Can Someone Please Explain Why A "Wholesaler" Would NOT Get Licensed?
Scott TrenchPro Member
Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votesCan Someone Please Explain Why A "Wholesaler" Would NOT Get Licensed?
Most Popular Reply
Jonathan BombaciBusiness Member
Real Estate Agent · Lowell, MA · Member since 2019 · 1k+ posts · 1k+ votes@Scott Trench Challenge accepted! I have a 5-year-old, so here goes:
Wholesaling is like finding toys that other kids don’t want anymore, showing someone else where to get those toys, and then asking for a finder’s fee in gummy bears. Getting a license is like opening your own toy shop. If you don’t have a shop, you can still point people to toys, but you’re not supposed to act like you own the shop or start setting prices for toys you don’t actually have.
Here’s why some wholesalers avoid getting their toy shop license:
1. Dodging Toy Shop Rules
If you run a shop (have a license), you’ve got rules. You have to tell people if a toy is broken, missing pieces, or might explode when played with. Without a shop, you can just say, “Here’s where you can find the toy” and skip the warnings.
2. Skipping Toy Shop School
To open a shop, you need to learn the rules, take a class, pass a test, and even keep learning as new toy trends pop up. Some people don’t want to bother. They’d rather just trade toys on the sly and call it a day.
3. Keeping it Casual
If you only find toys once in a while, you might not want to open a full-on toy shop. You’re just trying to make a few bucks to buy your own toys without committing to being a full-time shopkeeper.
But here’s the thing: Wholesaling without a license is like running around the playground trying to sell toys out of your backpack. Sure, you can make a few quick trades, but the playground monitors (a.k.a. the law) might notice, and you’ll miss out on the bigger opportunities and loyal customers.
So, while skipping the license might seem easier, it’s not the best way to win at the toy game in the long run.
I have this talk with 10-15 people each month at our Free Meetups here in MA, NH, and ME. Everyone wants to be a wholesaler these days and trying to convince them to get a license and do it the right way is like trying to take candy from a 5-year-old.
Hope this clears it up!
16 Replies
- 1yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
well as I posted last week Oregon is now going to require wholesalers to be licensed they have carved out a special license for this activity.. those wishing to continue to wholesale will need to do full criminal and get a bond.. some will not qualify as they have bad backgrounds or crappy credit. Plus they will now have to make FULL disclosures to both buyer and sellers and there will be a full 3 day right of rescission.
the main reason wholesalers dont get licensed is so they dont have to follow the rules like a licensed agents.. in other words they have Zero fiduciary duty to the seller or buyer..
That is the main reason.. so they can low ball and make large spreads .. or withhold facts on the house and get their assignment fee and move on without much risk.
But I agree with you these guys pass up a ton of listing opportunities and given the amount of money they spend thats just wasting marketing dollars in my mind..
the laws are changing on wholesale assignment business model.. like most things RE its always changing and evolving.
- Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes1y
@Jay Hinrichs this is what my mind jumps to. I wonder how the wholesalers frame it though?
Is there a reason beyond the "I don't have to actually look out for the seller's best interests" reason that wholesalers think they have?
- 1yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Scott Trench:
@Jay Hinrichs this is what my mind jumps to. I wonder how the wholesalers frame it though?
Is there a reason beyond the "I don't have to actually look out for the seller's best interests" reason that wholesalers think they have?
I deal with wholesalers every week on my fundings or should I say I see their fee's on the HUDS every week.. if I see one come in that is just way to high like a 50k purchase and 50k assingment fee I wont fund it.. If my client wants to pay it its up to them but I wont.. two reasons one is personal I feel most sellers this is there only asset or majority of their net worth and its just unconscionable but 90% of wholesaler frankly its about them they could careless and I know others will get on here and say they are not that way.. but as one who funds these deals probably over 100 deals a year with a wholesaler fee on it.. I think my line of thought is correct.
