All Forum Posts by: David Hines

@James Green

No offense, but your business model seems shady to me. If you can't be completely open and honest and still get the deal done, then there is a problem with what you are doing. It doesn't matter if its legal or not or if other people do it that way or not. If a wholesaler is put off by full and complete disclosure, that's a big problem in my eyes...

@Jose Castillo

That's an interesting scenario, this house you're buying for $1.00, did a seller approach you and they are adamant that they only want $1.00 for their house or is it more likely that you've convinced them that their property is only worth $1.00 so you can maximize the assignment fee you can make on the deal??

@Melanie Hartmann

This sounds like you are doing wholesaling the right way and conducting your business honorably.

Unfortunately, in my experience, you are not at all representative of wholesalers. I don't believe that there are many sellers who are fully educated who value "time and convenience" at tens of thousands of dollars. The much more common scenario is the wholesaler who leads a seller to believe that their property is worth less than it really is just so they can add their assignment fee and market the property to investors.

I am a broker in Texas and own rentals in the Houston area, but it has been years since I've come across a really attractive deal. I've heard a lot of good things about Tennessee, but I am not familiar at all with that market. Where should I start looking? Memphis, Knoxville, Chattanooga, are there good deals out there? I'd appreciate any recommendations for agents or property managers as well.

Thanks!

You can believe what you want, but I assure you if I had made my original post and 75-85+% of the responses had solid reasons why wholesalers are generally well behaved and that I was mistaken to write off the profession, then I would have reconsidered my position. However, that isn't what happened is it? If you want me to change my mind, then make a stronger argument...

Classic straw man argument, misrepresent what I said and then attack the misrepresentation (I get it, its easier). I never said making an offer was deceptive. Making an offer at X while knowing that you can immediately sell the property or assign the contract for X + $20,000 without ever doing anything of value to the property is deceptive if you haven't disclosed to the seller that that is the plan. I have seen this exact situation, and not on 400-500k properties either, I've seen a property with an ARV of 100k that a wholesaler gets under contract for 50k and markets to their buyers list at 70k. So I would say that at the time of the deal, the property is worth 70k and if the wholesaler isn't disclosing to the seller that they are going to sell or assign the contract for a 20k profit, then that is deceptive.

Also, that $20,000 is FAR in excess of the 6% charged by an agent. By my calculation, that's a 40% markup. If that seller were treated honestly by the wholesaler, then I think most sellers would end up using an agent and keeping much more of their equity. Wholesalers know this and it is EXACTLY why they aren't fully honest in the first place. Oh, I GET IT! You are sore about the outrageous 40% profit for doing nothing of value. Just follow the money...

I'm not shifting the blame, you are shifting the blame for the wholesaler's actions (the one actually contacting the seller and being deceptive) to other parties. The fact that they haven't been contacted by an agent or inspired to follow through on advertising does not excuse the misbehavior on the part of the wholesaler! 

Being deceptive in order to make money ISN'T a free market, very far from it. You seem to have the opinion that a free market means that everyone is on their own and what ever happens happens. If that is the case then I couldn't disagree with you more. What about a market free from deception? What about a market where everyone is free to expect open and honest and complete disclosure from the parties you are dealing with?

I'm not talking about some outside party setting the value of a property. When a wholesaler comes to a seller (in particular a distressed or uneducated seller) and makes an offer, it is very possible for the uneducated seller to view that as an outside expert saying their house is worth what is offered. I don't have a problem at all with a flipper doing the same thing and justifying it by saying here is all the work I'm going to do to repair or make improvements and then I'll profit when I resell it.

I also don't have an issue with a wholesaler (the one's who have the money and plan to double close) coming in and being completely open and honest and saying "here is my offer, I don't plan to do any work and I'm going to sell the property to my buyers list at my offer + $20,000."

That being said, I don't think that wholesaler scenario happens very often at all. I think it is MUCH more likely for the wholesaler to make an offer, an uneducated seller thinks ok I guess that's what my house is worth, then the contract get's assigned so the wholesaler doesn't have to actually close or they double close and in either case walk away with sometimes surprisingly large paydays. Its only afterwards that the seller feels like they were not told the whole truth and wishes they had put the property on the open market. This seems dishonest and deceptive to me. Someone else above said it nicely when they said that wholesalers do this out of a concern that full disclosure will interfere with the transaction being successful, I couldn't agree with that more.

@Caleb Heimsoth @Max T. @Jill F. @Jackson Pontsler @Will Gaston @Joe Splitrock @Arun D.

@Jason D.

@Kelly Conley @David Roberts @Account Closed

Thank you all for your responses!

By my count we have 8 negative impressions of wholesalers, 3 positive impressions, 1 wholesaler out to defend his good name and (most surprising to me) 7 wholesalers who themselves agree that if not the majority, then at least a large number of wholesalers are terrible at what they do. 

I haven't seen anything that dissuades me from the opinions outlined in my original post.

At least in Texas, you have 30 days to account for the security deposit to the tenant. It is possible that your property manager is still in the process of getting bids and having the repairs completed.

However, it is also possible that they haven't even gone to look at the property yet. I would absolutely contact your property manager, outline your concerns and ask them to turn the handling of the security deposit over to you. I would then follow that conversation up with something in writing that confirms whatever decisions are made.