Wholesaling in THIS market?

14 Replies

Hi everyone, I'm looking to get into wholesaling- I'm over the paralysis analysis and want to get started! I know it can work with distressed owners/pre-foreclosure or who need cash fast. I'm looking to hear from those who are outside of that audience- how are you marketing to others without pulling the wool over the eyes? I don't want to genuinely be in this to screw anybody.

AS a Licensed professional you would be held to a much higher standard if ever called to the matt.
Also check with your state many have very specific rules for working with those residential owners that are in foreclosure.

Thank you! I'm merely curious how others are practicing in this environment. I want to be in this to help others, not use a false scheme, yet want to learn from other's strategies in this market.

I hear ya.  but frankly the most help people will get in a distress situation is from their CPA who gives them a referral to a very good Broker.. or their lawyer who does the same.. The reality is we are all in this to buy low sell high. So at that point seller is losing money.. So thats why I said your held to a higher standard your job is to help people maximize their investment and in TODAYS market that is exposing it to the Open market not just a wholesaler buyers list which we all know their buyers have to make a significant profit plus the wholesaler has to make a good profit that is not helping the seller frankly.  Now if your working in the HOOD and war zones this is different.

@Kimberly Lima   Unlicensed wholesaling, as it's commonly described (get a property under contract that you have no intention of actually buying, find an end buyer willing to pay more, assign the contract and collect a fee) is illegal in Massachusetts - and most other states. 

To market a property that you don't already own (as in your name is already on the title) is a license-required activity.  That means even discussing a property being for sale.  For those who try to squirm around the law by saying "we're not marketing a property, we're marketing a contract", the Mass Real Estate Board has rejected that argument.

You're instinct about the potential of screwing people is spot on.  Wholesalers make their profit by stealing equity from property owners.  They do this either by lying about the true value of the property or by finding sellers who are so desperate to get out of a bad situation that they'll take a bad offer just to put out whatever fire is going on around them.

For the record, Mass law is crystal clear.  It can be found here: https://malegislature.gov/Laws...

The really odd thing is that wholesalers do almost the same job as Realtors.  Find a property, put it on the market, find a buyer, negotiate the details and bring it to a close.  The difference is that Realtors are subject to laws that the state puts in place to protect consumers from shady operators - like wholesalers.

The license exam in Mass is shockingly easy.  I studied and was told "this is a 4 hour exam".  I figured that it must be brutal, but it wasn't so.  I finished both the state and federal parts in 30 minutes.  10 minutes later, I was on the sidewalk with a real estate license in my hand.

My advice is to get your license and operate within the law instead of working in the shadows.

Originally posted by @Jay Hinrichs :
I hear ya.  but frankly the most help people will get in a distress situation is from their CPA who gives them a referral to a very good Broker.. or their lawyer who does the same.. The reality is we are all in this to buy low sell high. So at that point seller is losing money.. So thats why I said your held to a higher standard your job is to help people maximize their investment and in TODAYS market that is exposing it to the Open market not just a wholesaler buyers list which we all know their buyers have to make a significant profit plus the wholesaler has to make a good profit that is not helping the seller frankly.  Now if your working in the HOOD and war zones this is different.

What about the people who don't want to put their house on the open market for privacy reasons, don't want to have to do showings or deal with open houses, or don't want to have to pay 6-8% in closing and commissions? I'm talking to a guy right now who doesn't want to work with an agent (even after I suggested he does because price is the most important thing to him) and he's pretty adamant about working with investors/wholesalers directly because he feels like he has more control over the situation and since so many are calling him he's able to create a bit of a bidding war for his property. 

 

Originally posted by @Duane Alexander :
Originally posted by @Jay Hinrichs:
I hear ya.  but frankly the most help people will get in a distress situation is from their CPA who gives them a referral to a very good Broker.. or their lawyer who does the same.. The reality is we are all in this to buy low sell high. So at that point seller is losing money.. So thats why I said your held to a higher standard your job is to help people maximize their investment and in TODAYS market that is exposing it to the Open market not just a wholesaler buyers list which we all know their buyers have to make a significant profit plus the wholesaler has to make a good profit that is not helping the seller frankly.  Now if your working in the HOOD and war zones this is different.

What about the people who don't want to put their house on the open market for privacy reasons, don't want to have to do showings or deal with open houses, or don't want to have to pay 6-8% in closing and commissions? I'm talking to a guy right now who doesn't want to work with an agent (even after I suggested he does because price is the most important thing to him) and he's pretty adamant about working with investors/wholesalers directly because he feels like he has more control over the situation and since so many are calling him he's able to create a bit of a bidding war for his property. 

 

Duane  very few houses these days have open houses the seller can instruct the agent NO OPEN houses. so thats how they handle that.

and of course you want to pick a realtor who is investor centric like I do. If I got a deal and I get many that I dont want to list on MLS I call the 2 or 3 top Brokers in my network in the city I have these in and they will have a contract to me usually within 24 hours.. With no open house No running Investors through the house calling them inspectors or any of the other white lies that are done in wholesaling by non licensed folks.

But your absolutely correct there are defiantly certain cultural aspects and that will drive some sellers to think they are in control or getting more money but we all know that selling through a wholesaler Rarely if ever is going to get the seller top dollar especially in this market. 

I know man we own lots of property in lots of markets I get wholesalers calling me literally daily I get at least 5 direct mails per day.. 

they all pretty much went to the same guru school..  And Frankly the vast majority have no clue.