2nd and very few investors realize this.. but lets say you have a wholesale deal and your buying it for 100k and the wholesalers contract is 50k and there is a 50k assignment fee.. And lets say you then rehab it only to find out there is bad title and you make a title claim.. if there is no loan on it your only going to get 50k from title insurance and you will lose the 50k you paid for the assignment and any money you put into rehab. I know i learned this the hard way. So I am ok risking 5 to 10k on an assingment fee but huge fee's for the reasons I state no way. - 1yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
the other reason wholesalers wont get licensed is the guru's tell them they don't need it and its legal in very state ( which it is not) and the reasons you don't want a license are as I mentioned the fiduciary laws..
But I get it in the lower value assets of the mid west and rust belt cities wholesalers dominate because they spend 100s of thousands in marketing for those type of assets.. Where as realtor simply dont.. Many realtors are not going to work in low value asset areas as those are generally rougher neighborhoods that are probably deemed to unsafe especially for a single women agent to be out there.
- 1yJoe S.Pro MemberInvestor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
They’re probably reasons.
I had a real estate agent here local that probably sold 15 or so of our properties over a number of years. He told me that he was no longer going to work for Keller Williams and was going to do his own thing wholesaling. Whereas he already had his license, I am assuming he will keep them and do some Listing on the side as well. I’m not 100% familiar with all the guideline for Keller Williams. I think I remember hearing before that they want their agents to focus on being agents and not do other things. If course maybe there’s a Keller Williams agent that could speak on that particular item for clarification.As a buyer/investor that has done much of our own marketing over the years, there has been a handful of properties that we have wholesale. Less than five that we’ve done a contract assignment on. Of the other properties we actually closed on and then due to having a number of things going on or needing our initial Capital back sooner than we thought we resold the properties quickly as is.
- 1yCory CarlsonBusiness MemberReal Estate Broker · OR · Member since 2018 · 311 posts · 226 votes
In my opinion, wholesalers do not become licensed because:
1. Licensing takes time, effort and money. It is a career choice.
2. Wholesalers are not regulated by Real Estate Agency, therefore not required to abide by certain laws and disclosures. This is changing in Oregon as @Jay Hinrichs mentions. Look up HB 4058 for anyone who wants to read up on this.
3. It appears to be a means to an end and the path of least resistance (somewhat related to number 1). Most newer wholesalers I meet are looking to do this just to build their own portfolio, hold on to the properties they want and capitalize on the ones they do not. The reality is this is easier said than done.
4. The profile of seller who uses a wholesaler is commonly anti-broker. Even if arguably their net could be higher listing it. Transversely, wholesalers do manage to get buildings sold with one single walkthrough and have a deep cash buyers list.
5. Wholesale assignment fees are higher than commissions even though they could still use a Net listing agreement. A net listing is a type of real estate listing agreement where the seller specifies a minimum price they would like to receive from the sale, and any amount over that price is considered the real estate agent's commission.
Frankly I have been to dozens of wholesaler walkthroughs where its blatantly obvious the seller has no clue what is going on. They think they have a deal with this wholesaler and its obvious the wholesaler has no intent on buying the deal. Is it wrong they tell the investors if asked to say they are "partners", or "contractors" just bidding the job? I think that is what Oregon is trying to track down on - Sketchy people dodging disclosure.
Constant Commercial Real Estate Inc543 Reviews - 1yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Cory Carlson:
In my opinion, wholesalers do not become licensed because:
1. Licensing takes time, effort and money. It is a career choice.
2. Wholesalers are not regulated by Real Estate Agency, therefore not required to abide by certain laws and disclosures. This is changing in Oregon as @Jay Hinrichs mentions. Look up HB 4058 for anyone who wants to read up on this.
3. It appears to be a means to an end and the path of least resistance (somewhat related to number 1). Most newer wholesalers I meet are looking to do this just to build their own portfolio, hold on to the properties they want and capitalize on the ones they do not. The reality is this is easier said than done.
4. The profile of seller who uses a wholesaler is commonly anti-broker. Even if arguably their net could be higher listing it. Transversely, wholesalers do manage to get buildings sold with one single walkthrough and have a deep cash buyers list.
