wholesaling is unethical???

Question

so, I have my heart set on wholesaling real estate, and in searching for a closing company several local companies have said they don't double escrow because they feel its unethical.

I can make the argument to myself why it is not but, that might be because I want to be convinced its ethical

what yours thoughts??

Tim G. · Answer

The thing I don't get is this. A rehabber locks up a deal, super low and everyone is telling them "way to go! you killed it nice job getting that price!" There is more than enough margin for them, even enough where they could in fact sell to another rehabber and make money if they chose. But no one says a word about it. A wholesaler locks up a deal, super low price and they chose to mark it up and resell to a rehabber while making money in the process. Suddenly this person is a shark, or preying on the seller. I don't get it. Both are doing the same thing, trying to lock up a deal at the lowest price possible yet the wholesaler is in the wrong because they resell it to another party? Nonsense.

Aaron Mazzrillo · Answer

This is the 2nd post in recent days about wholesaling being unethical or illegal. This topic is totally pointless. Everything you buy - EVERYTHING - especially food, has some wholesaling involved at some point be it in the raw materials used to manufacture it, the bulk discount obtained by shipping mass quantities, or the actual product you purchase at point of sale. SO, why should real estate be any different?

Nicholas Spohn · Answer

as long as you are not forcing someone to do the transaction and they voluntarily agree to sell to you at that price then you have provided them a service and provide the rehabber a service. Because you add value to all parties involved you get to take a profit. This is how an economy works. You should never feel bad about that as long as you are not lying to someone.

Wayne Brooks · Answer

As Anthony touched on, the title co. may be talking about a "dry" closing where you don't have funds to fund the A to B transaction, and you want to use the the funds for the B to C transaction, to fund the A to B transaction. Most title co.s won't do these any more, but have no problems if you bring the funding for the A to B transaction, then "double close" 5 minutes apart for the B to C transaction. Thus, the reason for transactional funding, but it's still a "double close".

Anthony Dadlani · Answer

There are also companies that specialize in transactional funding to avoid double close. I don't think it's unethical. But I believe there are some state laws that say you can't use the buyers money to close.

Brian Stone · Answer

I wouldn't say it's unethical. Reason for double closings is usually to hide what you are making off of the deal from the buyer/investor, so it could be considered sneaky. I think it is a needed transaction because some buyers might be miffed if you're making a lot of money when they could be making it themselves. All in all, they can still back out at a double closing if they don't like the way everything is going. Find an investor friendly title company that does double closings. Any investors or other wholesalers got any advice?

John Rooster · Answer

It think what the title company is saying is that it is unethical for them to handle both sides of two transactions (a-b, b-c)and not disclose to parties 'a' and 'c' that each other exist.

Ellis San Jose · Answer

Wholesaling using a double escrow is just one technique. You can use an option or an assignment. Is it unethical to deliver a solution to a seller who has a problem & you perform as promised? Unless you truly believe in your heart that you are serving the seller with the right solution why should they believe in you?

Jeremiah B. · Answer

I don't mean to take sides on this - in large part because I'm not sure how I even feel. But, the logic of why this could be considered ethical seems like a logical argument. If the seller were to spend 10 minutes to post a free ad on Craigslist offering the property for what you are buying it for, plus your fee, that seller would likely get multiple offers. Insofar that this is accurate and complete, you are taking a fee for a service that saved the owner 10 minutes of 'work.' Defining this as unethical seems defendable. With that said, I know that this is not always the case. And at times, offloading a property requires a special set of expertise or connections - in which case the wholesaler is indeed providing the owner a value-added service.

Tim G. · Answer

Ask another local wholesaler that is how I found my title/escrow company. Find a deal, then worry about the mechanics.