Are Wholesalers Destroying Real Estate Investing?

Question

In general wholesalers:  misrepresent values, give wrong rehab numbers, market properties they do not control, ask for non refundable earnest money on others peoples houses, push for overnight closings, etc, etc, etc.  For those that have dealt with wholesalers you know exactly what Im talking about.

So sounds like a segment of real estate that does more bad then good?  Probably no one you want to deal with when it comes to getting deals?

I don't agree.  And just in the last 60 days I have bought two deals from two different wholesalers.

Where do you stand on wholesalers?

JD Martin · Answer

I really don't think about them much at all these days. Virtually all of them that have ever called me didn't have anything remotely close to "a deal" to be discussed. With prices up, interest rates up and people shackled to their homes they have virtually disappeared around here.

So no, I don't think they're ruining anything because they're such an insignificant part of the whole scene. I can remember when every other post here at BP was "I have no money and want to be a wholesaler, what should I do?" and that's almost completely disappeared.

Chris Seveney · Answer

Thats because they are now wanting to do Sub2 :)

Chris Seveney · Answer

@Peter Vekselman

Like anyone in any business there are legit wholesalers and those that are not legit

Unfortunately in wholesaling the ratio of legit to those who have no idea what they are doing leans heavily toward the latter

But when you get connected to decent wholesalers everyone can win

Eliott Elias · Answer

Just like any business, there are bad apples. Wholesalers as a whole, I believe are good for the business. They do the dirty work, the work that investors don’t want to do. Door knock, drive for dollars, cold call, talk to delusional people.

Peter Vekselman · Answer

We actually insert real estate agents between us and the wholesalers.  They do all the offers, negotiations, and bring the final deals to us.  They can also access info on the sellers, so we can approach them once the wholesalers contracts expire.

This strategy is working really well for us...

Scott Trench · Answer

The activity of wholesaling is often unlicensed. So, there's no reason to believe that wholesalers are better or worse than people in other professions, but it does mean that bad apples are able to stick around longer, and conduct themselves in ways that would get licensed agents' kicked out by their real estate commissions.

Right now, I think we are in an interesting time for real estate investing.

A lot of landlords and homeowners, I think, are scared of the market, and don't want to actually find out what their property is worth. But, they will bite at the right price.

And, the cost to soliciting tens of thousands of homeowners and landlords is plunging with AI and automation sequences and fierce competition to help wholesalers find information about off-market landlords.

So this creates an environment of low-risk, high-reward for wholesalers.

Further, wholesale deals that don't use an agent and/or a traditional lender can get "Creative" - this is neither good nor bad, it just is.

I suspect that wholesale deals are, by and large, no better than on-market deals, but that there is greater inefficiency in the wholesale market, which some investors are capitalizing on. It's another form of dealflow at the very least, which investors need to add to their arsenal.

If I had to guess, I think that this will eat up a greater share of deal volume in the investor transaction space for the next few years, but that states will continue cracking down on the activity and requiring licenses to not just transact real estate, but to assign contracts. I think there will be a battle over the next few years as state laws catch up with the increasingly clever ways that wholesalers get around not needing a license.

In the end, when the market stabilizes, I believe that most transactions will return to the MLS or public platforms. Competitive sales processes open to the public will maximize price in the long run. The question in the interim is for how long wholesaling will be as impactful as it currently is on transaction volume, and whether the simple fact that a public listing is the highest probability to maximize economics for the seller, or if states crack down and require licensure eats into wholesaler market share.

Peter Vekselman · Answer

I actually always wonder about that.  no matter what the motivation, why do sellers not take the traditional MLS approach.  In the end, nothing beats that type of exposure.  but in the end, i believe there is room for everyone in this space.

but points well made...

Peter Vekselman · Answer

One thing is for sure.  Everything runs in cycles in real estate.  Point well made...

Joe S. · Answer

We do not have time to run all of the leads that Wholesalers want to bringing us in order to find the needle in the haystack.

Do you have someone you hired to take a lot of that busywork off your hands?

Are Wholesalers Destroying Real Estate Investing?

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