Wholsalers etc: Why not just go get your RE license?

[Chris Mason]

General question.

I frequently read posts wherein a wholesaler, birddog, or similar, talks about finding buyers, finding sellers, connecting them, and this sort of thing. And the questions are invariably about what contracts to use, how to make it legal, why homeowners don't take them seriously, how to get legally paid, where to find buyers, where to find sellers, why investors don't take them seriously, and the like.

Mostly, I read unlicensed folks trying to find a way to lawfully make money from engaging in real estate agent activities, typically via arbitrage instead of commission. 

So the question begged: why not just go do all those things you wish to do, but as a licensed agent? What's so scary about getting a real estate agent license and doing all those things you wish to do, and perhaps are already doing, within the framework that already exists to do exactly those things? 

Let's take one common wholesaling model: Find people willing to sell for way under market value, tie it up in contract, go find buyer willing to pay more than the seller is willing to sell for, and pocket the difference. Why not get a license, list it, go to those same buyers you already have, present it, and take 5-6%? 

It seems to come down to arbitrage ("pocket the difference") versus commission as the only tangible difference that I can identify (you know, aside from the pesky legal stuff like "is this legal at all?"), unless I am missing something. 

One might suppose that the average arbitrage paycheck is larger than the average commission paycheck (2.5%-3% if you just list, 5-6% if you list AND bring the buyer). But from everything I've read on here, and the few wholesale deals I've been involved in, the wholesale ones are MASSIVE time sinks per-deal relative to the vanilla get the listing -> present it to your buyers -> identify a buyer -> close -> collect commission route. If you have that existing wholesaler skill-set, it seems to me that you could apply it to vanilla or vanilla-ish (as a REI specialist agent) transactions, and net more at the end of the year by simply closing a crap ton more deals.

So, wholesalers, educate me: What am I Missing? 

[Pratik P.]

That's a very good question.  Let's look at the tasks that a wholesaler does and see if they are the same tasks a traditional RE agent does as well. I know these aren't absolutes and can vary based on the individual agent. 

- Market for distressed properties : Re agents don't usually target these. 

- Estimate rehab costs : RE agents don't. 

- Negotiate price with seller: RE agents don't. They represent the seller. 

- Find interested buyers: RE agents DO this too. 

- Negotiate with buyers: RE agents don't. 

Lets ask your question the other way around.  Why should a wholesaler get licensed? I honestly don't see what the point of getting an RE license would be. How would it help me other than being able to get better comps? I'm not looking to represent the seller or list their property.  What if I wanted to close on it myself?

Your guy with 16000 mailers obviously did something horribly wrong. You think zero responses for 16k letters is a norm? Do you think that was a marketing issue or because he was a wholesaler? 

We're all accountable whether we have a shiny license or not.  I don't know what magical shield you get by assigning contracts. The fact that many flippers are contacting wholesalers for deals shows that they are providing something of value that agents aren't providing. 

At a glance,  the two may look very similar,  but when you look deeper or experience it yourself,  things are quite different.