All Forum Posts by: Account Closed

Check out this great thread by Chris Piper at https://www.biggerpockets.com/forums/12/topics/862964-wholesaling-101-how-to-wholesale-for-beginners

I posted a link to it on my own recent thread, which you might also find useful, it has links to some of the resources I have checked recently https://www.biggerpockets.com/forums/93/topics/1197244-how-to-do-wholesaling-right-in-maryland-east-coast-and-nationwide

Piper's thread is where I started my research and am very grateful to this person for dedicating his time to share so much of a valuable information. I wish he was still around. But you definitely need to do your own research, times change and some of the things he suggested that were valid 4 years ago may no longer be valid today.

Spend some quality time on your research first, I would recommend to give yourself a month to spend 4 to 8 hours a day just gathering as much information you can, networking, making connections before you are ready to go. When you are ready, set your revenue and marketing goals and launch. You should have a foundation by then to build on as you go.

Below are my answers (as a novice I emphasize that I am not an expert wholesaler, I just share my opinion which you may or may not find useful to your purposes).

1. It does. Successful people flip tens of properties a month. But it's neither cheap nor easy to do. You have to have a budget for marketing. You have to set realistic expectations. You have to plan your steps ahead of the time and know what you are doing before you plunge.

2. I would suggest couple of ways. One is to get access to MLS. If you don't have REA license talk to investor friendly realtor, some will allow you to use MLS to do your comps. If you can't do it, then just have at least one trusted realtor in your network who will do comps for you. You will send them prop address and they will email you back a report, with list of similar houses sold in recent months, advise you on temperature of the market and so on. Second option is to go to HML. Hard money lender finance rehab projects all day long, so they are pretty good with estimating ARV, profit margins and etc. If they refuse to finance property purchase and rehab then you probably have a bad deal not worth its asking price in a wholesale market. Estimating repairs is also not so tough. Ask around your gen contractors, what is the cost of cosmetic repair per sq foot in the area of your interest. I believe where I am located it's around $30/sq ft, so if property is sound in general but needs just light renovation. Using a formula you can multiply the cost of repair per sq feet by sq footage of the house and you will get a rough estimate of the repair costs. You can also use a software to do more accurate estimates on your own , once you see the property and know exactly what needs to be repaired and how you want it to be repaired. Finally, you can bring a contractor or shoot him an email with 30-40 images with a video of the property and ask him how much he would charge to fix it to your expectations. Sometimes you will have to move fast and won't have time for it, so try to learn as much as you can to do accurate repair estimates on your own. Read Chris Piper's thread, he tells how he did it.

 3.I am not an attorney, and this is not a legal advise. You should consult one with any legal questions you have just to be on a safe side.  What follows is my general understating, as a layman,  and personal opinion.

The most obvious thing is not to misrepresent yourself as agent or broker, as someone who represents anyone in the transaction. If you don't have a license you can't represent anyone but yourself. The other is be sure NOT to market the house, it's not yours until you own it. If you seek to assign a contract your right to purchase is what you sell as an assignment, with your fee added to it. Be honest with sellers. Never pretend to be an expert to value their property. You can make whatever offer you want to make based on your math and MAO, but don't lie them by falsely claiming that their property is worth less than X dollars in a market. Just make an offer, explain that as investor that is what you can afford to pay and let them decide what to do next. Come October 1, 2024 you will also have to disclose in Maryland that you are a wholesaler , not an end buyer, if your intention is to flip the contract on short notice. Do not market to public. As to protection of deal, your purchase contract should do it. Once you have a contract to buy you have 30 days to close it, and your contract should be enforceable in court (that's another reason you should not do anything illegally, so that you can bring other party to court and enforce the term of the contract if they act in bad faith).

4. See Chris's thread I referenced above, he has links to purchase and assignment contracts. You can print those as templates, show to your local closing attorney and ask what if any suggestions they would make to better protect you and stay compliant with your local laws. 

I did some research on marketing and here is what I figured so far.

You should project your marketing costs to be around 22% of your revenue. So, if your revenue goal is $100K then you should plan to spend $20K+ per month. But if you want to start slow, have limited capital and realistically can't afford to pay $20/mo for the next year then set a target of $10K rev./mo (1 deal per month @ $10K average), with $2200 budget a month. You will have to investigate various marketing options out there (i don't endorse and recommend any and will not do so until I have a year worth of data to analyze and share any opinion on it).

