Is wholesaling predatory?

[Chris Gould]

When I'm buying property at steep discounts, I've had people ask me "isn't that predatory, buying someone's house for 'less' than it's worth?"

It's something worthy of consideration. I've meditated on it myself because it made me mad when the person said this. But why did it make me mad? Was there a part of me deep inside that was afraid he was right? Possibly. I needed to dig deeper and really come to terms with the service my wholesaling company offers to sellers. 

One of our core tenets within my company is to "only help people who need help." So I knew, at least on paper, we were focused on helping people. I've heard the stories of people crying when we agreed to take their problem property off their hands. But what I kept coming back to was the term "predatory." How much equity is appropriate to give up to get someone out of a tough situation and get them paid in cash within 7, 10, 14 days? I've had deals where, for all my efforts, I only made $500. Other times we've made over $40,000 on a single wholesale deal. Is $40,000 too much? When does the profit from a single deal become too much and move into predatory waters? 

As I considered all of these things, an analogy came to mind...

Sometimes you're sick and need to go to the doctor. You call in to the office, and schedule an appointment, if you can get one. Let's say you have to wait 3 days to see the doctor. If you're not highly motivated or extremely sick, you can probably wait that time and would much rather only pay your copay of $40 to see the doctor. 

Now on the other hands, let's say your are violently ill and need medical attention immediately. In this situation, you'll probably call an ambulance despite it costing upwards of $1,000 for a single trip. Someone will pay 20x more for immediate servicing of their need. Worse yet, if someone is in a super difficult situation, injured in the mountains and needs a helicopter ambulance, they'll be looking at a bill of $20,000 or more!

This made me realize, wholesalers are the ambulances of real estate. Not everyone can wait days to see their doctor (i.e. use a realtor). Many times people need help right now and the value in that is immense. We provide a very specific service to sellers and depending on the level of service they need, we can get paid well for that.