All Forum Posts by: Barry Pekin

For the first and second situation, the buyer doesn't care.  All he cares about is what he's getting - just like I don't care what the dealer is getting for more car.  More accurately, I don't want to know because I know it's more than I got.  But I made that choice.

As for losing your license, of course you would.  Your license is to act as an agent of the seller.  That term, agent, isn't random.  An agent is someone who acts on behalf of, or for, another person.  That's the specific relationship you're entering into in order to earn your commission.  If I want to buy someone's house, as an investor, homeowner, wholesaler, etc., I'm not acting on behalf of the seller.  I'm acting in my own personal best interests.  If I can get the seller to come down a few thousand dollars, I'm going to do that.  What home buyer doesn't do that? That doesn't make me bad.  It just doesn't make me an agent. 

The last house I owned and lived in, I sold through an agent.  The buyer negotiated through the agent and got us down several thousand dollars.  The buyer wasn't dishonest.  He was just trying to get a good deal.  The agent was kind of useless.  He didn't even work on finding another buyer or anything.  He just told us we should take the offer.  In the end, we took the offer because we just wanted to move out and on and didn't want to deal with the whole process.

@Joseph Hernandez,

Laws vary based on where you are.

Having a signed contract is not the cure-all for everything.  Yes, it gives you rights.

All you have is a contract that says you can buy a property.  You're don't own the property until you execute the contract.  You can certainly sell the contract, but you can't sell the house since you don't own it.

Again, you should already know a lot of cash buyers, and if you don't, you should be hard at work connecting with them.  Actively seek out cash buyers.  Call them, email them, and text them.  Do whatever it takes to open the lines of communication with them.  One of the first questions they are likely to ask is, "Do you currently have an opportunity?"  Most wholesalers say no because they're doing the networking up front.  You can say yes.  And if they don't want what you currently have, you've formed a contact for the next opportunity.  This route is more work, but it pays off way more.

@Joseph Hernandez,

Be extra careful.  It sounds like you are crossing the line between wholesaling and acting as an agent.  Acting as an agent (unless you are one) can get you in a lot of trouble.

As a wholesaler, you should already know a LOT of buyers and be soliciting them to buy your contract.

@Steve Morris So what you're saying is that if I get the property under contract and then sell that contract to another investor, but I don't tell the seller what I sold it for, I'm being dishonest.

But, if I get the same property under contract from the same seller for the same price, take ownership of the property, and then immediately turn around and sell it to another investor, I'm being honest.

From the seller's perspective, how is either of these situations different from the other?

You're saying that for most sellers this is their primary source of wealth.  You're neglecting to mention that most sellers are going to sell through a realtor, as it should be.  They've taken care of their primary source of wealth, and when it comes time to sell it, they're going to sell it the way you would expect them to.  These people are not going to be dealing with wholesalers.  If a wholesaler does manage to trick them to selling their house for less than they could get through other means, that wholesaler is the operating WITHOUT integrity and transparency, which is what this question was about.  So, to the OP, I say Don't do that!

You're saying that the seller doesn't know the actual price.  No, they do.  The price they've agreed to - after they've been told they can get a lot more by going through a realtor, possibly after making a number of repairs.  They know that they can go this route and they've chosen not to.  Again... if the wholesaler is operating with integrity and transparency.

You're saying that the wholesaler is tying up their property with a false promise of buying.  No, they're not.  The promise is no less real than if a rehabber or landlord were making the same offer.  All offers come with a due diligence period where they buyer can inspect the house in detail.  Say they discover a major foundation problem during the inspection.  If that happens, the buyer will either re-negotiate so that they can get that fixed and not go under in the process, or they will back out of the deal saying that the property did not pass inspection.  Now, if a wholesaler is repeatedly getting properties under contract and backing out, or they string a person along forever in hopes they can make the deal work (when it probably can't at this point), again - no integrity and no transparency.

A realtor is a commissioned salesperson.  He makes a percentage of the purchase price and negotiated up front.  An investor or business owner (of any kind) is someone who is looking to make/purchase goods and services and sell them at a profit.

Any business owner or investor can act with integrity and transparency.  Or they can choose not to.  Wholesalers fit into that category.  They are a business owner or investor, and they can choose to act with integrity and transparency, or they can choose not to.

You're confusing those who choose the ethical path with those that do not.  And to be honest, I can't really blame you since there are a lot who choose the latter.  Those who choose the first path are smeared with the stench of those who choose the second.

I think the difficulty is that a vast majority of people should and do sell their property through a realtor or at least go the FSBO route, and there are a lot of "wholesalers" who listen to the less-than-ethical gurus who tell them the can make fat stacks of cash just injecting themselves in the middle of the sale. Wholesalers shouldn't even be talking to these people. They should be asking the seller, "Why aren't you selling through a realtor where you can get more money?"

