Originally posted by @J Scott:
Originally posted by @Bill Gulley:
Seriously? This reminds me of all the brainwashed guru students on here who threaten me with "slander" lawsuits for pointing out that their high priced coaches are ripping people off. As i point out to them, their threats typically coincide with me making points that they don't like to hear but can't refute .
Like i tell my four year old -- if you don't like what someone says to you just stop talking to them. Likewise, if you don't like debating a topic on a public internet forum, just stop debating.
Anyway, here's what I take away from your last post...
Wholesaling is perfectly legal as long as:
- You call it a "quick sale" instead of "market sale".
- You keep your profits to same vague percentage that can't legally be justified or refuted. Let's just pick the number 10% out of thin air.
- Your buyer happens not to ask about where the product came from or how much it cost.
- If you buy the asset outright before not adding any value and then resell it, that's not wholesaling.
Anything I'm missing?
Harass, as you've been at this now for 4 days, there was not threat intended and I think you know that, it's just your passive aggressive style in disagreeing.
Statements such as "wholesaling is perfectly legal as long as" then you misstate my opinions into simplified statements.
This isn't a simple matter, it can be very complex, just as the law is complex and you want to boil it down to a 5th grade level, that isn't going to happen. You're missing a lot.
That 10% comes from the Goods and Services Act (of 79 if I recall and as amended) concerning pricing of services, and don't be asking where it says 10%! What is done is to compare prices of services within an industry.
Services have wide variables, expertise, knowledge, qualifications, level of services offered.
A wholesaler does, bottom line, the same thing a broker would do, facilitate a sale. The usual and customary charge for that in residential properties is 6%, it's not a rule or law, it's customary. That sets a base line from which to judge the value of the service rendered in light of the Act mentioned. I'd say it would be very difficult for a wholesaler to claim more expertise, knowledge, be better qualified than a broker or to offer any service that a broker could not accomplish.
It is not uncommon for a broker to charge 10%, especially in commercial transactions having more complexity. IMO, a distressed sale situation carries more complexity to the transaction and with the services required. It is generally acceptable for a broker to charge 10%, it's hard to justify a higher commission if that broker does nothing but facilitates a sale.
That is where the 10% figure comes from, it's not arbitrary, not out of the clear blue, but has a justifiable basis in pricing according to industry norms.
Let me help you justify just part of your thinking.
Are there justified exceptions? I think there are. A property that has an ARV of say $65,000. A remodel was started but abandoned, it's sat for five years, the roof leaks and has now destroyed the ceiling. The cost to correct the issues and bring it to market standards is say $30,000, that's just material costs. Who would buy that at $35,000 and mess with it for nothing? Not you or I !
Say that most any contractor or labor guy will want $10,000, the house is on the side of a hill, 100' from a private road with limited access. Getting materials to the project and debris up the hill is a problem. At $10,000, it's a heck of a deal.
What if we drop the price 10% to $22,500? This is probably where the owner sees the value pricing to be, initially agreeable since the owner can see the math.
It's a rural property, marketing is slow, holding time will be longer, transaction costs are not effected. A fair estimate is $3,500. We are at $19,000.
How many brokers seek out $19,000 listings? Not very many! 6% is $1,140, 10% is $1,900, at least at 10% we are getting into a discount brokerage fee.
You can't run a brokerage at these prices! Most brokers would take a $60,000 listing that may have marketing issues, that's $3,600 in commissions.
Under these circumstance a flat brokerage fee of $3,600 could be reasonable, justified and with a motivated seller, agreeable. That's 19% of the $19,000 listing!!!
What we have here is a distressed sale. We have external valuation concerns. We have marketing time concerns. We also have issues in the market as to the potential buyer, how big is that target market? As a % to the value, the availability of a broker working this property is an issue as well, there are minimum amounts to be paid to attract professional assistance.
BUT, as to a marketable property, marketable in that no extensive work is required for, say a landlord, where there are no real marketing time issues and the value is in a range sought by a facilitator of a sale, 10% is pretty much going to be the value of the service of a facilitator.
Point of most of this is, pricing an untouched property, assuming it is fairly marketable, assuming there are no other issues that require greater attention, such as curing title matters, acting in basically the same arena as a broker, the fees for services should be at that 10% level in order to justify your service fee.
A bit like the 70% rule, it depends, but it is usually applicable, but I don't buy based on guesses of a %, when there are many other variables not discussed on BP.
Most of the issue here is attitude, that you are free to charge whatever you might dream up, that thinking in real estate is totally wrong. It's popular because it's an easy way to view things, like a truck load of shoes, but real estate is not personal property. Pricing is justified, it is not arbitrary.
Interesting too Jason, you don't mind calling expensive guru materials being "predatory" but you seem to mind when pricing gets to be your back yard.
Now, if a transaction meets the definition of market value, you can't just call it a quick sale.
As to legal, wholesaling can be legal in all states, it depends on how it is done, as it is promoted on BP, that usually skirts the law or is illegal in several aspects, not just license law but much of it gets into fraudulent dealing. IMO, they just don't know or they don't care.
Wholesaling here as it is seen is done by not taking title. The price you sell something at does not define it as a wholesale transaction, if I take title, I'm selling, not wholesaling. Pricing takes into consideration the risks and rights of ownership, something wholesalers don't assume.
My last comments on this matter:
My impression is that while you obtained a license and were introduced to the social aspects of real estate, responsibilities, fair dealing, proper pricing, valuations and the like, you have either forgotten or decided that your ideas are more favorable to you. I can see that too coming from a corporate environment leans toward less social responsibility and regulatory matters where value or profits require much less justification. Whatever the market will bear thinking.
There is a big difference in dealing in real property and personal property, your applications are more in line with personal property.
I can understand that thinking being more popular with newbies and those like minded, I'm not in a popularity contest, I'm more interested in keeping people out of trouble. I'm also interested in teaching a correct approach to dealing in real estate as opposed to dealing in personal property, real estate is not like a car dealership, you simply don't get that. Maybe in another 20 years you'll understand the difference, maybe not.
(Simplistically, another car dealer does have the same type of car for sale, in real estate, there is not another property on the face of the earth that is identical or even as similar as two new or used, blue, models by the same maker with the same equipment and condition. There is no marketable difference. And, real estate is a necessity, a car is not. That's why real estate is treated differently than personal property.)
Hopefully Jason, you further comments won't be insinuating that I deal in a predatory matter or be related to my integrity, I don't think anyone on here believes that I deal unfairly, so that may look a little foolish. I also have thick skin and shrug off foolish remarks. So, I'm done. My views are clearly made on this matter.
Now, if anyone else has a question or constructive comment, be happy to address it. :)