Wholesaling structure changing ?

Question

I just watched Jerry Norton's new video and he's saying we have to change the structure of the way we wholesale or its illegal because of our intentions to sell it to a cash buyer. I'm new to this and trying to get my foot in the door of real estate so I can move on to flipping but now I feel like I might have to start all over. Is it still considered illegal even if I tell them my intentions or if I work with the real estate agent for on market properties and let them represent me as the buyers agent ?

David Frandsen · Answer

@Charlie MacPherson I couldn't disagree more about the role of a wholesaler. Sure there are shady players out there. When done right though a wholesaler provides a service that benefits all parties. And they are compensated for their service. When you bring value in a business setting you are rewarded. A wholesaler spends time and $$ on marketing to find distressed properties. (Not every flipper or investor wants to do this. They would rather buy from a wholesaler). The wholesaler provides value to the seller because they have a problem that needs solving (Quick sale, the house is too run down to list on the market, they just want the problem gone, ect.). The wholesaler provides value to agents because they have a pool of buyers that the agent usually does not have. The agent can "sell" to the wholesaler and still make the deal happen. Just so you know wholesaling is legal in most states and in my opinion perfectly ethical. Just my two-cents on the subject.

Charlie MacPherson · Answer

@Jazmine Hill  In most states, if not all, it is illegal to market a property that you don't already own (i.e., your name is on the title), unless you have a real estate license.

States heavily regulate real estate agents in order to protect the public from unscrupulous operators who would steal their equity or otherwise defraud them.  Boiled down to the bare minimum, that is exactly what wholesalers do.

Disclosing your intent to practice unlicensed real estate brokering doesn't make that illegal act into a legal act.  For example, if I were to say to you, I fully intend to rob you at gunpoint and steal your money, and then do it, it's still armed robbery and I still go to prison.

No real estate agent will work with you to wholesale a listed property.  They would have to be a blithering idiot to take part in stripping (stealing) equity from a seller.  The local real estate commission would most likely revoke their license and fine them into oblivion - and their managing broker would show them the door in a red-hot hurry.  The broker doesn't want the bad publicity when the wholesaler screws Grandma out of a $25,000 (illegal) "contract assignment" fee.

If you want to get into selling real estate, do it the right way.  Get your real estate license and subject yourself to the laws and regulations that are in place to protect the consumer.

I was licensed in both Mass and Maine and I can tell you from first-hand experience, the exams are ridiculously easy.

Account Closed · Answer

@Charlie MacPherson

Yes.

Let’s regulate every aspect of American life to the point that two consenting adults cannot make a real estate transaction without a licensed realtor involved.

That’s the most un-american thing I’ve ever heard.

Plus the fact that, some people don’t want the headache of dealing with realtors, they don’t want pictures of their house blasted to 10,000+ people like you claim.

They don’t want to deal with showings, they don’t want to pay realtor commissions.

They want a quick, easy transaction and are willing to sacrifice a little bit of equity for it.

Nothing wrong with that at all.

Aaron Smith · Answer

Believe it or not, there are properties that agents can't or won't sell. A good wholesaler finds these properties and puts together an ethical deal. Bad wholesalers rip people off.

Let's not pretend that all real estate agents are angels, though. While they are regulated more closely, there are sketchy deals put together by sketchy agents.

Bottom line: there are dishonest people who sell homes. Some happen to have a license, others don't.

As for Jerry's latest (which I just watched), I can only assume that he's:

1. preventing future liability, making sure he can't be sued for teaching people the wrong way to wholesale.

2. just doing his part as a wholesaling trainer to keep his students/viewers out of hot water.

Account Closed · Answer

@Eric James

I think what people have to understand is wholesaling is just a vehicle, a business.

If everyone had the mindset that you just put on display, there would be no Apple, there would be no cars, we would have nothing.

Often times, people don’t just resort to entrepreneurship for the financial aspect but for the chance of freedom.

Don’t give up on being a entrepreneur.

Charlie MacPherson · Answer

Personal insults are the surest indication that you have nothing to offer in your argument.  Lawyers are taught that if you have the facts, pound the facts.  If you don't have the facts, pound the table.  You guys are pounding the table.

I'll explain this to you like you're 6 years old.

