This is why wholesaling is becoming illegal, real life examples of what NOT to do as a real estate wholesaler

by | Indiana real estate, Indy Anna, Real Estate Investing

Examples of what NOT to do as a real estate wholesaler and why wholesaling is becoming illegal.

There are many laws around real estate wholesaling that are changing.  These changes in laws are a result of LC wholesalers doing things wrong so all real estate investors can learn what NOT to do by watching them.  Then I’ll go over the CORRECT way to get into wholesaling and what we can all do to clean up our industry and stay safe as wholesaling laws change.

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Now for today’s class on new laws making “wholesaling illegal”…

Five wholesaling mistakes to avoid to stay legal BigReia.com

Why is wholesaling becoming illegal?  Why legislation is changing and is making wholesaling illegal, coming to a state near you soon.

THIS is why lol.

When wholesalers killed the deal, before they even began. Why wholesaling is becoming illegal – why legislation is changing and is wholesaling illegal, coming to a state near you soon.

Also a quick note you can download the above Visual Guide in .pdf from by clicking HERE.

Did you know in MOST states wholesaling real estate is not currently illegal but in at least 35 or our 50 states real estate laws are changing regarding wholesaling? Wholesaling has been around for at least hundreds of years, as long as real estate investing has been around (so before Twitter) but with recent availability of technology and “influencer” gurus spreading false information, more and more
people are getting into real estate wholesaling.

If a real estate investor buys low and sells high, then a wholesaler buys really low and sells low to the investor, when this formula is not followed well problems happen.

Today we will talk about real estate wholesaling and why the laws are changing, we’ll go over good and bad practices, how to spot bad wholesalers with steps to take to make sure you stay legal as a real estate wholesaler and I’ll go over a few real life BAD examples of wholesaling practices that illustrate exactly why the smart real state investors welcome these law changes.

Indy Anna explains:

Back taxes hidden by wholesalers

Wholesale deals not even being legitimately wholesale deals

The MEGA markup, coming up with prices that are INSANE and taking advantage of newbies

I’m going to go on the record here and say that if you’re a wholesaler I work with, consider yourself lucky. I’ve learned that I had to learn to be VERY selective about the wholesalers that I work with and you’ve got to be the real deal or we are no deal, end of story.

If you think you’re the real deal, let’s talk- if you’re watching this and you’ve done or try to do some of the things I’m about to explain… please don’t even try lol

I know that may sound harsh but the LCs are ruining things for everybody.

Here are three examples of problems happening everywhere with real estate wholesalers, across the board:

Unfortunately it is NOT one area or location, this is happening everywhere and we must work together to make it stop because we are all paying the price for it.

Bad Practice One:

Undisclosed liens, judgments and/or other debts:

Recently I ran into a wholesale deal that seemed pretty good – the price was decent for the rehab needed and the ARV. This came from a Bird Dog and he was super excited and trusted the wholesaler because they are “known and reliable”. So after spending the money/time on an inspection, making the offer and getting ready to close we find out that…

There are about $10,000 in back taxes owed that they did not disclose.

What?!!??

That totally killed the deal and was a time waster and YES the title search could’ve and should’ve been done but it didn’t come up on the pre-lim search. Was it illegal to not disclose this? Was it unethical and more than a bit shady? Yes and yes. It also took the advertised price and raised it by $10K, which made it not a deal at all. So they knew if they advertised it correctly it would sink the deal.

Bad Practice Two:

Not YOUR deal to market.

It’s not your deal. Look, I get it social media has allowed people from all over the world to be instant pros at life and in all professions. I’m not being serious. This is TOTALLY illegal. To market a deal that you have zero equitable interest in is NOT okay.  Your equitable interest is the assignable contract, not  someone else’s exclusive right to sell, not another wholesalers deal you’re adding a markup to, etc.

If you bring me one of these deals, or I simply come across it we will have a nice little chat about what your equitable interest in the property is and I’ll always try to see where you’re coming from. I’m gauging to see if the wholesaler is trying to learn or if they (think they) know everything. 

If there’s any chance you could ever have real deals.

Often they are nearly hopeless.

