Wholesaling is a great way to learn how to become a real estate investor. In its most simplest form, you could find a property, put it under contract, and flip your contract to another buyer for a small mark-up and make some easy money. This is called the "find and assign" method.
Anyone who finds this concept to have a negative perception is too ignorant to take the time and learn about the process. I have been wholesaling for over 5 years now and sold over 50 million dollars worth of real estate. Check out our website at KLEVER INVESTOR DOT COM TO SEE AN EXAMPLE OF WHAT A "REAL" REAL ESTATE WHOLESALER DOES!
There are also land developers, subdividers, and many other types of legitimate wholesale operators<
I am disparaging one small segment.: Another type of property "wholesaler" is an businessman (with no real estate license) who makes low offers to desperate sellers. When the "wholesaler" is not a licensed agent, they think they have no legal or ethical obligation to inform the naive and desperate seller that they are going to skim tens of thousands of dollars of the sellers equity off of them.
Often, the "wholesaler" misrepresents the facts about the properties value and the sellers options for obtaining a better price in the open "retail" market. "Wholesalers" often write their contracts with a clause that allows them to "assign" the contract to another investor before the close of escrow.
The wholesalers business can only succeed when the seller is naive and / or desperate, and it can only succeed when the seller is unaware of / or misinformed about how he, the seller can quickly obtain a price that is closer to retail value through the service of a real estate agent.
Yeah, I am negative on the assignor type of wholesaler.
Klever and I agree on how it works, or how it is supposed to work when it is successful.
The disagreement that I have is in the ethics of the practice - when buying from uniformed, sometimes elderly individual home sellers. I have no problem with you buying in bulk, or in pieces from banks and investors.
Banks may be foolish enough to sell at huge discounts at auctions or in bulk outside of the MLS when they could net more selling their properties through traditionally listing them on the MLS. - I have no problem if you are able to take advantage of foolish banks and witless asset managers.
Every REO contract addendum I have seen. ( I have read dozens of these contracts ) Every REO contract states that the contract is NOT to be assigned. Either you and the bank sellers are ignoring this contractual item in your assignments, or you are negotiating them out of the contracts.
I said I was disparaging and continue to disparage wholesalers who target individual homeowners who are unaware of their property value. You see, while I believe in the theory of evolution of the species as proposed by Charles Darwin, I do not believe in the morality of social and economic Darwinism.
Economic Darwinism at its greediest proposes that it is okay to take advantage of foolish people and senile people. The proponents and defenders justify their actions by analogy to the law of the jungle. Survival of the strongest by the strong (those with superior market knowledge) over the weak ( Elderly, trusting and uninformed homeowners)
When a licensee in California is purchasing real estate from a consumer,she or he is obligated to disclose to that seller that the purchaser holds a real estate license. Whether you are licensed or not, you are not exempted from the golden rule which is to treat others as you would wish to be treated. Certainly, an impaired or naive homeowner deserves to know that they are selling at a HUGE discount to what they could sell for if they listed on the MLS (the capitalization is Klever's - not mine)
My attacks are on a fairly narrow segment of people who call themselves wholesalers. That is those who mislead longtime homeowners about the value of their property and the alternative or mainstream methods of selling property. Also those who disguise their intention to assign the contract to another buyer. Klever describes it as the simplest form of wholesaling. Perhaps it is so simple because extras like disclosure and fair dealing are not standard included equipment.
While wholesaling might make tremendous sense to the Klevers of this world, and be "easy money" it is a lose- lose proposition for the credulous homeowner who gives his property to Klever and his associates at a 20%, 30% or more loss, when they could easily have disposed their property much closer to its market value for a marketing fee averaging less than 10% - Many consumers on Trulia object to the famous 6% fee on a market rate sale. Isn't a wholesaler discount of 30% five times worse for the consumer?