Keep in mind that Marketing Costs are just part of your overall costs, it doesn't include time spend calling, texting, following up, talking to sellers/buyers, closing the deal and etc. It doesn't cover the cost of gas you put in your car to drive and see the property yourself. And it certainly doesn't cover the closing costs you may have to front to acquire the property. 

Remember, transparency with sellers has nothing to do with finding cash buyers, so you can pretty much ignore "transparency with sellers", "be Jesus to sellers" , "rip your heart open and hand it to sellers" mantra when you are looking for cash buyers. The insincere narrative popular among certain podcasters is irrelevant to the question you have asked. It's a PR gimmick and aimed at target audience who would pay to hear what they like. I would much rather receive truthful  advise from honest and direct people who don't feed me BS, even if what they say didn't excite my feelings. As a grown up I learned to take life as is, not live in a fantasy world and ,above all, value the TRUTH, no matter how bitter it is.

P.S. Speaking of transparency, transparency, honesty and integrity are business tools, they give you a competitive leverage/advantage and also protect your bottom line. 

You should be transparent will sellers because doing otherwise could be illegal (if you have insane person sign a contract to sell a house for $1, or mislead and lie to seller about their property value in order get a contract you could be liable for fraud. Fraud is a crime, they are consequences for committing it and it's not a question of IF, but WHEN. As you see, it's just not profitable for business to commit crimes (unless your daddy is Go-Brandon or you are Boeing's CEO, of course) . 

You should be transparent and honest with buyers because most (if not all) of them are just as smart or smarter than you. If you inflate ARV, diminish repair costs and lie about the property value it won't close a deal for you, It will just tarnish your reputation and make them shun you next time. They probably have their teams and people they will reach out to , to analyze the property/deal and decide for themselves whether it's worth to buy or not. So, it's bad business to lie and shoot yourself on your foot. It's good to build a reputation of reliable person who stands by what they say and does his best to deliver the best product for the buck.

Never forget, this is a for profit business. You are not running a Church or non-profit organization. Moreover , be careful about going too far above and beyond and trying super hard to help sellers. In certain instances ( since your help as far as your solutions go is considered consulting), you could cross a red line and end up violating the law. If you consult them on matters that you are not competent in (like giving expert valuation of their property's worth in the market) , you could be in trouble. You should NOT "help" the seller in certain circumstances, no matter how pure, sincere and full of Godly intentions you are, if they are in foreclosure or pre-foreclosure and live in the state of MD. We have laws that state you can't do it. Only licensed REA can do that. If you do such things you will expose yourself to serious liability. 

To sum it all up: your top priority is to serve your interests and earn profit, therefore you should do everything you can to minimize risks and maximize profits. Honesty and transparency is simply a profitable, long term strategy to build sustainable source of income and not end up with huge fines or, worst of all, in jail. 

 You are welcome Daniel. I have sent 25 contact requests this month, so can't send a colleague request to you. Please feel free to do so and we will keep in touch. I am starting out local, but eventually will scale it and Florida is one of my future target areas. If you ever need any information or suggestion about MD market or look for buyers here please let me know. 

P.S. There are some hatemongers that don't have a clue about law and this line of business but deliberately spread false information about wholesaling on BP to intimidate and mislead. Steer clear and ignore them. Listen to your guts, read, watch, connect and network with people and you will learn as you go. 

 It's marketing, like everything else. But unlike the sellers, you may find them through direct networking. It doesn't cost anything to attend RE meeting, introduce yourself and get contact of people who invest in properties. You may also check out Chris Piper's thread (I posted a link to it in my thread (https://www.biggerpockets.com/forums/93/topics/1197244-how-to-do-wholesaling-right-in-maryland-east-coast-and-nationwide) . He suggests posting ghost ads for properties and whenever potential buyers call get their information and add to your list. I haven't done that because , I don't want to make people think I advertise non-existing deals, but he says he did it and it worked for him. I personally think networking is your best route. You need few but serious buyers, a list of secondary buyers in case you can't liquidate property right away through your main contacts. 

Do you need a real estate license to wholesale properties in Baltimore?

