Where do realtors fit into the wholesale process?

[HardMoneyTampa]

I'm confused about the realtors role and commission in the wholesale processs.

For example, with REO's, does the banks realtor get  commission from the transaction?  or are they being paid in other ways?

Also, it seems that a wholesaler, like a realtor, is nothing more than someone who connects a buyer and a seller (with a focus on distressed sellers and investor buyers).  If a wholesaler has a realtors license, can they earn a traditional commission from the sale?

Any clarification on the realtors role/commission would be greatly appreciatted.  Please excuse my ignorance in advance!  Thx

[Roger J]

Answer:  They don't fit in ANYWHERE.

An agent should not be in a wholesale deal (that being a deal between a wholesaler and a retailer).

If you're buying a REO, then you're not wholesaling the property.  First, it's going to be rare that you'll find a REO that would be worth wholesaling.  Second, if by wholesaling, you mean simply assigning contracts, then that's not an option with a REO anyway.

Again, though it's probably happened, it's going to be a rare occasion where a wholesaler has an active RE license.  In most states, there are simply too many issues that arise from an agent trying to buy at a steep discount and then resale for a profit, especially if you're trying "non-conventional" ways to do it.

Raj

[tampasteph]

Roger,

Maybe your market is a lot different than mine, but here, there are a ton of REOs that are getting wholesaled, and many of the people wholesaling them also have their licenses.   Some of the REOs are coming on the market at very attractive prices right out of the gate, and it's like a feeding frenzy.  Lots and lots of deals being made with REOs right now.

I'm closing on my 4th wholesale of the year next week.  All of them have been off of the mls, and 3 of the 4 were REOs.

True, you can not assign REOs, but there are other ways to wholesale them.

Steph

[raquel]

While it's nice to buy properties that aren't listed with an agent, the fact is most people who want to sell list with an agent! Realtors can help you purchase properties on the MLS. Just go make an appointment with an agent, and tell them you'd like to receive emails on available properties in the areas you're interested in. When an agent sends you a property you want to buy, call them and they'll prepare and present your offer for you. REOs are a good source of wholesale properties right now. There are also many properties that may need a short sale that are good candidates. And there's always the junkers. Contrary to what people tell you, you CAN wholesale REOs, you just need to work around the contract.

[ericmedem]

Always be careful to listen to absolute answers like "Realtors fit in no where",  anytime you hear absolute answers mentally preface whatever you read with "From my experience", many people mistakingly believe that their experience is the only experience, I am sure everyone in here means the best but.....just know that most people speak from their own personal experience, not taking into account what your personal experience will be.

I just posted some advice on working with realtors you may want to check that out.

[FaceyInvestmentGroup]

[CAN wholesale REOs, you just need to work around the contract.
[/quote]

Could you please give some examples of this?  I read somewhere that one way is to form an llc and then turn around and sell your interest in the llc.  What expense should I be facing when doing this?  Is there any other ways that are cost effective that you have done?

Thanks,
Leti

[raquel]

Some people use the LLC method, where they create an LLC, then sell the LLC for the assignment fee. The cost for an LLC will depend on your state, but they should be pretty easy to setup. Others have added the buyer to the contract, then quick claim the deed to the buyer after our closing with the bank. I'm sure there are other ways as well. Check out the articles on this site, as well at flippinghomes.com

Best of luck!

[Roger J]

Okay, we just go in order.

Steph,  all markets are different.  So, yes, our markets may be entirely different.  That said, if there are "tons" of REOS being wholesaled (that is bought by investors flipping to other investors) then either your market is flooded, the agent's aren't doing their jobs, or you simply have alot of lazy investors.

No offense, but if a property is sold through the MLS at the highest price for the condition (the purpose of selling through MLS) and/or timeframe needed, and it's available to any investor with a decent agent, how can a wholesaler, on a regular basis, be buying up properties with enough spread in them to resell to another investor?  Yes, it does happen, but if it's happening alot, then something is wrong somewhere.

