of their well deserved money. One story I heard was there was a couple in Massachussets who was selling a ranch home, three bed and two bath if i recall correctly. The wholesalers used the couples lack of knowledge to basically convince them that no one was going to be able to pay more than 220K dollars for that house when really it was worth 315K. The real estate agent I talked to managed to save the couple in time by listing the house and netting them the 310K that the house sold for. Thank god for that guy.

I honestly want to try and start in wholesale but there seems to be so much evidence for both sides that I am kind of crippled in terms of making a decision. People like Nicky and Steve make good points about spamming, lack of fiduciary responsibilities, swindling and scumbaggery in general that bolster the position that wholesalers are bad. On the flip side there are people I have met at REIA meetings who have helped sellers with their wholesale activities. The sellers were very relieved after letting go of their distressed assets and some even cried, if what she said is to be believed.

However, I am new to real estate in general and just sharing my thoughts and evidence that I have collected. I intend to do more research.
lets be realistic.. here.. sellers are embarrassed and dont want to talk to realtors.. OK I get that.. but they will talk to random wholesaler who is going to do exactly what a realtor does.. they will not be able to sell the house without their buyers walking through it and usually having their contractor as well.. an Agent will walk through with a buyer and a contractor also.. so whats the difference ??? End of the day the wholesaler is just a middle man and not the buyer .. the agent is a middle man and not the buyer.. plus an agent will almost always get the seller more money as you probably have heard from others.. so who is really doing the seller a service.
Keep in mind sellers just dont know what they dont know.. they thinking saving a RE commission is saving them money.. when in fact they are leaving tons on the table.. the wholesalers pitch is all the same..
1. NO commissions NOPE we just make money through your equity right they are not doing it for free. and most times its way more than a RE fee or they try to get more.. now if they did it for less than a RE fee then i could see the value to the seller anything else is just the wholesaler BS.
2. close when you want to.. is on their marketing.. Agents close when they want to as well.. so nothign special there.
3. buy in as is condition.. Agents sell all sorts of OREO or as is properties nothing special there..
its all about the sellers not really understanding and getting talked into thinking they are getting more or have to not be shamed..
REALLY ?? LOL.. Now I get the wholesalers business I have I guess been doing it for 40 years. I buy low and try to sell high.. But I buy and if I dont buy we list.. both legal not grey areas to flat out illegal.. And believe me all of us in the distressed space try to get the best deal we can. ton of risk and work in this game.

Jay,

Thank you for your response.

Please keep in mind that I am not trying to start arguments with anyone. Maybe I am misinterpreting the tone of your passage and if that's the case I apologize. I am just trying to share what I learned with him.

The wholesaler I talk to does full disclosure. She asks people why they don't go to the MLS because normally they would get more money if they had the assistance of a listing agent. Again, for the reasons I stated above (I guess you could say dumb reasons) they don't go find a listing agent. She says most if not all the sellers she has helped were grateful for her services. However, she is just one example. I am still learning about what benefits a seller might get from people like her.

I know I might be a bit repetitive at times but I am trying to get the full story. You do make good points though. A seller for the most part benefits more from the listing agent then a wholesaler. I still have to find counter evidence for that point and maybe there is none.

Thank you again for the discourse.

Sincerely,

Jonathan Hasan

we all have thankful clients.. its part of the bizzness.. I did foreclosure rescue for about a decade before it became illegal / or basically illegal here on the west coast.. sat with many a person 3 days from losing their home.. And I rescued it.. pulled it from the fire. Came up with 20 to 100k in cash in 24 hours to cure the default that type of thing.. situation they could never pull off or 97% of wholesalers out there and many times they were in dire straights because the wholesaler could not perform they had no money of their own.
I remember one where they showed me a deed the people actually deeded it to this wholesaler for 10 dollars.. I explained to them did you know you just signed your house away and of course they did not.. they gave me the ladys number I told her you get to the court house and deed it back by tomorrow at 12 or I am calling the DA and filing charges.. they deeded it back.. I can go on and on .. of all the weird crap that people with no experience in the business pull on folks.. And don't get me started on the out right thieves like this lady i just mentioned.

It does seem like wholesaling does attract a lot of scumbags. Some people have no qualms with screwing people over. If I did decide to get into this business, those are the last types of people I want to associate with. About 5 years ago I was in relatively large credit card debt, 6000 or so and I was cash poor and living with my parents while going to university. To say that took a toll on my health is an understatement. I know that I am luckier than others in being able to go to university and live with my parents but being stuck with debt and being cash poor left me with a lot of stress. Luckily I managed to get my degree and get an engineering job for 8 months before covid hit but it really hit me hard being poor.

I can't even imagine the hell people go through when their house is tied up in a contract by an immoral individual who bullies the seller to concede to his/her terms. Or when a seller couple loses a huge chunk of equity because they weren't informed of their houses true value. I feel for those sellers. All that potential money taken away that could have gone to their children's education fund,their retirement, their down payment on a new house, money for debt repayment taken away by scumbags who don't give two sh*ts about anyone but themselves.

I do empathize with sellers and their plight and maybe its my responsibility to bring change. Or maybe I am just being a dumb kid who thinks in idealistic terms and can't come to grips with reality. I don't know but whatever the case I will try my damnedest to be a person that people would be happy to work with.

However, words are cheap. I want to prove it with action but I need to do a lot more research first.