5. Wholesale assignment fees are higher than commissions even though they could still use a Net listing agreement. A net listing is a type of real estate listing agreement where the seller specifies a minimum price they would like to receive from the sale, and any amount over that price is considered the real estate agent's commission.
Frankly I have been to dozens of wholesaler walkthroughs where its blatantly obvious the seller has no clue what is going on. They think they have a deal with this wholesaler and its obvious the wholesaler has no intent on buying the deal. Is it wrong they tell the investors if asked to say they are "partners", or "contractors" just bidding the job? I think that is what Oregon is trying to track down on - Sketchy people dodging disclosure.
Yup wholesalers are taught to lie to the sellers full stop.. this is one reason its starting to be regulated.. and I guess wholesalers knowingly not telling the truth to the sellers is OK with them.. obviously it is.- Flipper/Rehabber · Portland, OR · Member since 2017 · 45 posts · 10 votes1y
Quote from @Jay Hinrichs:
Quote from @Cory Carlson:
In my opinion, wholesalers do not become licensed because:
1. Licensing takes time, effort and money. It is a career choice.
2. Wholesalers are not regulated by Real Estate Agency, therefore not required to abide by certain laws and disclosures. This is changing in Oregon as @Jay Hinrichs mentions. Look up HB 4058 for anyone who wants to read up on this.
3. It appears to be a means to an end and the path of least resistance (somewhat related to number 1). Most newer wholesalers I meet are looking to do this just to build their own portfolio, hold on to the properties they want and capitalize on the ones they do not. The reality is this is easier said than done.
4. The profile of seller who uses a wholesaler is commonly anti-broker. Even if arguably their net could be higher listing it. Transversely, wholesalers do manage to get buildings sold with one single walkthrough and have a deep cash buyers list.
5. Wholesale assignment fees are higher than commissions even though they could still use a Net listing agreement. A net listing is a type of real estate listing agreement where the seller specifies a minimum price they would like to receive from the sale, and any amount over that price is considered the real estate agent's commission.
Frankly I have been to dozens of wholesaler walkthroughs where its blatantly obvious the seller has no clue what is going on. They think they have a deal with this wholesaler and its obvious the wholesaler has no intent on buying the deal. Is it wrong they tell the investors if asked to say they are "partners", or "contractors" just bidding the job? I think that is what Oregon is trying to track down on - Sketchy people dodging disclosure.
Yup wholesalers are taught to lie to the sellers full stop.. this is one reason its starting to be regulated.. and I guess wholesalers knowingly not telling the truth to the sellers is OK with them.. obviously it is.@Jay Hinrichs I've had many agents lie to me as well, this is not strictly a wholesaler problem. And by the way, the new wholesaling regulations in Oregon also include regulations against predatory realtor practices.
- 1yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Scott Michael:
Quote from @Jay Hinrichs:
Quote from @Cory Carlson:
In my opinion, wholesalers do not become licensed because:
1. Licensing takes time, effort and money. It is a career choice.
2. Wholesalers are not regulated by Real Estate Agency, therefore not required to abide by certain laws and disclosures. This is changing in Oregon as @Jay Hinrichs mentions. Look up HB 4058 for anyone who wants to read up on this.
3. It appears to be a means to an end and the path of least resistance (somewhat related to number 1). Most newer wholesalers I meet are looking to do this just to build their own portfolio, hold on to the properties they want and capitalize on the ones they do not. The reality is this is easier said than done.
4. The profile of seller who uses a wholesaler is commonly anti-broker. Even if arguably their net could be higher listing it. Transversely, wholesalers do manage to get buildings sold with one single walkthrough and have a deep cash buyers list.
5. Wholesale assignment fees are higher than commissions even though they could still use a Net listing agreement. A net listing is a type of real estate listing agreement where the seller specifies a minimum price they would like to receive from the sale, and any amount over that price is considered the real estate agent's commission.