As to RE license and wholesaling, didn't say that people wouldn't do it.  Simply said that there are too many issues (at least for me) to do with if you're trying to flip a CONTRACT as an agent.  Now, buying a property and then reselling is a different story, though it could still have issues.

raquel, too much to get into there, but safe to say that if we're answering basic questions on wholesaling, we're no where near ready to move to "getting around" the contract.

Eric, I agree that absolute answers are suspect.  However, that said, my answer wasn't that realtors fit in "no where" it was that they should NOT be involved in a wholesale deal, at least as described.  And as both an investor and a Realtor, I believe that I have experience in both sides.  Since there seems to be some confusion, I'll simply answer the questions asked rather than getting to the real root of the problem.

For example, with REO's, does the banks realtor get  commission from the transaction?  or are they being paid in other ways?
Yes, the bank's realtor gets paid a commission from the transaction as outlined in their contract.  No they do not get paid in other ways.

Also, it seems that a wholesaler, like a realtor, is nothing more than someone who connects a buyer and a seller (with a focus on distressed sellers and investor buyers).  If a wholesaler has a realtors license, can they earn a traditional commission from the sale?
Having been both, I'd say that there is a vast difference, but not the time or place here.  Yes, if a wholesaler has a RE license AND is working as an agent during the transaction they could earn a traditional commission as well.  Read previous posts for problems associated with.

Raj

[tampasteph]

Hi Raj,

Right now in my market, there is a lot of money being made wholesaling REOs, whether you want to believe it or not.  I'm out in the trenches every day, and I am seeing it for myself.  I'm not basing my statements on what someone else told me, or what might have been true 3 years ago-  I'm telling you from personal experience what is going on right now.

Your statement "it's going to be rare that you'll find a REO that would be worth wholesaling"  is totally false.   Maybe that's the case in some markets, but definitely not all of them.

Steph

[Roger J]

Okay, Steph, maybe "rare" was too strong of a word, I'll give you that.  That said, if you're going to be a successful wholesaler, relying on the MLS to provide you with your inventory is a poor business choice, as it should not be the primary source for wholesale properties.

And if you're truly wholesaling REO properties (that is selling to other investors in order for them to make a profit) on a "regular" basis, then no offense, but I'm still sticking with the "something is wrong somewhere" theory.  I'll assume that you're in Florida from the name, right?  If so, I understand what is wrong, and wholesale opportunities would probably exist on a more abundant scale than normal.  And my comment is NOT totally false.  In fact, I'd say that it's MOST markets, not simply some.

Look.  I've bought and wholesaled REO properties before myself.  It does happen.  Never said that it didn't.  However, the deals that I got were either a) deals that other investors didn't know how to happen.  What I classify as "problem" deals.  Something is wrong with the house/property/etc that most investors don't know how to fix.  I buy them, fix the problem, then resell.  Or b) I simply beat another investor to the punch, closed the deal and they wanted it badly enough to buy it from me.  On the rare occassion, there was even a c) where my past dealings with a particular bank/agent (ie, past experience showed I'd close and close FAST) let me simply get a better deal than some newbie that wanted the property, too.

Raj

[gordo2417]

Raj,

While I agree that its important to have as many lead sources as possible I'm making a living wholesaling ONLY REO's.   Don't be so narrow minded Raj.  Wholesaling REO's is going on all over the country.  I know invesestors in MI, FL, NJ, NV, IN, etc. who are doing this every day of the week.  Its no mistake.

I actually hate dealing with mailers, direct mail, sellers, all their situations, the whining, the hugging, the crying, blah blah blah. etc.  YUCK!

I like the REO's.  Much more easier for myself, I can go in and out of them with no complaints from anyone, I can see the repairs that I need to do, etc.  Its just my preferred way of doing business.   If I do one deal a month at 5K I can run my household.  Anything over that I'm good to go.  I made 26K last month and this month wholesaling ONLY REO's.   Works for me.

Nate-WI

[tampasteph]

Raj,

Yes, your comment is totally false.

Clearly you are not up to date with what is going on in the current market- if you were, we wouldn't be having this conversation.

