{"id":3308,"date":"2024-07-18T09:42:21","date_gmt":"2024-07-18T13:42:21","guid":{"rendered":"https:\/\/davidpollan.com\/jbrea\/?p=3308"},"modified":"2024-07-18T14:05:24","modified_gmt":"2024-07-18T18:05:24","slug":"big-news-for-pa-wholesalers","status":"publish","type":"post","link":"https:\/\/davidpollan.com\/jbrea\/big-news-for-pa-wholesalers\/","title":{"rendered":"Big News for PA Wholesalers!"},"content":{"rendered":"[vc_row type=”in_container” full_screen_row_position=”middle” column_margin=”default” column_direction=”default” column_direction_tablet=”default” column_direction_phone=”default” scene_position=”center” text_color=”dark” text_align=”left” row_border_radius=”none” row_border_radius_applies=”bg” overflow=”visible” overlay_strength=”0.3″ gradient_direction=”left_to_right” shape_divider_position=”bottom” bg_image_animation=”none”][vc_column column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_spacing=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” column_border_radius=”none” column_link_target=”_self” column_position=”default” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”1\/1″ tablet_width_inherit=”default” tablet_text_alignment=”default” phone_text_alignment=”default” animation_type=”default” bg_image_animation=”none” border_type=”simple” column_border_width=”none” column_border_style=”solid”][vc_column_text]You have probably seen the <\/span>We Buy Houses Cash<\/span><\/i> signs stapled to telephone polls or while scrolling through your feed. <\/span><\/p>\n

Ever wonder what these bandit signs are all about? <\/span><\/p>\n

Stick with me, I am about to explain.<\/span><\/p>\n

 <\/p>\n

What is wholesaling?<\/b><\/p>\n

 <\/p>\n

In essence, wholesaling is assigning a contract for a fee. Let me explain in English.<\/span><\/p>\n

 <\/p>\n

Wholesaling is a way for a wholesaler to make a profit on the sale of a house without having to actually buy it. If it sounds too good to be true, well, that\u2019s because it is.<\/span><\/p>\n

 <\/p>\n

A wholesaler will approach a homeowner and make a clean, cash offer on their house. The offer is always well below market value, but the wholesaler will usually add in perks to the seller to entice them into signing the contract. They usually buy the house As-Is, which means that the seller doesn\u2019t have to allow any inspections or make any repairs. Unlike a traditional sale where the property needs to be delivered vacant, free and clear of all personal property and in broom swept condition, a wholesale deal allows the seller to take what they want and leave the rest there to be dealt with by the buyer. If all this isn\u2019t enough to grab the seller\u2019s attention, they throw in the closing argument, <\/span>no real estate commissions.<\/span><\/i><\/p>\n

 <\/p>\n

Here\u2019s where it gets interesting\u2026.<\/b><\/p>\n

 <\/p>\n

The wholesaler (who the seller thinks is the buyer) adds a few magic words to the contract, right after his name, <\/span>and\/or assignee.<\/span><\/i> This tiny phrase changes everything. Now, the wholesaler has this house locked into a contract, meaning the seller is legally obligated to sell them the property at the agreed upon price. In the time between the contract signing and the settlement date named in the contract, the wholesaler gets to work finding a buyer.\u00a0<\/span><\/p>\n

 <\/p>\n

Wholesalers have websites, social media platforms, text and email lists. They get to work blasting these deals out to potential buyer to assign the contract.<\/span><\/p>\n

 <\/p>\n

Let\u2019s say the house is worth $200,000, the wholesaler might approach the seller and offer them $100,000 for the property with the promise of a clean cash closing and entice the seller into signing. As soon as the contract is signed, the wholesaler gets to work trying to find a buyer. He will blast it out to his email list and say that he is offering a house for sale for $150,000 but it is worth $200,000.\u00a0<\/span><\/p>\n

 <\/p>\n

When he finds a buyer, he assigns the contract to her. That means that he signs over his rights to buy the property form the seller. It does NOT mean that the wholesaler buys the property for $100,000 and then sells it to the buyer for $150,000.<\/span><\/p>\n

 <\/p>\n

\u00a0Pay attention to this. It is the key that makes wholesaling so enticing to wholesalers. They do not have to come up with $100,000 to buy the property. They put down a small deposit when they sign the contract with the seller, and I have seen them as low as $100.\u00a0<\/span><\/i><\/p>\n