While wholesaling real estate in some states can require a license, in Baltimore, and throughout Maryland, wholesalers can operate without a real estate license provided they follow legal guidelines and may have to work with a licensed broker depending on the wholesale strategy they select.

What are the legal requirements for wholesaling real estate in Maryland?

In Maryland, it is imperative to comply with state laws for real estate transactions. This includes understanding that the assignment contract is a legal document transferring rights from the wholesaler to the end buyer. Wholesalers must ensure that these contracts are properly drafted and executed.

Can you explain the typical wholesale real estate contract terms?

Typical terms in a wholesale real estate contract include the fee the wholesaler will earn, the time frames for closing, and any contingencies that must be met. The contract should clearly outline the rights and obligations of the wholesaler and the buyer.

LINK: MD Real Estate Wholesaling

By Ben Lovro

Oct 16, 2023

Introduction

The roles everyone plays are crucial. However, a palpable tension often undermines the potential synergy between realtors and wholesalers. Understanding the root of this friction requires an in-depth exploration of their operational differences, the financial implications, and the overarching impact on the property market.

1. Operational Discord: Clashing Business Models

Realtors and wholesalers are two distinct players in the real estate market, each with their own unique approach and business model. While both are involved in buying and selling properties, their perspectives and strategies differ significantly.

Realtors, also known as real estate agents, typically work on behalf of clients who are looking to buy or sell a property. They are licensed professionals who specialize in assisting individuals and families in finding their dream homes or selling their current properties. Realtors often act as intermediaries between buyers and sellers, helping to negotiate deals, arrange property showings, and handle the paperwork involved in real estate transactions. They are experts in the local market, staying up-to-date with trends, property values, and legal regulations.

On the other hand, wholesalers take a more entrepreneurial approach to the real estate market. They are investors who focus on finding and securing properties at a discounted price, often distressed or undervalued properties. Wholesalers aim to quickly acquire properties and then sell them to other investors or buyers for a profit. Their business model revolves around identifying lucrative opportunities, negotiating favorable deals, and then assigning or flipping the contracts to interested parties. Wholesalers typically do not hold onto properties for the long term, but rather focus on generating income through quick transactions.

The fundamental difference between realtors and wholesalers lies in their objectives and target markets. Realtors primarily cater to individual homebuyers and sellers, providing personalized services and guidance throughout the buying or selling process. They focus on building relationships with clients and ensuring their satisfaction. Wholesalers, on the other hand, are more concerned with identifying profitable investment opportunities and connecting with other investors or buyers who are interested in acquiring properties for investment purposes. Their success lies in their ability to find undervalued properties and negotiate favorable deals that allow for a quick turnaround and profit.

While both realtors and wholesalers operate in the real estate market, their perspectives and business models differ significantly. Realtors focus on assisting individual clients in buying or selling properties, while wholesalers take a more entrepreneurial approach, seeking out discounted properties and quickly flipping them for profit. Understanding these differences is crucial for anyone looking to navigate the real estate market effectively.

Realtors: The Facilitators

Realtors are licensed professionals who specialize in negotiating the buying, selling, or renting of properties. They adhere to a strict code of ethics and are often members of national and local real estate associations.

The Process:

Property Listing: They list properties on local Multiple Listing Services (MLS), exposing them to a broad audience of potential buyers.

Client Representation: Realtors represent either the buyer or the seller, guiding them through the transaction process, ensuring legal compliance, and striving for the best deal for their client.

Commission-Based Earnings: They earn through commissions—predetermined percentages of the property’s selling price.

Wholesalers: The Middle-Men

Real estate wholesalers seek out off-market properties, secure them at significantly low prices, often through a signed contract with a seller, then "assign" or sell that contract to an end buyer for a higher price.

The Process:

Property Hunt: Wholesalers look for properties often not listed on MLS, sometimes requiring significant repairs or distressed sales.

Under Contract: They negotiate directly with sellers and sign a purchase contract, with no intention of actually closing the deal themselves.

Assignment of Contract: Wholesalers then sell this contract to an investor or end buyer at a markup, pocketing the difference as their profit.

