Clarify the relationship between realtors and wholesalers?

20 Replies

As I'm studying wholesaling, a lot of advice is saying to connect with realtors. I'm still not quite sure how wholesalers and realtors collaborate to their mutual benefit. It makes sense that realtors would have the MLS access and could pass along listing information to wholesalers, but I'm confused as to how realtors benefit. It seems like we would be in direct competition. Are we trading referrals instead? I'm so confused. Can someone help me understand?

My experience thus far has been that realtors are against wholesalers saying we're just a bunch of scammers operating without a license. I say it's because we are, as you said, competition. However if you're lucky enough to actually locate a realtor that's willing to work with you it would be to your advantage. The dibble dip strategy then comes into play, meaning you both earn a commission. Good luck.

depends on your market ..  there are certain markets and asset types that wholesalers thrive in.. in other assets and markets not so much to very little activity for the wholesaler..   in those markets the I buyers have moved in.. and they close on everything first they use the same techniques IE mass market  robo call.. low ball the crap out of any seller with the hope of a big score.. but they actually close..  now in some markets they get pretty aggressive on what they pay ( the I buyers) there are a few hedge funds that i have seen move into a C D space in the mid west and upper mid west and they can be aggressive.   But by and large I think trying to network with realtors is going to be a waste of your time.

you have the realtor that has no clue as to what wholesaling is..  ( these are your agents that sell owner occ exclusively)  And then you have agents that do a lot of work in areas that are high volume whole sale areas and these agents specialize in selling these props that are going to end up as rentals sold to either turnkey providers or other buy hold investors.. And the top brokers in each market will basically only give their duds to a wholesaler they have a better list than most wholesalers and just make a few calls and sell their listings.. you know they call someone like me.  I  personally wont work with a non licensed person simply because its infected with to many beginners who don't really know the industry have no clue and are huge time sucks.. so you have that barrier .. or the wholesalers that are proficient but they sell to beginner investors who are chomping at the bit and will over pay ..

I believe the goal is for the agent to give you leads on properties that agents do not want to mess with. The wholesaler then cuts the agent in if deals are closed. 

I'm a noob but that is how I understand the relationship to work.

Yes Dominique, as you can see there is a lot of contention between realtors and wholesalers. Case in point, but hey he's only acting on en-stinks and it does, plus there's a hole in what he says. LOL

I would venture to say every successful entrepreneur became successful by ignoring what the competition says and sing his own song. So do whatever works best for you, and once more, good luck.

@Sam Compton yeah, that makes sense. That's what a lot of the advice I was reading seemed to be getting at. I just wonder, if the wholesaler isn't the one who sells the house after all's said and done, how does the realtor get commission? I'm not expecting you to know, just thinking out loud. Thanks for your insight!

@Randall E Collins It's good to know up front that there's contention there so I'll be able to move forward with my eyes wide open. You're right, I'll have to feel out what works best. Thanks for the well-wishes!

Good morning Dominique, I'll try to answer your question to Sam. I'm uncertain what type of contract a realtor does with the seller. I've never done a sale through a realtor, but I would imagine the realtor would draft a Purchase and Sale contract with the wholesaler listed as the buyer. The wholesaler would then assign the contract to the end buyer and/or business partner.  For all purpose and intent the wholesaler IS the buyer. Even though the wholesaler has assigned the contract, he/she will remain listed on the contract as the buyer up until closing. At closing the title company would ensure that both the realtor and wholesaler get paid. That's just my guess, but sounds right to me.

I was under the impression that it was a gentlemen's agreement. You bring me leads, I split wholesale fee. win/win 

Then, said agent is used as selling agent after rehab???

I am basing this off of reading and not actual experience so take that for what its worth.

I have a question; out of curiosity, is it a bad move, on the wholesaler, to go around the listing agent on a property (on mls) ans straight to the seller? As in, just contact the seller directly to ask them to sell to you (wholesaler)?

Realtors have buyers that need a home and it doesn't matter where it comes from: the MLS, FSBO, wholesaler, etc. The commission for the agent will need to be negotiated since the realtor will often handle the bulk of the transaction. Also, if you choose to wholesale and run into sellers that want top dollar, you can refer these leads to an agent for a referral fee and it is a win/win.

@Dominique Nolen it usually goes both ways: 

The agent sends to the wholesaler the leads he doesn't want to deal with (mostly badly damaged properties where the agent knows he's not gonna be able to obtain conventional financing for his buyer). Most agents like the fancy listings while wholesalers shine on distressed assets. The wholesaler ends up kicking the agent a referral fee out of his assignment whenever he closes. 

On the other side, wholesalers spend a lot of money advertising to distressed homeowners (cold calling, texting, postcards ppc...) but only a small percentage of the leads coming in are going to fit the wholesale model (less than 10%), instead of throwing the residual 90% away the wholesaler can work out a referral agreement with an agent to recoup some of these lost marketing dollars. 

Sadly most realtors don't realize the value in this kind of partnership, hence why more and more wholesalers are getting licensed and keep everything in-house. 

I strongly believe that the close-minded agents who are not ready to provide several options (listing, cash offer, seller financing, subto) to a homeowner are ultimately going to be weed out of the market at some point. 

@Randall E Collins  You speak to one of my main points, which is that I'm not sure that we as wholesalers could control whether or not the end buyer even uses an agent, so no real way to guarantee they get commission on the back end. Thanks for the idea, I'll dig into it some more.

@Nick C. Yikes. From that perspective, I see more and more why so many people in the industry think wholesalers are sleazy. Thanks for the heads up.

@Sam Compton I like the the win/win idea you laid out. I'm wondering if we'd send realtors leads for sellers who aren't willing to or can't sell their properties at a deep discount but still want to sell.

@Brandi Vigil you touched on the above point. Also, I hadn't even thought about the perspective of them having buyers who are looking for homes. Especially in the current market, and especially in the Twin Cities where we're scrambling for inventory, that makes lots of sense. Thanks for your input.

The tricky part about giving realtors leads as a wholesaler is that since wholesalers are not licensed, it is technically illegal for licensed agents to pay unlicensed parties who play a role in the deal. David Greene talked about this on a real estate Q&A podcast recently (BP Show 501). He also has an older Q&A with a couple questions about wholesaling that he answered (BP Show 473). The youtube videos I hyperlinked have timestamps in the description so you can skip to the questions about wholesaling. I think David does a pretty good job of explaining these things while being mostly unbiased, although he obviously is an agent so keep that in mind with his responses.

What @Evan Kraljic said is correct, a realtor cannot pay commissions to a wholesaler, but as mentioned by others the relationship is sharing leads.  

A wholesaler can refer sellers to realtors who want top market value and a realtor can share leads to the wholesaler for sellers that want a quick as-is sale.

@Evan Kraljic @Ramandeep Sidhu ideally every wholesaler should get licensed as it is the easiest way to get paid on referrals + the way wholesaling is advertised, regulations are going to kick in at some point and they won't have a choice, so better be prepared than being surprised. 

But for the ones who are not licensed yet, there are still ways to be paid for those "retail leads", you just have to sell them outright with a flat price per lead, it becomes a marketing service and is not considered as a referral since you're not sharing/splitting a commission.  

It's perfectly legal otherwise all the lead providers & marketing companies out there would need to get licensed. 

An agent can either bring you a deal (Pocket listing) and keep the commission for themselves or they could bring you a buyer. The value they bring is that either the property or the buyer is already vetted, the seller or buyer is already lined out by the realtor and you are able to capitalize on their relationships