All Forum Posts by: Eric Pinter

@Thomas Chapin  the vast majority of licensed real estate agents do not have an investor mindset.  I think that may be part of the problem.  They consider themselves to be salespersons, just like a used car salesman, and with only slightly more training.  That being said, the vast majority of agents that homeowners come into contact with only know one way to deal with a property.  I don't know that wholesalers really fill a useful gap.  I think that they probably just convince a seller that their way is best, just like an agent would try to do.  Some people buy Fords, some buy Chevy, but they all get you where you need to go.  

My issue with wholesaling is that, as low as the barriers are to entry to being a licensed agent, there is at least SOMETHING.  There are zero barriers to entry for being a wholesaler.  And the lower the barriers to entry, the less informed and educated the people will be.  I am also an attorney.  The barriers to entry for being an attorney are quite high (undergraduate degree, LSAT entrance exam, admission to law school, successful completion of law school, pass the bar exam, undergo fitness of character investigation).  Real estate agents are practicing law within strict guidelines, so they need to be competent in those areas.  Most are not as competent as I think they should be, but at least they have some relevant training and have passed exams and are under the supervision of a principal broker.  And as I've mentioned above, the benefits of wholesaling to the seller can still exist (and even surpass) by using a licensed agent to help sell.  

I'm not talking about value added. I do my own version of "wholesaling", but I actually close on the property, then list it for sale in the MLS. I often don't do anything more than change the locks. I might get trash cleaned out or have the yard mowed, but that's about it. So I have no problem with turning properties quickly without really doing anything to them. But I actually solve the problem by buying the house, not just pretending that I'm going to solve the problem by getting a property under contract then trying to find a real investor with actual money and hoping they will solve the problem. That setup is what leads to causing actual damage to sellers, when wholesalers tie up properties and don't deliver. The seller often ends up in a worse position than they were before. I see it a lot when I buy foreclosed properties. I come across unscrupulous wholesalers who have talked an unsophisticated homeowner into deeding the property to them for no real benefit to the homeowner. The wholesaler fails to deliver, then the house gets foreclosed on anyway. Similar situations happen with contracts which tie up the property and prevent the homeowner from seeking additional methods of selling.

Add all that up and combine it with the fact that it's super easy to just get a RE license, allowing that person to have better access to real estate sales data and to legally accept commissions for helping people sell, and I just don't get why people even bother wholesaling.  

In Arkansas I believe it is still 2 years for an agent to have an active license (under another broker) before being able to become a broker. There is an exception for those who can demonstrate that they have more experience and the AREC may reduce that 2 year period. Again, I see those as being good things. I already think the barriers to entry are way to low to become a real estate agent. Agents spend 60 hours in a classroom, take a simple test, then they are licensed. Arkansas does not require attorneys to be involved in RE transactions (many states do). So between low barrier to entry of being an agent, and zero attorney oversight, there are lots of ways for consumers (general public) to get screwed in dealing with what is often the most expensive asset/investment they will ever buy/sell. Add to that a bunch of people running around sticking "WE BUY HOUSES" signs on telephone poles (illegally), trying to "wholesale" properties, generally not being able to perform, and often suckering unsophisticated people into tying up or relinquishing rights to their property. It makes for a bad combination where many people get taken advantage of. Notice I didn't say "all wholesalers are bad", but I do think MOST are. It's way too easy to just go get your RE license, find a broker to let you work there (it costs the broker nothing if you pay your own MLS & Realtor fees), that it just doesn't make sense to try and be a wholesaler. It's way too easy to find funding or use your own $ for the deal and close on it yourself, then sell it the right way as an owner. You can still do all of the same things, just in the light of day.

@Eric Metz and others, the AREC has enforcement power against unlicensed persons as well as real estate agents.  It doesn't matter if you hold a license or not.  The regulations are law, and you can break them even without being licensed.  The AREC can then impose civil penalties against the person.

@Allison Lane the pros you listed under wholesaling often apply to just listing a property as well. I very frequently list and close on a property within a matter of days. A wholesaler simply does not have the marketing power of the MLS. They never will. Agents also have long extensive lists of investors and other buyers. There is no more reason to have to "show" a property in the MLS than one offered by a wholesaler. The seller can still offer all the same terms they would offer if wholesaling. Many properties are sold by brokers without putting a sign in the yard and allowing the seller to keep their privacy.

I generally don't list and sell for other people.  I pretty much only handle my own properties.  When I first got into this business in 2004, I did some of what the kids call "wholesaling".  It was shady.  Illegal? No.  Did it make me feel good about what I was doing? No.  I was always having to have these weird conversations with people in desperate situations about why they should let me try to wholesale their house.  Many unpredictable situations arose and I could see both legal and reputation issues arising in the future.  So I quickly stopped and became licensed.  I can do everything above board in the light of transparency without having to run around behind the scenes like some seedy underbelly black market.  In life, we all have the same amount of time, and we only have 1 reputation, so we might as well use it the right way.

I have people ask me all the time about getting started in RE investing.  They inevitably ask me about wholesaling, and I explain how much better they are just getting their real estate license.  Or just doing something else entirely.

@Jay Hinrichs is dead on.  There are lots of untrained and uninformed people out there running around claiming to be wholesalers.  Really, they are just going out of their way to circumvent long established laws that regulate the real estate industry.  The purpose of those laws is to protect consumers, and the laws are generally very fair and reasonable.  If most of them sat down and did the math, they would find that it would be easier and they could make more $ if they just became licensed and sold RE.  

@Jared Kluver there really is no slippery slope. For one, some of the things you describe are already happening, but on the lending side of the equation (see FHA & some conventional 90 day anti-flipping rule, or 180 day 2nd appraisal & proof of improvements rules some lenders have, as well as 20% over purchase price restrictions). These restrictions are forced into the system by the investors of the loans. And if a seller chooses to dance with the devil by selling to a buyer using that type of financing, then the seller agrees to play by the devil's rules.

As far as not being able to freely dispose of your property, that will never happen (unless the seller happens to choose to sell to a buyer who is using financing of the sort I just mentioned).  There are long established prohibitions on certain types of "restraints on alienation", which eliminate the slippery slope you were trying to describe.  It's really not something to worry about, so no need to sound the "big government" alarm.  

I support the bill.  

You should really be talking to your title company about this.  They will send you a preliminary settlement statement with most of this information for your specific transaction.  They can tell you about transfer taxes, property taxes, special improvement taxes, etc.  Depreciation doesn't have anything to do with these types of taxes. 

Regarding the survey, if you are in another country, I would definitely suggest a survey, no matter what kind of property it is.  

For info about the enhanced title insurance policy, call the title company you are closing with.  They can tell you anything you want to know about it.  Most people do not buy it, but some do.  It's usually really cheap, and if you are from another country and do not have local relationships, you might want to get it.  You do not have to close where the seller is closing, you can close wherever you want.  I close all of my deals with Commerce Title in Little Rock.

If you are using the Realtor forms, then you must be working with a Realtor.  Those are questions you should be asking your Realtor directly.  

Another one is ADDI.  However, as a seller, I generally do not accept offers if a buyer is using ADDI or something similar.  They often add a lot of headaches & delays to the seller.  So in a competitive market, using one of these programs might hurt your chances of getting the property you want.