So just last week I get yet another call and accidently answer let them go through their pitch.. I said sure I will sell. and of course everything we own is for sale..  they will NEVER say what they will pay.. they want you to say what you want up front in the hopes that your stupid have no clue and they will rip a fat deal.. ( you know this is true LOL)  So on this house in Balt city its rented 1000 a month worth at least 70 to 80k .. I tell her I will take between 7k and 12k for it.. this does not phase her.. At that point she should have said were can I send the contract.. But no she says well I dont know if its worth that and whats the condition and goes through a whole laundry list then is going to check with her partner to see if they can squeeze 12k out of it..  

So you know thats the game.. But I have met a few other wholesalers that were flat *** honest and to the point and I let them liquidate some homes we had but they were all licensed as well.. 

But anyway.. thats my take on it from someone who has been funding this wholesaler type inventory since 2002 starting in Detroit and working in 20 plus states. 

The line that they just want to help these people is just frankly disingenuous It would be much more acceptable and believable if they just came out with it.. they are a for profit business .. And followed the laws on the books.. like we all strive to do. 

 

Originally posted by @Kimberly Lima :

@Charlie MacPherson I've seen a lot of controversy about this and am working with an attorney on it. My preclusion to getting a license is having to work for a broker for 3 years, with no interest in the retail aspect. 

As a former Mass resident and Realtor (exiting the business in December 2020), I have personally run this by both a 26+ year real estate attorney and the Mass Board of Registration in Real Estate.  

The only controversy is from people who are looking to circumvent the law.

The law itself is 100% unambiguous.  Marketing a property you don't already own in expectation of any sort of benefit requires a real estate license.

Wholesaling as described is simply unlicensed real estate brokering and the state of Massachusetts clearly says it's illegal.  The state wants consumers to have protection against unethical operators who would swindle them out of their equity.

By the way, unlicensed real estate brokering / wholesaling lights a couple of different fuses you should be aware of.  

First, if you put a property under contract when you don't have both the intent and ability (funds) to close on it subjects you to charges of "Fraud in the Inducement" (a tort).  You fraudulently caused the seller to enter into a contract.  You represented that you could fulfill your obligations under that contract when you knew that you could not.  See: https://www.law.cornell.edu/we...

Next, ask your attorney what he says about contracts formed for an illegal purpose.  He'll tell you that they're void (not just voidable, but void) at their inception.  So you might think you have a valid contract with a victim seller, but if he gets wind of your scheme, he can tear the contract up without recourse.  See: https://www.upcounsel.com/what...

Do the right thing.  Get licensed with a broker who will support your investing goals.  They're out there if you look.  And an important side benefit is that you'll have the guidance of a broker who will keep you out of trouble by making sure that you follow the law to the letter.

 

@Kimberly Lima there will always be a percentage of people, both sheets and buyers, that don't want to follow the rules or the crowd.

We liked wholesaling to pawn shops. Go watch the show Pawn stars. Even though it's a fake show, the premise is that a motivated seller agrees to sell something NOW for less than the market value they are told it is worth.

Real estate can be the same way, some sellers will always accept less cash NOW rather than wait an unknown amount of time to get the highest value.

So, a good wholesaler doesn't have to steal equity from a seller, they can just offer a quick close for an under market price.

@Kimberly Lima I've been buying properties for several months now, and I've noticed that a lot of sellers will do an off market deal or sell to a wholesaler simply because they just don't want to deal with listing it on the MLS. I asked a property management company "why would they take so much less for their property when they could just list it on MLS and get more and get multiple bids?" He said a lot of people just want it to be easy and quick and they will take less money for that to happen. Another motivation to sell the property this way is that they don't want their neighbors coming into their house when it's publicly listed on the MLS. I think it's hilarious that this is such a big motivation, but people literally just don't want their neighbors to see the inside of their house for privacy reasons, so they will sell it for less off market to maintain their privacy. I think a big market for wholesalers is people who have inherited a property from a parent who has passed away. They don't really care about getting the highest amount of money, they just want it off their hands the quickest and most surefire way possible. So if you can make it easy, they will be happy with taking less and everybody wins.

@Kimberly Lima I like to start with why they shouldn’t sell to me. First I say they can get more money from the market, make sure they don’t have any parties that would buy at market rate and then say what you would need to buy the house for to make your numbers work. Make sure that they know what your daytime job is and that you are a professional. Disclose, disclose, disclose and get acknowledgment that they know what you are doing.

Wholesaling is an actual business and takes a lot of work. 
A good portion of people who attempt wholesaling fail and stop after a certain period(not to say that this will be your case).

My question is that since you are a CPA with 10+ years of experience, have you considered focusing on your job to see if you can make more money through that avenue?
Are you able to take on a second job during busy seasons?
Are you able to gain any of your own clients and charge a fee?

@Basit Siddiqi this is a big consideration for me, and thank you for bringing that up! It's definitely something I explored and want to be able to utilize my skills, however, would like to find a way to find some skin in the game of RE. I want to be able to advise my CPA clients with real world experience. Happy to chat more if you'd like!

@Kimberly Lima wholesaling is not illegal. please don't listen to the previous comment.

As someone who assigns contracts (not selling real estate), you are providing a valuable service: you assist homeowners whose properties are no longer assets; they're burdens

many homeowners need to sell because they don't have the money to fix up their home. some have inherited homes that are costing them thousands each year in taxes. some need to move quickly and don't need the equity. 

don't listen to uneducated sour grapes who bash assignments of contract.