Governments put laws into place to protect people from those who can otherwise do them harm.  Yes, that includes surgeons and airline pilots.

Saying that the service provided by the wholesaler is "free to the seller" is hilarious!  Sure Mr. Seller, I won't charge you a cent for stealing your equity.  You walk away with a $25,000 markup when you sell the contract.  There's only one place that money comes from - the seller's equity that rightfully belongs in the seller's pocket.  In fact, if the end buyer had struck a deal directly with the seller at the same price, that's exactly where that assignment fee would have gone.

Saying that there are properties that Realtors don't want to sell just demonstrates a breathtaking ignorance of how real estate works in the real world.

When I was licensed, I actively sought out these properties to both list and to help my rehabber clients to buy.  I knew that if I played my cards right, I'd get two transactions out of them.  One on the buy side (low price, crappy commission) and again on the sell side (all fixed up, much higher commission).

You guys sound like a street level drug dealer trying to rationalize selling heroin.  Yes, Judge, I sold him the drugs, but it was only to save him from the horrors of opiate withdrawal.  I did it to save him!  I'm a hero I tell ya!

BTW, I'm no longer a Realtor, so I have no dog in this hunt.  I just hate seeing people get screwed.

Charlie MacPherson · Answer

@David Frandsen  Of course you disagree.  No wholesaler likes being called out for illegal, unlicensed real estate brokering, even though that is their stock in trade.

Whether you like it or not, there is literally NOTHING that a wholesaler can do for a seller that a real estate agent can't.  There isn't a house in the world that is in such bad condition that it can't be listed on MLS.  I know - I've done it.

The simple fact is that listing a dilapidated house on MLS with a good agent will bring a flood of buyers within 24 hours, many of them ready, willing and able to pay cash.

I have worked with a lot of rehabbers and been at those houses the same day they were listed.  I'm talking about houses covered in mold.  Houses with flooded basements.  Condemned houses with collapsed cinder block foundations.

Every single time, we were elbow to elbow with a flood of buyers and we nearly always lost out to a higher bidder - and that's the golden nugget in all this.  The seller had multiple offers to choose from, most often on the same day, and they ended up with more money.

How many genuine buyers are in a wholesaler's list?  I mean buyers who will actually transact - not the 99.999% of dreamers.  5?  10?  Let's be crazy and say it's 100 real buyers.

An agent who does a vanilla MLS listing will expose the property to tens of thousands of buyers.  Which do you think has the better chance of finding the one buyer who will pay the highest price?

Instead of paying a wholesaler's often obscene assignment fee, with no fiduciary to represent them in the transaction and with none of the protections that the law provides sellers, they pay an agent's commission of 4%-6%.

The bottom line is that wholesalers prey on sellers who are either uninformed as to the true value of their property or are in such a desperate situation that they'll take a bad deal to get out fast.

That is the textbook definition of unethical.

Randall E Collins · Answer

I'm truly getting tired of realtors criticizing wholesalers, putting us down like we're trash, saying what we do is illegal and we're just scammers. I TOTALLY agree with David Frandsen. There are two sides to every coin, but still just one coin. Realtors and wholesalers both have a part to play in real estate and we're both in the business for that same coin. Wholesaling in NOT even remotely close to the position of a realtor, nor do we claim to be a realtor because we're not licensed and we're not doing the same job. However both jobs are legal in most states. So get off of your high horse realtors.

Charlie MacPherson · Answer

Account Closed  Now THAT is truly comical!  Wrap yourself in the American flag to justify screwing desperate and/or uninformed sellers out of their equity!!!

Why yes - how DARE state governments put licensing laws into effect to protect the public from unethical operators?  What is this?  Soviet Russia???  Next thing you know, they'll want to make surgeons go to medical school.  They'll want airline pilots to be licensed.  It's all a communist plot, I tell ya!

Honestly, until now, I thought I'd heard it all from wholesalers, but now I really have.

Thanks for the laugh.  I'm going back to work.

Account Closed · Answer

@Charlie MacPherson

Yeah because, someone buying a house and Brain surgeon are very similar…

Craziest thing I’ve heard in a while lol…

And yes, because someone doesn’t want the hassle of selling with a realtor and doing showings, blasting their pictures out online… they should be forced to deal with one if they want to sell!

I hope you’re kidding

Wholesaling structure changing ?

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