 <\/p>\n

Once the buyer is secured, the parties proceed to a settlement where the seller sells the property to the buyer for $100,000 and (ready for this???) the wholesaler charges the buyer a $50,000 commission. But only real estate licensees are allowed to charge a commission, so the wholesaler calls it something creative, like a consulting fee or a clean out fee.<\/span><\/p>\n

 <\/p>\n

So at the end of the transaction, we have some happy people.<\/span><\/p>\n

 <\/p>\n

The buyer just got a $200,000 property for $150,000. Happy.<\/span><\/p>\n

The wholesaler just made $50,000 for putting the deal together. Happy.<\/span><\/p>\n

The seller sold their property. Happy?<\/span><\/p>\n

 <\/p>\n

But, wait! Remember I said that if it sounds too good to be true, that\u2019s because it is?<\/b><\/p>\n

 <\/p>\n

The buyer is happy and made out. She is pretty much in the clear.<\/span><\/p>\n

 <\/p>\n

The wholesaler made out, but at the expense of the seller. They also just got paid for bringing the parties together in a real estate transaction, basically a commission, which is what real estate agents need a license for.<\/span><\/p>\n

 <\/p>\n

The seller might think they got out lean, but probably didn\u2019t realize that they left $100,000 on the table. Nobody was looking out for their best interest and informed them of the true value of their property.<\/span><\/p>\n

 <\/p>\n

3 reasons why wholesaling is problematic<\/b><\/p>\n

 <\/p>\n

    \n
  1. They avoid the double transfer tax. Every time a property is sold, there is a transfer tax, which is like a sales tax. By assigning the contract to the buyer, rather than purchasing the property from the seller then reselling it to the buyer, they turn what should have been two settlements into one. They do this in part to avoid having to pay that tax twice, which is illegal.<\/span><\/li>\n
  2. There has been a lot of criticism that wholesalers are selling real estate without a license, but their defense has been that they were not selling real estate, they were selling a contract.<\/span><\/li>\n
  3. The seller is robbed of their equity, often without realizing it. No one is looking out for their best interests. They are in essence paying the wholesaler $50,000 to rob them. This seems unbelievable, but it happens every day, and usually to vulnerable people like seniors and folks in low income areas.<\/span><\/li>\n<\/ol>\n

     <\/p>\n

    Wholesaling gurus, some next level sh*t<\/b><\/p>\n

     <\/p>\n

    Wholesalers can make tons of money with little financial risk. Once they have realized success, many of them graduate themselves to be gurus and begin coaching and teaching others how to make money quick with no money down. They create courses and masterminds and membership groups and charge people to teach them how to wholesale.<\/span><\/p>\n

     <\/p>\n

    You may have seen them come across your feed promising you quick riches. You may have even been tempted to swipe your credit card.<\/span><\/p>\n

     <\/p>\n

    Slow down, and think again.<\/span><\/p>\n

     <\/p>\n

    Things are about to change. Drastically.<\/b><\/p>\n

     <\/p>\n

    PA just signed a bill into law which amends the Real Estate Licensing and Registration act to define wholesaling as an activity which requires a license. It will also require that the wholesaler provide certain disclosures to the seller informing them that this is an assignment deal as well as that the seller has a right to obtain an appraisal. In simple terms, this means that as of January, all wholesalers in PA will need to have a real estate incense and be subject to regulation.<\/span><\/p>\n

     <\/p>\n

    This is a huge change to wholesaling. It will bring transparency to these deals and protections to the seller and also much needed education for wholesalers.<\/span><\/p>\n

     <\/p>\n

    Making money is not evil<\/b><\/p>\n

     <\/p>\n

    Making money is great, and real estate is my favorite way to earn a living. My real estate license has supported my life for over 25 years, affording me freedom to be with my kids, travel and own a vacation home. Making money, even gobs of it, is not evil, but I live by the motto<\/span> be led by something greater than money, and the money will follow.<\/span><\/i><\/p>\n

    There are so many ways to serve people, do the right thing, AND make a sh*t ton of money. If you are interested in finding out how you can get your license and begin your career in real estate, check out our website <\/span>here.<\/span><\/a> \u00a0 You can always reach out with questions or to set up a call!<\/span>[\/vc_column_text][\/vc_column][\/vc_row]\n","protected":false},"excerpt":{"rendered":"

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