The OP asked how a wholesaler can act with integrity and transparency.  That's what I was trying to convey.  

On a few notes, I would disagree.

First, when you get the house under contract, you don't yet know what the end-buyer is going to pay.  You might have an estimate, but you don't know.  It depends on their exit strategy and other factors.

As the wholesaler, you have multiple exit strategies available.  More uncertainty.  I also work with hard-money lenders who are willing to come up with other plans if we want to.

And of course, the seller knows you're going to make a profit that's to-be-determined. They have to be ok with the price they're getting and that you're going to make a profit. If they're not, and they want more for their house, they can sell retail. I had one person ask why they couldn't go directly to other investors, and I told them that they certainly could and that would get them more money - maybe as much as $10K. They asked some other questions about how they could sell their house and I suggested FSBO. I've actually only had such a conversation once, and it didn't seem to matter in the end. I didn't get that deal. He did sell it FSBO and made just about what I offered him.

A vast majority of people who sell their homes do so retail.  They want top dollar and they are willing to do what they can to get that.  Some people want to get rid of a property that's causing them distress (financially, emotionally, etc.) and they're willing to give up equity for that.  They're hard to find, which is why wholesaling is difficult.

I once sold a car through a private sale.  I ran ads and negotiated with the buyer.  It was a bit of a pain, so I decided just to trade my car in next time.  Do I know what the dealer sold it for?  Nope, and I really don't care.  I traded equity for convenience.

@Michael Yates,

Essentially, if you want to operate ethically and honestly, then just do it.

I ask people if they're willing to sell.  I don't say right off the bat anything about buying their house.  If the conversation goes anywhere, I tell them that I have a network of investors that I work with who would be interested in buying their house.  I might even explain that I will get the house under contract and then assign the contract to the right investor.  I do not say this stuff from the beginning, of course.  They don't want to know the details if they're a truly motivated seller.  They just want to get rid of the property.  On a few occasions, I've been asked what my fee is.  When they ask, I tell them that they won't be paying any fee.  I work that out with the end buyer.  At this point, I've never had anyone pursue it any further.

It's true you need to operate within the laws in your state, but contrary to what some might say, that's not difficult.  Be sure you know the laws and follow them.  Illinois, for example, will let you wholesale once per year.  That's the most extreme state.  Others might follow suit, at which point you might want to get a license.  Having a license doesn't prevent you from wholesaling.  You just need to follow those rules as well.

As for stealing equity from a homeowner when they don't know the value of their house, I couldn't disagree more.  Investors (wholesalers, rehabbers, etc.) are always looking to purchase properties at a discount.  Some (very few) sellers are ok with this.  Again, be honest.  I tell them from the get go that I'm looking for properties at a discount.  Motivated sellers have a reason they're willing to sell at a discount.  Maybe they don't have the time and/or resources to fix up the property enough to sell it at retail.  Maybe they're an investor who is unhappy with the property.  IF they are willing to sell at a discount, then that's someone you can work with.  In fact, I always tell the seller that they can get more money going with a realtor.  If the house is in really poor condition, I explain that they're most likely going to have to fix it up before they can list it.  The last two people I spoke with contacted me BECAUSE I was a wholesaler.  In both cases, the property was in distress and they didn't want to deal with it.  They knew exactly what I did and they wanted to sell through me.

Bottom line... be honest and open about what you're doing.  If what you're saying doesn't work for them, then wish them luck and drop it.  Of course, follow up in a few months and ask them how it's going.  They're motivation may have increased over the months and they might want to discuss it with you further.  If not, move on.

Good luck!

@Brennan Taberna,

There's no added complexity when working with out-of-state owners.

For the closing, your title company is going to be used to handling work where someone is out-of-state. 

Before anything, though, contact the owner and start the conversation.  If they're interested in selling and working with you, they can make sure you have access when you need it.

@Helian Mikel Plaza,

There are a lot of free or near-free resources you should take advantage of first.  Read books, watch videos, listen to podcasts, etc.  I recommend the book, "If you can't wholesale after this... I've got nothing for you."

As a minor, I don't think you can enter into a legal contract, which is going to be important.  I suggest taking the time to learn and get to know others in the industry.  Form relationships.  When you are ready to dive in, you'll have all sorts of knowledge and contacts, so you'll be way ahead of the game.

If you do want to do things sooner, you're going to need help from your parents or some other trusted adult to handle the contractual work.

@Mark Saied,

You should be networking with a lot of buyers.  Ask them.  Some will want that, and some will not.

@Shayanna Lee,

Leads are motivated sellers.  You say you have 150 solid leads but you're not getting anywhere.

Can you share why you're calling them solid leads?