Frankly I have been to dozens of wholesaler walkthroughs where its blatantly obvious the seller has no clue what is going on. They think they have a deal with this wholesaler and its obvious the wholesaler has no intent on buying the deal. Is it wrong they tell the investors if asked to say they are "partners", or "contractors" just bidding the job? I think that is what Oregon is trying to track down on - Sketchy people dodging disclosure.
Yup wholesalers are taught to lie to the sellers full stop.. this is one reason its starting to be regulated.. and I guess wholesalers knowingly not telling the truth to the sellers is OK with them.. obviously it is.@Jay Hinrichs I've had many agents lie to me as well, this is not strictly a wholesaler problem. And by the way, the new wholesaling regulations in Oregon also include regulations against predatory realtor practices.
understood and agree.. bad actors come in all flavors
- Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes1y
Others have hit it on the head. It's easier and faster to wholesale then go through the process of getting your license. Bar of entry for being a wholesaler is low and you can do your "own" rules. On the other side of the coin the turnover and amount of terrible wholesalers is high. Getting a license is not hard so there is plenty of bad agents but least it's not as high and you are regulated. If I wholesaled I would get a license, I feel like they are losing a lot on commissions that they can convert to listings
- 1yJonathan BombaciBusiness MemberReal Estate Agent · Lowell, MA · Member since 2019 · 1k+ posts · 1k+ votes
@Scott Trench Challenge accepted! I have a 5-year-old, so here goes:
Wholesaling is like finding toys that other kids don’t want anymore, showing someone else where to get those toys, and then asking for a finder’s fee in gummy bears. Getting a license is like opening your own toy shop. If you don’t have a shop, you can still point people to toys, but you’re not supposed to act like you own the shop or start setting prices for toys you don’t actually have.
Here’s why some wholesalers avoid getting their toy shop license:
1. Dodging Toy Shop Rules
If you run a shop (have a license), you’ve got rules. You have to tell people if a toy is broken, missing pieces, or might explode when played with. Without a shop, you can just say, “Here’s where you can find the toy” and skip the warnings.2. Skipping Toy Shop School
To open a shop, you need to learn the rules, take a class, pass a test, and even keep learning as new toy trends pop up. Some people don’t want to bother. They’d rather just trade toys on the sly and call it a day.3. Keeping it Casual
If you only find toys once in a while, you might not want to open a full-on toy shop. You’re just trying to make a few bucks to buy your own toys without committing to being a full-time shopkeeper.But here’s the thing: Wholesaling without a license is like running around the playground trying to sell toys out of your backpack. Sure, you can make a few quick trades, but the playground monitors (a.k.a. the law) might notice, and you’ll miss out on the bigger opportunities and loyal customers.
So, while skipping the license might seem easier, it’s not the best way to win at the toy game in the long run.
I have this talk with 10-15 people each month at our Free Meetups here in MA, NH, and ME. Everyone wants to be a wholesaler these days and trying to convince them to get a license and do it the right way is like trying to take candy from a 5-year-old.Hope this clears it up!
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes1y
@Scott Trench there isn't any good or intelligent reason.
Some have pointed out the fallacy that to be licensed in some way is different upon the operation.
What is a "wholesaler" at simplest terms?: Experts at sourcing viable properties to market for sale.
What is a Listing agent at simplest?: Experts at sourcing viable properties to market for sale.
How does a Wholesaler monetize a contract? They market and sell the lead to an end user.How does a Listing Agent monetize a contract? They can market and sell the lead to an end listing agent. They can bring it to open market and facilitate the transaction.
What are the advantageous of wholesaler vs Listing Agent? None.
What are the advantageous of Listing Agent vs wholesaler? The transaction is insured via E&O. The laws protect vs detract the operations. Protection of a brokerage. Legitimacy via licensure. Additional resources and tools via brokerage....
And the BIGGEST advantage, more ways to monetize a lead. Many, many more ways.
It is harder, more difficult, more risky to wholesale without a license. And with less means to monetize.
And with brokerages now offering new agent programs where they will pay 100% of the expense to get licensed, there is literally no reason not to.
