All Forum Posts by: Tyco Bronye

Newbie here still trying to make sense of wholesaling's role in society.

John H, I guess to me I'm saying it's weird that wholesalers have to inform home owner of their options because it seems like there are only 2 options basically for a home owner who wants to sell.

1. FSBO

2. Agent

To Simplify: The way I understand it there are 2 basic ways a seller can sell their house free and clear (I realize there are creative ways like subject to's and rent to own) but I'm just talking free and clear in a short time.

Scenerio: Your mother died, you inherit her house, she lives across the country, the house has not been renovated since the 60's

Option 1.You call up a realtor and the realtor says. Get your house appraised, then this is what it's like going through me. I will try to get you top dollar for your house, but for the house to sell you need to get it renovated, then on top of that it will take on average 6 months to sell (or whatever is truly average for that time and area) minus 6 percent commissions and closing costs

-advantage ... most money, most likely

disadvantage...will take longer , all the headache of dealing with a renovation

Option 2. get house appraised at ARV, minus rehab cost by a professional appraiser. You can sell this house quickly and without messing around with a renovation by selling to an investor who will buy your house legally at 70 ARV minus rehab.

advantage -takes less time, don't have to deal with renovation

disadvantage -will not make as much money as option 1.

I'm just saying it seems that more sellers should be familiar with this concept in general, it seems odd that a wholesaler makes a seller aware of this option since there are basically 2 options total.

Jon H,

We might of had a misunderstanding. I realize the legalities of buying a house. I have purchased one house in my life that I still live in and I hired a buyer's agent when I bought my house.

I didn't mean one should sell a house on craigslist the same way one sells used dvd's on craigslist. I fully realize there are legal documents, title exchanges, escrow etc. all that legal stuff.

If a seller goes the traditional route through the listing agent or if the seller does a for sale by owner they both go a closing at a title company. I'm not arguing against that.

http://www.youtube.com/watch?v=Cj4CMj8KTKc

This link has a guy talking about the question "Is wholesaling real estate ethical?"

He brings up an example from his own life where he made a 6k wholesaling fee. The seller and the buyer later by chance found out they were selling to each other through this middle man. Once the seller found out about this he said to the wholesaler if I find out where you live I will shoot you with a shotgun.

I ask the question if wholesaling elicits that kind of response from the seller it seems to illustrate the point that it has no role for the seller who's basically feels like he's been robbed of 6k

Also the very fact that in general wholesalers don't want to go to a closing with all three parties there. That in itself shows they know they are screwing over the seller.

Jon H,

Why is matching buyers and sellers a complicated process? It seems like one of the least complicated dynamic in life in general. You get pre approved for a certain limit of money say 200k, then you go out and choose from hundreds if not thousands of houses that are for sale 200k or under.

Thanks to everyone who responded. To be clear to everyone I understand the advantage to the rehabber /buyer by using a wholesaler, that's obviously win-win. I also understand the advantage of the quick sale to the seller and that they would take less money for that advantage. I also understand the seller advantage if it's in bad condition and that they don't have to deal with a renovation to put it on the market.

I realize the equation 70 percent of ARV minus repairs is for the rehabber that's why I'm saying it should be a normal cultural thing for a seller who

1. wants to sell the property fast with all cash

2. Doesn't want to deal with a renovation himself

That seller should go on craigslist and say "House for sale for rehabbers selling for 70 percent ARV minus repairs"

That seller with be better off by not having to lose an extra 4-7k to a wholesaler who does nothing for the seller.

I'm just saying it strikes me as weird that this wholesaling industry even exists because it seems relatively easy to eliminate them. It seems the industry is based on sellers ignorance of just going on craiglist and putting an ad up that will appeal directly to the buyer/rehabber and that is "house for sale 70 percent ARV minus repairs"

To Jon H, yes the basic question was why does this intermediary even exist?

To Patrick who asked me so is it unethical to match a buyer and a seller? I'm not saying it's unethical, it just seems unnecessary in theory.

Maybe I'm revealing too much with this next analogy but here goes. 12 years ago I was living in San Diego. I was working at as an apprentice plumber and my fellow workers told me about this place called Tijuana, Mexico which is not very far away were prostitution was cheap and legal. They told me what to do and then I decided to check this out.

I walked over the boarder and headed down to Revolution and Constitution street and see all the available women just lining the streets there first hand. There were hundreds of women available wanting to sell you their services. I walk down the street with many offers of "****y or sucky" from many different women. I picked one out, paid her 25 bucks and spent 5 bucks on the room. We did our thing, deal was done.

An hour later I decided to do it all again with a different woman. This time while I'm walking down the street I am accosted by a Tijuana local guy with broken English saying he will find me a women. I wasn't interested but he was really annoying and just kept hanging around walking next to me. I'm looking at the women and he is doing the same thing looking at the same women. He picks one out, she was good looking and I asked her if she was interested and she was.

This local Tijuana guy who I just considered a gnat was asking me for money because of how he assisted me, I have him 5 bucks just to shut him up, but the point is he was "completely unnecessary" He was trying to make it seem like he had some role, but in reality he was not needed.

When I reported back to my fellow plumbers about my experience and told them about this local guy and his attempts to get money out of me, they said yea just stay away from them.

The Tijuana guy seems like the role the wholesaler plays.