Here’s what happened; I had someone come to me with an ‘off market’ deal recently. The asking on this deal was $107K and “maybe they could get it down to $105K for me”. So after I hop on the MLS and find this EXACT deal for $75K with the exclusive right to sell by an agent, I immediately reached back out to the ‘wholesaler’ and asked what his equitable interest was in the property.

His equitable interest in the property was that he had put it on Zillow himself and the MLS. Right…and I have oceanfront property in Arizona to sell to ; )

Just to be SUPER clear on it, I happened to call the listing agent -just to make sure this wasn’t a seller trying to get out of an exclusive right to sell contract. Her 88 year old female client didn’t seem to have the same name as this under 30 year old ish male who claimed to have the rights to market and sell it.

This is just SO incredibly illegal and wrong, it’s exhausting and I urge all of you legitimate wholesalers to call out every single one of these other guys doing this- they are making wholesaling illegal, period.

Bad practice three:

Being too GREEDY and not thinking of the investors.

The defense of charging way too much? “If you can get away with it.”  This is an awful approach and it will only “work” because there are enough people who fresh and inexperienced that a wholesaler probably can get away with BS mark ups. Be sure to check out my class on Indy deals and the realistic profits for more on this.

I just spoke with an investor who bought a deal for 40k and had paid a 20k assignment fee on it and it is killing her options and profits.  In fact, this deal has cost her the entirety of her savings, she refinanced her house and has leveraged that and she even borrowed money from friends and she is still in the whole.

Yes you can blame her and her ignorance, but she trusted the “wholesaler” because they seemed like professionals. I admire her for having the drive and I blame our industry for not having a better immune system. We can fix this, together.

The over greediness is a problem because you aren’t thinking about anybody else.

It’s too much off the top and too little spread. The typical assignable contract should have a $3K-$5K assignment fee for the wholesaler. On a $100K deal you’re still making more than the agents in most cases with $3K-$5K. Sometimes you’ll find a better deal and make much and that’s great AS LONG as the investor has a clear path to WINNING.

I had someone bring me a deal that was just about $25K overpriced to be a good deal, and as I usually do, I asked to see the assignable contract. I noticed the contract was for $25K less than the asking
price.

What’s that mean?

The wholesaler was trying to make $25K on this one deal.

WAY too much and they wouldn’t budge on it, so it killed the deal.

The REALLY sad part about this is that in most cases, the folks selling these houses just need the money. This wholesaler who was supposed to keep them from foreclosure, bankruptcy, etc. and is shooing away
buyers and their money by being greedy.

It’s not one deal like this at $25K markup that would make you a great wholesaler. It’s having multiple deals like this a month and going for around $5K-10k in an assignment fee and keeping long term
relationships with your investors that makes you a great wholesaler.

Wholesaling was at one time a great way for those that didn’t hold a real estate license to get into real estate quickly and take advantage of legislation designed to empower folks to move real poverty quickly.

It’s turned into something LC’s love and they are running it for everyone, and you’re going to start seeing legislation change to outlaw it for these very reasons.

Bad practices include:
– Lying about liens, debts, etc.
– Not returning calls and creating needless delays
– Not even legal access to a property and just marking up MLS listings lol
– Raising the prices by WAY too much for anybody to profit and milking newbies
– Not having a team of people ready to go with your investors to walk them through everything
– MASSIVE spam campaigns of text, emails, etc. to “leads” that are sick and tired of being harassed
– Never building relationships for the long term, you should have 10+ years on your mind with each new contact NOT just this month

So in summary:

We went over bad practices of wholesalers and how to fix them

We also went over the GOOD practices and turn around so you build a real business

We also talked about you do NOT want to SPAM as this is creating the need for government action

You can also check out our other class on how to make six figures a month as a real estate wholesaler, that’s a good helpful class well.

Upcoming I’ll have a preview of our always FREE download and the adventures of our BigREIA friends, but for now

Make sure to go BigReia.com and get our list of over 100 FREE ways to find motivated sellers, we are providing the world’s clearest instructions on how anybody on the planet can create a passive income
of at least $30,000 a month through real estate and business building:

BigReia.com, go there and you’ll…

Make the Universe Smile.

Thanks so much! = )

Indy Anna

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Thanks so much!  = )

Make the Universe Smile.

~ Indy Anna
Love (at) BigReia.com
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