Like Nate, I know of other investors in various states (MI, FL, NJ, MA, PA, OH, WI), who are consistently getting deals off of the mls (REOs, and HUDs, mostly).  Steve Cook (in Baltimore) has been wholesalig REOs for 10 years now.  Go tell him that "relying on the MLS to provide you with your inventory is a poor business choice, as it should not be the primary source for wholesale properties".   Or, go tell Bob Norton who is making 6 figures A MONTH wholesaling REOs in the Detrioit market. 

Times have changed, Raj. 

You say you are "still sticking with the something is wrong somewhere theory."  Well, no kidding.  Something IS wrong.  The bottom has fallen out of the housing market in most parts of the country, foreclosures are SKYROCKETING, and the pool of sub prime buyers is all but gone.  That's what's wrong. 

Steph

[raquel]

HardMoneyTampa, while wholesalers do connect buyers and sellers, as agents we take on more of a representation role. While the end result is the same, an agent has more responsibilities.

Roger, sounds to me like you're someone who's tried to wholesale and can't succeed, or you're just stuck on silly.

No matter what market you're in, small towns or big cities, any property can be bought and sold for the right price. It doesn't matter where you are, the only thing that matters is: is it a deal?

Wholesalers make money by getting properties cheap and selling them cheap. Rehabbers aren't into the "make an offer and wait" game, they're into the rehabbing properties game. So you can see why they don't snatch up the deals listed on the MLS, they don't feel like taking the time to go after them. But we do. And as an agent, you're crazy if you don't take advantage of the opportunity to increase your business by selling to investors. As long as you disclose your position, there are no issues. And if you can make a commission as well, why not? Every agent who has the time should wholesale. But, we all know that not every agent will take advantage of the opportunity, which is why agents like me will continue to make money.

[Roger J]

If you guys would kindly step off your soapboxes for a minute, we'll conclude.

Nate, yes, I see that you can "make a living" wholesaling REOs.  I've done it.  I know.  However, you'll be hard pressed to get into the Steve Cook level of wholesaling if that is the only method that you use.  One other point on this, as well.  Most investors that work in this environment have "special" setups with agents to get "pocket listings" and other "before everyone else" insider deals/secrets.  Just be aware that unless the seller is fully informed of what is happening that it's more than likely a violation of the agent's ethics codes and/or flat out illegal.  Neither here nor there with this post, but then again, pretty much everything said isn't concerned with this post.

Yes, Steph,  I think that I am pretty much "up to date" with what is going on with "the market" (by which, you mean the great big national market).  Heck, I believe that I even mentioned WHY your market is a better place for REO wholesale deals in my last post.  Maybe you missed it when your knee jerked so hard.

Raquel:  I think that my experience level speaks for it's self.  Maybe in your eyes being an established investor/wholesaler/landlord/Realtor/Business owner isn't considered a success.  Or maybe we just need to leave the 3rd grade playground taughts to the 3rd graders in school and stick to the issues as adults.
Other than that, all I can say is apparently the rehabbers in your market are just plain lazy, which is good for you and the wholesalers.  YAY!  If you can flip contracts while being an agent without undue risk for doing it (which is WHAT we were talking about in the first place) then more power to you.  From my understanding of the code of ethics, I see strong potential problems.

No matter what market you're in, small towns or big cities, any property can be bought and sold for the right price. It doesn't matter where you are, the only thing that matters is: is it a deal?
No kidding?  We all do that.  Question was, is it a good enough of a deal to buy, then resell to another that is going to resell it again?

which is why agents like me will continue to make money.  You're simply awesome!

[raquel]

If you can flip contracts while being an agent without undue risk for doing it (which is WHAT we were talking about in the first place) then more power to you.  From my understanding of the code of ethics, I see strong potential problems.

I don't believe the original post was asking about ethics. It was asking where realtors fit in, and we fit in everywhere. Whether it's representing a wholesaler client, or wholesaling the properties ourselves. Ethics issues? I don't see any, and neither do a bunch of other agents across the country. As long as we follow the law, we'll be fine, and so will our clients.