When I bought my first and only house I looked into how much I should offer and I read from various sources that you should not offer more than 10 percent off the asking price or your offer will be rejected. In my own experience I've only purchased my own house that needed rehab that I bought for the listed price. Before that I made an offer on a house for listed price that had multiple offers and mine was not accepted, in other words someone offered more than listed price.

So it begs the question: why are houses sold at 70 percent of the value?

Sorry if this offends anyone. Also thanks for everyone who has responded to my other questions. This message board is awesome! True learning takes place here at BP forums with real people in real situations.

It seems to me a wholesaler is a middle man who yes serves a purpose to an investor but at the expense of screwing over the seller. It seems like a lose-win-win scenario. I have looked into this and I have heard analogies to a store like Target or Walmart. That in essence they are middle men, since they buy their products for one price then raise the price when they sell it to you the consumer. However, this analogy doesn't seem to work in my opinion because those stores offer a convenience to the consumer that they are willing to pay for. You pay more at the small hardware shop located a block from you than you would at the Home Depot 12 miles from you, but I will still occasionally shop and pay a higher price at the ma and pa store if I want the convenience.

But a wholesaler doesn't offer a convenience. I guess I don't understand why and how real estate wholesaling exists in the market. Basically I'm saying: Sellers and buyers should be able to come together without this middle man. If I want to sell my house fast and it's in bad condition why can't I just put an add out on craigslist saying :

"House for Sale - Priced at 70 percent ARV minus repairs"

Then just hook up directly with the cash buyer, instead of adding this extra person who takes another 20 percent.

Why hasn't 70 percent ARV minus repairs made it to the popular lexicon even for people outside of the real estate business in this age of information?

My parents are not real estate investors but they just bought a second house for retirement and they are familiar with concepts like "comps" "points"

Shouldn't the market have eliminated this unnecessary person called a wholesaler/middleman? I realize there is an advantage of all cash purchase because of the speed you can get your money guaranteed and also if the house is not in good condition you can't sell it on the market. But shouldn't their be a legitimate business out there that where a "motivated seller" can just hook up directly with the buyer and cut out this unnecessary person who is just taking thousands of dollars for doing nothing?

(Doing nothing from the seller point of view, I realize wholesalers put in a lot of work to find their prey)

This seller has to be taken advantage of is all I can conclude at this point.

I've looked this question up on Google: Is Wholesaling ethical?" There was an article that broke this question down into two categories.

1. A deal is a deal. You approach the situation fully trying to deceive the seller.

2. Inform the seller of their options.

The author of the article decided to take the second approach and would lose some deals because of it. I can't understand if you really are informed as a seller why would you sell to a wholesaler?

Agents, feel free to educate your first time home buyer about how the business works while your driving around with a client in your passenger seat. This is just a story about how an agent wasted A LOT of his time with me because of simple communication issue. A first time home buyer does not have a same understanding of the house buying subculture vs. a professional agent. I thought that when I looked on a non agent MLS site that a house listed "for sale" meant it was for sale. If I was made aware that it doesn't mean that it would have saved a lot of time.

I became interested in buying my first house a few years ago. I got preapproved then I contacted an agent. I told the agent I wanted a house that needed to be rehabbed. I didn't care what the inside of the house looked like since I was going to change it all anyway. I was only interested in the house square footage and neighborhood.

I told the agent I would find the house myself.I used the Edina Reality website. One of many websites that have the MLS. I thought I was making it really easy for the agent. I told him don't show me any houses that I didn't pick out and drive to first. I would find properties "for sale" off the MLS, up to 130k then I would drive to the properties I was interested to see if I like the neighborhood. Once I found 7 or so that I like I would send him an email and we would set up a time on the weekend to go look at the interiors. I only needed 3 minutes inside the property since I brought my video camera for a quick tour....really easy to work with. I wanted to buy a house ASAP because I hated paying more for rent than I would if I bought.

When he would show up we might take a look at one of the properties I had requested then he would show me a bunch of others that I never looked at myself. I would ask about the other properties I was interested in seeing and he would kind of shuffle through his papers to see what the issue was. Being a naïve first time home buyer I was never satisfied by what he said, to my mind it's "for sale" I just saw it on the internet for sale this morning. Also the fact that he was showing me properties that I didn't request to see overall made me think this guy just doesn't pay attention to me. Over about 4 weekend days, he probably showed me 35 houses.

I did make an offer on a REO house for 150k, but after a month of not getting anywhere with it I was finally laid off from my construction job and could no longer buy a house.

Once I found a job again, I found a new agent who told me that the MLS agent site is different than the general public MLS. It will show if a sale is "pending" and therefore a waste of time to look at especially if you want to buy ASAP. So what I did was find properties I liked of the general public MLS, I sent my new agent the MLS numbers. She would check and see if any are pending sale, then send back the email showing which ones were ok to look at. We spent one afternoon looking at about 7 houses, 3-5 minutes inside each one, plus about an hour of total drive time. I made an offer and it was excepted. We close a few weeks later and she's paid her commission.

I understand agents make 20k to 40k per year on average. I'm wondering why exactly this is?

If your a buyer's agent and your client is preapproved to buy a house, it seems like there would be around 100 percent chance of making your 3 percent commission. I can understand there are occasions where your client gets laid off suddenly and therefore can't buy a house, but overall it seems once you've secured a client and they sign a contract with you what else would prevent this sale?

I'm guessing it must be an issue with lack of clients?