Don't have a buyers list? Ok, join eXp. They have an internalized system where instantly a person has thousands of potential end buyers for a "lead" coast to coast. Can easily get a 20% referral fee just for sourcing and handing off that lead. I've heard people getting up to 40%.
That seems a whole lot easier than any wholesaling start-up mapping I've ever heard of. Can be done 100% remote, nationwide, all but 0 risk.
So yeah, why not be licensed???????
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes1y
Quote from @Jonathan Bombaci:
@Scott Trench Challenge accepted! I have a 5-year-old, so here goes:
Wholesaling is like finding toys that other kids don’t want anymore, showing someone else where to get those toys, and then asking for a finder’s fee in gummy bears. Getting a license is like opening your own toy shop. If you don’t have a shop, you can still point people to toys, but you’re not supposed to act like you own the shop or start setting prices for toys you don’t actually have.
Here’s why some wholesalers avoid getting their toy shop license:
1. Dodging Toy Shop Rules
If you run a shop (have a license), you’ve got rules. You have to tell people if a toy is broken, missing pieces, or might explode when played with. Without a shop, you can just say, “Here’s where you can find the toy” and skip the warnings.2. Skipping Toy Shop School
To open a shop, you need to learn the rules, take a class, pass a test, and even keep learning as new toy trends pop up. Some people don’t want to bother. They’d rather just trade toys on the sly and call it a day.3. Keeping it Casual
If you only find toys once in a while, you might not want to open a full-on toy shop. You’re just trying to make a few bucks to buy your own toys without committing to being a full-time shopkeeper.But here’s the thing: Wholesaling without a license is like running around the playground trying to sell toys out of your backpack. Sure, you can make a few quick trades, but the playground monitors (a.k.a. the law) might notice, and you’ll miss out on the bigger opportunities and loyal customers.
So, while skipping the license might seem easier, it’s not the best way to win at the toy game in the long run.
I have this talk with 10-15 people each month at our Free Meetups here in MA, NH, and ME. Everyone wants to be a wholesaler these days and trying to convince them to get a license and do it the right way is like trying to take candy from a 5-year-old.Hope this clears it up!
You missed an important item:
Depending on how a person does #1 or #2, it could get them:
A fast-pass to the "Principles Office" for "bullying" and now there sitting in "detention"....
Because little Johnny's Mommy wasn't too pleased when showed what the "nice kid with a backpack" gave him for selling him his "toy" and found out it was worth a whole lot more than a "handful of jelly beans"....
Or when little Janie's Dad noticed the "shiny newish toy" was just a busted piece of junk held together with bubble gum, and it was obvious the "nice kid with the back-pack" new the whole time and let Janie think it was something else....
That's when the not-so-nice kid with a backpack of toy's often runs into a not-so-happy "big brother" with a "baseball bat"....
- Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes1y
Because the sheer majority of truly motivated sellers do not like agents.
They RUN!
Being licensed means you have to disclose you are an agent. That is like trying to sell a tofu burger to an animal rights activist having to disclose that the building attached to your tofu burger joint is a slaughterhouse you also own where they slaughter baby cows, and using the exact knife that slaughtered the cow to cut the tofu.
- Flipper/Rehabber · Portland, OR · Member since 2017 · 45 posts · 10 votes1y
Hi @Scott,
I can answer your question. The reason that a lot of wholesalers don't get licensed, is that we want to stay focused on our business model, which is being expert marketers and negotiators, and finding inventory for investors. Getting licensed would require us to pay brokerage fees, have principal brokers that have veto-power over our deals, would open us up to liability for deals that we wholesale instead of list (as we are not acting in a fiduciary), not to mention there is the burden of additional paperwork and ongoing training. Sure we could squeeze out a few more bucks, but we would also complicate our lives. I like to keep things simple in my business, and I have no desire to represent buyers or sellers - that's a completely different skillset than wholesaling.
It is similar to asking why a doctor wouldn't also want to sell supplements - some would, in order to "better serve" their patients and create an additional revenue stream, and others would rather keep things simple.@Scott Trench undefined
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