Is "We Buy Houses" on marketing materials false advertising?

Question

Is it considered false advertising as a wholesaler to tell people that "we buy houses" I buy houses" etc...? Is it false advertising to put it on marketing materials? Is it false advertising to use it as a website name, business name etc...?

I know everyone is doing it, but as a wholesaler I'm not actually buying houses.

Jonathan Greene · Answer

I personally think it's false advertising for wholesaler who do not have the financial capability to buy the home to send those out, but I don't think anyone is going to stop or get in trouble for it. Also, an honest wholesale postcard would be this:

"Will put your house under contract, but don't have any money of my own, so will then try to find someone else to buy the contract that I wrote with you (again, no money) and then I will take the gain in there for all of my very hard work of taking 5 photos and sending out an email and making up repair costs and ARV. So what day works for you?"

Nick C. · Answer

False advertising is the rock solid foundation that wholesaling is built on. You're going to have to ignore stuff like that if you want to be a successful wholesaler.

Don Konipol · Answer

@Juan Santiago

Sometimes definition is determined by usage.  I guess the I buy houses means I put houses under purchase contract. But in a strict sense you are absolutely correct.  Very interesting point.  The wholesaling business is a place where operators can choose where are the honesty and disclosure spectrum they want to operate.

Will Barnard · Answer

Very interesting question, in all my years here and in Real Estate, that is the first time I have heard this specific question so kudos to you for that!

I would say no in the legal sense (I am NOT an attorney and this is NOT to be construed as legal advice) as one could argue context and intent of the message. That said, in most cases with most wholesalers, they are not actually "buying" the house but I think you are safe in your message. Where you may not be safe is if you intend to wholesale via any one of the ways in which you may be constituted as "brokering without a license". I would be more concerned with that than the sign message.

Joe Splitrock · Answer

I highly doubt anyone would get challenged or investigated by the FTC for making the claim "we buy houses". For "false advertising" to be investigated would require some level of financial harm to the consumer. If the seller is offered $100K for their house, there is no financial harm if someone else pays the money.

That being said, some wholesalers do make misleading or false statements. Saying "we buy houses" when in reality you are selling a contract to a customer is not accurate. When you say "we" or "I" it implies you or your company are the one buying the property. Ironically wholesalers argue all day long they are not buying or selling a house, they are selling a contract. When it suits their argument, all the sudden they are buying the house, lol.

Here is the most important point. You don't need to say "We buy houses". You can say something like "Sell your house fast" or use other wording that doesn't claim you are personally buying it. You can say "we have investors that pay cash" instead of saying "I pay cash". How hard is it to be honest? Not very hard...

Don Konipol · Answer

@Randall E Collins

You are entitled to your opinion, of course, but it is just as biased by the fact that you’re a wholesaler as a licensed broker’s opinion is by the fact that he’s licensed.

However, whether you’d like to admit it or not there are some basic facts that everyone except wholesalers will acknowledge

1.  Despite trying to portray themselves as principals in the real estate transaction, wholesalers, as the term is commonly used, are middlemen, agents, intermediaries or brokers.  Hence they provide a service the same as, or very similar to licensed real estate brokers.

2. Wholesaling is by no means investing, it is a real estate service business

3. The vast majority of people trying to wholesale real property do not have sufficient knowledge, education, or experience to do it successfully.  In fact they can be very harmful to home sellers

4.  Either through ignorance, morals, or lack of legal enforcement, the majority of wholesalers provide a false picture of their intent, financial strength, abilities, organization size and chances of successfully closing the purchase to home sellers

5.  Licensed real estate agents/brokers must successfully complete a course of study that provides a firm foundation in the legal, ethical, financial, marketing and theoretical aspects of real estate.  Wholesalers courses are focused on sales and marketing of wholesaler services.  Big difference.

6.  Licensed agents/brokers must pass written exams attesting to their basic real estate knowledge.

7.  Licensed agents/brokers must take and pass continuing education courses to renew their licenses

8. If a licensed agent/broker acted in the same way as many, or even most wholesalers, they would receive sanctions from both the NAR affiliate and the state real estate commission, ultimately resulting in the suspension or revocation of their license.

9. A licensed agent/broker has a wide system of support to enable him to successfully sell a homeowners house; MLS, local Realtors Association, sponsoring broker, team leader, etc.  wholesalers seem to get their support by asking questions in sites such as bigger pockets, where only rarely do they receive answers from full time successful wholesalers.

If I were a wholesaler, or thinking of getting into the field, I would seriously consider if I had the knowledge, expertise, and abilities to perform a needed service for the home seller, or if that service could be better provided by another party, such as a licensed agent with listing on MLS.  If the former, I’d educate myself in all aspects of legal, financial, general real estate and concentrate on the niches where my services are competitively advantageous.  If the latter, I would find some other way to make a living that did not involve having to mislead people into doing something detrimental to their best interests.

Will Barnard · Answer

Originally posted by @Randall E Collins :

......As such, you are the actual buyer who has simply utilized a business partner to assist in closing cost........

You’re sort of verifying all the other comments above that wholesalers misrepresent the truth.

Actually, not "sort off"!

Randall E Collins · Answer

My comment in no way whatsoever misrepresents the truth. The truth is that haters such as yourself for whatever reason, do their utmost best to put down wholesalers. I believe it's because of  competition and wholesaler challenge their useless profession. I will forgive you for calling me a liar on the cool.

Randall E Collins · Answer

I fully and totally agree with you Don. Except the part of a wholesaler acting the part of a realtor/agent. I for one am self taught, learning by experience as I go along what to do and what NOT to do. I have of course watched some of the U Tube video's on wholesaling just to get a basic idea of what's it's all about. But at the end of the day, I sing my own song. As well I have Christian morals and ethics which far out weigh any other. The point I've been trying to convey is that not all wholesalers are bad guys. Yourself as well as all others in the real estate profession had to start somewhere. I choose wholesaling simply because I cannot afford to do otherwise. My beef is with those who criticize the end goal that I'm working very hard to accomplish. Which is to learn real estate and investing, obtain a real estate license or in the least, become a transaction coordinator and become financially stable. If any one is willing to help me reach my goal of course I'd be more than grateful, but please don't criticize some one who is less fortunate and not stupid.

Is "We Buy Houses" on marketing materials false advertising?

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