Divergence Creates Tension

This fundamental difference in operations sets the stage for conflict. Realtors work towards a property's sale between a buyer and seller and are remunerated based on the property’s final selling price. In contrast, wholesalers focus on quick, off-market transactions, often sidelining realtors, and potentially undervaluing the property to ensure their profit when the contract is sold.

2. Financial Implications: The Commission Conundrum

The financial structure of realtors and wholesalers' earnings plays a significant role in exacerbating the discord between them. This discord stems from the fundamental differences in how these two entities generate income and the incentives that drive their actions.

Realtors primarily earn their income through commissions. When they successfully facilitate a real estate transaction, they receive a percentage of the sale price as their commission. This commission-based model creates a strong incentive for realtors to prioritize closing deals quickly and at the highest possible price. Their earnings are directly tied to the value of the properties they sell, which can lead to a focus on maximizing profits rather than considering the long-term implications for the market or the needs of buyers and sellers.

On the other hand, wholesalers earn their income through the practice of buying properties at a discounted price and then selling them to investors or other buyers at a higher price. They make money by identifying distressed or undervalued properties, negotiating favorable purchase prices, and then selling them for a profit. Unlike realtors, wholesalers do not rely on commissions but rather on the difference between the purchase and sale prices of the properties they deal with.

This difference in earning structures creates a fundamental misalignment of interests between realtors and wholesalers. Realtors are motivated to sell properties at the highest possible price to maximize their commissions, while wholesalers aim to buy properties at the lowest possible price to maximize their profit margins. This misalignment often leads to conflicts and disagreements, as realtors may perceive wholesalers as driving down property prices and potentially affecting their own earnings.

The commission-based model for realtors can also create a sense of competition and rivalry between them and wholesalers. Realtors may view wholesalers as direct competitors who are encroaching on their territory and potentially taking away potential clients. This can further fuel the discord between the two groups, as they vie for the attention and business of buyers and sellers in the real estate market.

Understanding these underlying financial dynamics is crucial in addressing and finding solutions to the discord between realtors and wholesalers in the real estate industry.

Commission Loss for Realtors

These properties never reach the MLS listings, and since realtors' commissions are tied to these listings and final sale prices, their potential earnings significantly diminish.

Profit Transparency

Wholesalers’ profits are somewhat concealed. They make money on the contract's sale, not the property, making it difficult for a realtor to discern what a wholesaler earns from a deal. This lack of transparency can breed mistrust and a sense of unfair play, especially if a realtor feels a wholesaler undervalued a property to widen their profit margin.

3. Ethical Considerations: The Trust Factor

Ethics play a significant role in the real estate industry, and this is another area where realtors and wholesalers often find themselves at odds.

Code of Ethics

Realtors are bound by a code of ethics that demands fair treatment, honesty in advertising, and full disclosure about property conditions. Wholesalers, not being licensed professionals, are not bound by these ethical codes. Some wholesalers have been known to engage in less-than-transparent marketing strategies to secure a deal, further straining the relationship.

Questionable Practices

Some wholesalers may engage in practices that realtors deem unethical, like purposefully seeking out financially distressed homeowners and pressuring them to sell at prices well below market value. While this isn't a standard practice for all wholesalers, the actions of a few can tarnish the reputation of many.

4. Market Impact: Perceptions and Reality

The activities of wholesalers have a distinct impact on the real estate market, affecting property prices, market dynamics, and client relationships.

Property Valuations

Wholesalers often search for properties they can secure at prices below market value. While this is part of their business model, an extensive presence of wholesalers can create a perception of a lower property valuation in an area, especially if most properties do not go through the more formal appraisal processes with realtors.

Disruption of Market Dynamics

Wholesalers operate on quick sales, which can sometimes disrupt the usual pace of the market. This speed can create unrealistic expectations for clients about the time it takes to close a deal, subsequently putting pressure on realtors to hasten processes that traditionally need more time for due diligence.

Client Relations

Realtors invest considerable time in building client relationships, providing advice, market analysis, and negotiation skills. When a wholesaler bypasses this traditional route, clients miss out on this professional guidance, which can lead to misconceptions and, at times, legal complications in transactions, further reinforcing realtors' aversion to wholesalers.

5. Bridging the Divide: Pathways to Synergy

Despite the inherent tensions, pathways exist that can lead to a more synergistic relationship between realtors and wholesalers.