2 Reply
Darius Ogloza
Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes
6y
@Jonathan Hasan

I am sure loan sharks could tell you about all of the people that their service "helped" and how grateful those people were afterward, how some cried, etc. Not saying anything about wholesaling as I have no personal experience but that's not a data point I would cling to as a defense.
2 Reply
Jonathan Hasan
Member since 2019 · 57 posts · 25 votes
6y
Originally posted by @Darius Ogloza:
@Jonathan Hasan

I am sure loan sharks could tell you about all of the people that their service "helped" and how grateful those people were afterward, how some cried, etc. Not saying anything about wholesaling as I have no personal experience but that's not a data point I would cling to as a defense.

Sorry but can you tell me how wholesaling and being a loan shark are equivalent?

The person I talked to about wholesale says the sellers were relieved because they got out of a distressed asset. No blemish on their credit report and they helped a family get liquid cash to do with as they pleased.

For a loan shark, I am unsure of how having a payday loan say with 1000% interest would have anyone being grateful. I guess they would be happy to have money to feed their family temporarily but then get hit with the interest and then they wouldn't be as grateful or would severely regret their actions. Also maybe a loan shark chases after someone with a bat who refuses to pay or can't maybe in a seedy part of town or something. Sorry but the person I talk to doesn't look like nor talks like a person who would do that. I met her through a REIA if that helps the argument in anyway and she was cordial throughout the meeting. She was invited by veterans with decades of experience to speak.

Jay makes a good argument though that sometimes wholesalers take more equity from families through exorbitant wholesale fees. Or ties up a contract to bully people, I guess you can argue that is similar in a way. The person I talked to has had many happy sellers.

Of course, I could have misinterpreted your argument so please correct me if I am wrong. Again, I am not trying to start fights here. I am trying to learn from anyone who is willing to talk to me.

0 Reply
Darius Ogloza
Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes
6y
You missed my point. Judging a profession or strategy by the reaction of a few anecdotal stories is not decisive (or even meaningful) in determining whether the practice or profession is one that meets your ethical standards. I am sure there are a few genuinely happy souls in hell.
1 Reply
Jonathan Hasan
Member since 2019 · 57 posts · 25 votes
6y
Originally posted by @Darius Ogloza:
You missed my point. Judging a profession or strategy by the reaction of a few anecdotal stories is not decisive (or even meaningful) in determining whether the practice or profession is one that meets your ethical standards. I am sure there are a few genuinely happy souls in hell.
Darius,
Thank you for your response. Sorry, this one might be a bit long but I would appreciate your feedback since you are a real estate expert.

As a new person to real estate, I have been actively trying to learn about both sides of the story when it comes to wholesale. I have been trying to avoid confirmation bias in regards to this topic. I have been actively seeking out arguments that are for and against wholesaling. I can't really comment on the religious aspect of your passage but I will try and present my arguments to counter. To be honest though, they are mostly just questions.
Couldn't a person say that people who don't really understand wholesaling are doing exactly what you say I am doing? They hear about a couple of bad wholesalers and now all of a sudden any wholesaler is bad and immediately conclude that they are immoral cash grabbers? Why don't these people bother doing research and trying to find ethical wholesalers or even just do more research on the issue? Why is their a wholesale calculator on bigger pockets if the profession is so bad or unethical? Couldn't someone make the argument that BP is facilitating criminal activity if what is being said is true? This might be a stretch but the only reason I see someone going to click that link to the calculator is to test it out or to generate reports to convince cash buyers about the worthiness of a deal so they can commence business.
I also have not talked to many real estate agents either. The ones I talked to all seemed to be upstanding people who care about others based on their stories. Is it right to say all real estate agents are good? That seems to be the assumption that real estate agents are better, ethical and more honorable than wholesalers Is it because they are bound by the fiduciary agreement? Does that hold any sway over someone with no ethics in that field? Does the fiduciary agreement really hold any power? Barrier to entry for being a real estate agent as far as I can tell for my state is like 200 dollars for the application fee, licensing examination, fingerprinting and the background check. So it honestly seems like anyone with criminal intentions could go both routes.
I am honestly still trying to reach out to other wholesalers in my area to learn more. I talked with about 3 more people who are in this business who say that they have helped people as well. I guess trust seems to be the main issue. I still need to find sellers to see how they benefited and perhaps some listing agents as well.
Thank you for the discourse. I do hope I understood your main point and sorry for misinterpreting your first response.
Sincerely,
Jonathan Hasan

0 Reply
Christi HawkinsPro Member
Columbus, OH · Member since 2017 · 237 posts · 142 votes
6y
@Jonathan Hasan I know several good wholesalers as well. They are professional and completely transparent. In regards to scumbags, some of the biggest scumbags I’ve ever known were Realtors and/or Landlords. Every industry has them The only thing you can control is how you operate and with whom you surround yourself
0 Reply
Frank Jiang
Investor · San Diego, CA · Member since 2014 · 592 posts · 765 votes
6y
One thing I've learned as I become older is that there is often little functional difference in terms of results between ignorance and dishonesty. If there's one thing the wholesaling industry will never be short on, it's ignorance.
Many new wholesalers don't truly understand what it would mean if they lock up a contract and fail to procure a buyer. They aren't thinking that far ahead.
0 Reply
Jonathan Hasan
Member since 2019 · 57 posts · 25 votes
6y
Originally posted by @Christi Hawkins:
@Jonathan Hasan I know several good wholesalers as well. They are professional and completely transparent. In regards to scumbags, some of the biggest scumbags I’ve ever known were Realtors and/or Landlords. Every industry has them The only thing you can control is how you operate and with whom you surround yourself
Hello Christi, thanks for weighing in

Can you tell me more about how they are being completely transparent? I guess that seems to be the issue holding people up, including me. I thought that being full disclosure is what all wholesalers do by default...
Sincerely,
Jonathan Hasan

0 Reply

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