Please advise. My wholesale world just came crashing down.

[Account Closed]

Hey all! 

After months of following the subject, my entire wholesale world turned upside down today when I discovered most wholesalers are breaking the law, operating unethically, or both.  Anyway, I was hoping you guys could help me understand how to approach wholesaling in a way that's legal and ethical.

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I learned that you can't market to a seller, put a property under contract, market to a buyer, then assign the buyer that contract without having an RE license (in many states).  That's essentially what most wholesalers do.

From what I understand if you actually BUY the property with your own or borrowed money, close on the property, take title to the property, and THEN market and sell it, you're good to go.  Makes sense.

So, I started researching options for wholesalers who need funding to execute that workflow after reading a BP post that mentioned "transactional lenders."   

I called up a few and it turns out that they fund double close transactions.  One site expressly stated the key benefit to using their service was that they'd help the wholesaler hide how much money they were making from the buyer. I was expecting more of "we help you wholesale legally... the right way."

Nonetheless, their service seemed worthless to anyone looking to wholesale without an RE license since they require a double close, as in order to arrange a double close, you must act as an agent... In order to act as an agent, you must have a license...

Now... here's the thing.  In order to set up a double close, or a assign a contract to a buyer - LEGALLY, you must have license.  Isn't there a conflict of interest issue here though?  

Do I call up Joe Seller and say "hey Joe, I am a licensed real estate agent and I'm calling to lowball you."?  Isn't your responsibility to get the best possible price for your client? 

How does one navigate these issues successfully?  More specifically,

1. How do you successfully and LEGALLY operate as a wholesaler WITHOUT an RE license?
2. How do you legally and ethically lowball people if you are licensed?  

What if Joe Seller says "No I will not take a lowball offer, I want max dollar." What are you supposed to do, list the house and say "Ok, I understand you've declined my lowball offer, I will list and work hard to get you max dollar."?

Thanks for your time!  

[Jay Hinrichs]

I have been an agent for 4 decades and probably bought and sold as much property as most on this site over the years.

I make an offer i disclose i am a broker and i am buying for PROFIT or LOSS... my dads attorney had me put that in my contracts in about 1976..  works like a charm.. 

but what i do is i close with my own money or a loan etc.

then i figure out what to do with it once i own it.. 

simple as that.

those that dont want to sell for what i want to pay .. I would list it and sell it.. or refer to another agent for a referral fee. all leads had some income.

the amount of money wholesalers spend to get leads then let those leads just walk when they cant make a deal to tie it up is just the most assinine thing i have ever seen.  

One young couple down in Slidel  was all hot to trot on this spent the money got the leads.. Never did do a deal first 6 months but gave their real estate buddy j6 ot 7 referrals that turned into listings.. so not sure about them but i an NOT a non profit orginzation when i am doing real estate deals..