Collaboration Over Competition

Identifying opportunities for collaboration can be beneficial. Wholesalers can leverage realtors’ market knowledge and legal adherence, while realtors can benefit from the off-market property leads that wholesalers provide.

Regulatory Measures

Implementing regulatory measures that guide wholesalers' operations can assuage some of the mistrust associated with them. This might include mandatory disclosures or ethical guidelines similar to those that realtors follow.

Education and Training

Providing comprehensive education and training about each other’s roles can foster mutual respect and understanding. This knowledge can pave the way for innovative partnerships that blend the best of both worlds.

Conclusion:

The tension between realtors and wholesalers stems from operational, financial, and ethical differences compounded by the distinct impact each has on the real estate market. However, recognizing these differences and working towards mutually beneficial solutions can transform this contentious relationship into a powerful partnership. Both realtors and wholesalers play vital roles in the real estate ecosystem, and finding pathways to synergy could redefine market dynamics in positive, progressive ways.

https://www.linkedin.com/pulse/why-do-realtors-like-wholesalers-ben-lovro

 I don't have time for trolls. If you have anything of substance to share please do so. Every day I spend close to 8 hours of my time learning about this trade and I have already started my marketing campaign. 

 This is not sex-crimes unit and not a sex-trafficking business. This is a business of buying, holding, reselling or reassigning a contract on house. If you associate wholesaling with sex-crimes and pedophilia and make your arguments in such mind-set then that's your problem. Come to MD and try me here. I will laugh at you and your charges. 

Btw, I have very low opinion of state prosecutors in general. A lot of criminals apply for jobs as cops and prosecutors, make a career of prosecuting innocent people (it's easier to frame up and use one of your paid informers, professional criminals, to send a dupe to prison while real murderers and predators who commit the crimes roam the streets). Why don't we talk about crimes and corruption in police force? Why don't we talk about paid informers that peddle drugs and kill on orders, while "cooperating" with prosecutors and making false testimonies to imprison innocent individuals? I have worked on those cases, in major civil rights violation cases, where someone who spent 30 years in prison (because of corrupt, malicious, criminal prosecutors and cops) sued the states and received monetary compensation in tens of millions of dollars, when their innocence was proven by DNA tests (willfully hidden by prosecutors, with evidence tampering and witness coaching), or by confessions of real criminals who committed the crime that innocent person was imprisoned for. If you are for doing things right, why don't we discuss all the crimes committed by your bunch all over the US? Anytime someone in your mindset tells me they were ex-prosecutors I don't see it as bragging, I see it as confirmation of their criminal mindset and bias. A lot of lives of Americans are ruined by such abusive mindset and you forget that state's prosecutors are MY SERVANTS. I am a US Citizen, and the job of my government is to serve and protect me, not to terrorize, help violent criminals get scotch free and imprison uneducated, innocent victims framed up by corrupt prosecutors. How about we talk about government in service of Citizens, as opposed to tyranny where government officials see themselves as overlords above the law, who can do as they please and cooperate with organized crime to import massive amounts of illicit drugs that kill millions of Americans. Btw, what is your take on Epstein? Why we still don't have a list of high ranking officials who were visiting him for you know what, why all prosecutors run with their tails between their legs when it comes to real, big , serious and heinous crimes in this country? Care to explain?

Anyway, I am getting tired with your nonsense arguments and this is my last response to you. I know for a fact that wholesaling is currently legal in MD, and I intend to do it with transparency, honesty and integrity. It's not my intent to harm anyone. And as investor myself, of course I will be looking after deals that make sense to close. I am not a church preacher or non-profit charity, I am in the business to make money and to acquire properties at the price point that would make sense to either buy/hold/resell them or assign to other potential buyers/investors. If you think it's illegal come to MD and take me to court. I know my rights and responsibilities. 

 That's exactly how it should be done. Wholesaler should also be an investor and have investor's mind, seek each property as a great opportunity to close on, rehab, retail or hold and resell. If you just think of assigning a contract and make most money off it you you will end up with bad deals, the ones that everyone frowns upon , with unjustified ARVs, high rehab costs, in cold markets that are too risky or a losing bet for a buyer. I intend to own properties I have enough funds to purchase with financing, and leverage assignments to scale the business.