I want to buy your house!

[bacchi]

You know those postcards or one-page letters you receive in the mail?

"Hi bacchi, my name is Jim and me and a buddy want to buy your house, as-is."

What's up with those? Did these people go to a flipping seminar and were told this is a good way to find houses? Are they taking advantage of people in distressed situations? Is "Jim" actually a hedge fund that's buying up rentals in the area (something like 15% of house sales last year in my city went to such corporations).

[FINate]

I've wondered about this as well. Would love to hear from an insider on this.

[Goldielocks]

Yes, they learn about it from those seminars.  It is a widely taught technique.

Yes, it is more likely a fairly large business that invests in real estate.  They can put out hundreds of these notices a month. Some look handwritten, some look like a company offer.

Sometimes it is a realtor that wants to build business, but then they say "I have buyers looking for a house in this area and they saw yours and asked me to approach you".  Which means that maybe they are working with various clients, and mayber someone asked the realtor to approach EVERY 3 bedroom home in a 10 block area because it is close to the specific school that they like.... and sometimes it is just pure fishing on the realtor's part and there is no buyer client right now, but if they have a book of listings for less than market value, they can quickly find someone..

It is pretty much guaranteed to be a below market offer by 10%, minimum.  You save the realtor fee, but also still end up with a lot less than the market will normally pay, for the "fast / convenience" of dealing directly.

[bacchi]

So, not a good trolling candidate?

[sammybiker]

@bachi

The letter you received was from a wholesaler - an individual (or a company) that will market for sellers directly, based upon various lists they can pay for or pull manually from city/county records.  Lists such as probate, foreclosures, etc.  They may have seen that you have a lot of equity in your home, thus a good target for them.

They'll contact people directly and attempt to negotiate a quick cash deal.  Once they have that deal under contract, they'll add their mark-up and go market that deal to their investors that will actually buy the house, flip it/renovate and rent it - guys like me.  When I close on the property, they make their money and the seller gets whatever they get.  Yes, they are usually capitalizing on someone in a distressed situation.

Normal profit margin varies.  I've seen some make only $3K but more recently I see them make quite a bit more ($10k or more).  Pretty impressive for what was probably less than a few hours of work and very little risk on the wholesaler's end.

There are marketing expenses for the wholesaler, of course.  Smaller shops or solo gigs may be only spending a couple grand a month.  The big shops are spending in excess of $30k/mo in marketing in all forms - snail mail, virtual assistants making calls all day, digital marketing, etc.

And yes, definitely a trolling candidate.  Hell, see what they'll offer you.  Try not to laugh when it's 50 cents on the dollar.

It can be an unclean business but it does serve a need.  I see a lot of properties that have been passed down from parents that have died and the children let the property get behind on property taxes, repairs, etc...and simply don't have $30-50k+ to renovate the property back up to market value.  I've purchased a house where there was a suicide and the family wanted to close that chapter and move on asap, while the property needed a lot of repairs.

There's certainly a need for it.  But it does capitalize on a distressed situation. 

[Archipelago]

@bachi

The letter you received was from a wholesaler - an individual (or a company) that will market for sellers directly, based upon various lists they can pay for or pull manually from city/county records.  Lists such as probate, foreclosures, etc.  They may have seen that you have a lot of equity in your home, thus a good target for them.

They'll contact people directly and attempt to negotiate a quick cash deal.  Once they have that deal under contract, they'll add their mark-up and go market that deal to their investors that will actually buy the house, flip it/renovate and rent it - guys like me.  When I close on the property, they make their money and the seller gets whatever they get.  Yes, they are usually capitalizing on someone in a distressed situation.

Normal profit margin varies.  I've seen some make only $3K but more recently I see them make quite a bit more ($10k or more).  Pretty impressive for what was probably less than a few hours of work and very little risk on the wholesaler's end.

There are marketing expenses for the wholesaler, of course.  Smaller shops or solo gigs may be only spending a couple grand a month.  The big shops are spending in excess of $30k/mo in marketing in all forms - snail mail, virtual assistants making calls all day, digital marketing, etc.

And yes, definitely a trolling candidate.  Hell, see what they'll offer you.  Try not to laugh when it's 50 cents on the dollar.

It can be an unclean business but it does serve a need.  I see a lot of properties that have been passed down from parents that have died and the children let the property get behind on property taxes, repairs, etc...and simply don't have $30-50k+ to renovate the property back up to market value.  I've purchased a house where there was a suicide and the family wanted to close that chapter and move on asap, while the property needed a lot of repairs.

There's certainly a need for it.  But it does capitalize on a distressed situation.

This is a good explanation. It's a questionably ethical practice at best. A lot of the wholesalers are the ones capitalizing on people who do not know the value of their property (i.e. elderly, senile, people who have passed away, etc.). That, and wholesalers tend buy properties with no mention that they don't actually have the money to buy them. Rather, they're assigning the contract to another person for a fee. They don't actually have the funds whilst committing to the purchase. You can quickly see how shady this business model can become.

These are the same people who put bandit signs out with the whole "We buy houses cash" verbiage with no regard for local property and signage laws.

You can definitely see where my bias is here, but there's a lot of money to be made in real estate by helping people, not taking advantage of them. Steer clear of BiggerPockets - the hosts of that website/podcasts give wholesalers a platform and glorify their practices.

[solon]

You mean this one?

https://www.biggerpockets.com/

:)

[rothwem]

@bachi

The letter you received was from a wholesaler - an individual (or a company) that will market for sellers directly, based upon various lists they can pay for or pull manually from city/county records.  Lists such as probate, foreclosures, etc.  They may have seen that you have a lot of equity in your home, thus a good target for them.

They'll contact people directly and attempt to negotiate a quick cash deal.  Once they have that deal under contract, they'll add their mark-up and go market that deal to their investors that will actually buy the house, flip it/renovate and rent it - guys like me.  When I close on the property, they make their money and the seller gets whatever they get.  Yes, they are usually capitalizing on someone in a distressed situation.

Normal profit margin varies.  I've seen some make only $3K but more recently I see them make quite a bit more ($10k or more).  Pretty impressive for what was probably less than a few hours of work and very little risk on the wholesaler's end.

There are marketing expenses for the wholesaler, of course.  Smaller shops or solo gigs may be only spending a couple grand a month.  The big shops are spending in excess of $30k/mo in marketing in all forms - snail mail, virtual assistants making calls all day, digital marketing, etc.

And yes, definitely a trolling candidate.  Hell, see what they'll offer you.  Try not to laugh when it's 50 cents on the dollar.

It can be an unclean business but it does serve a need.  I see a lot of properties that have been passed down from parents that have died and the children let the property get behind on property taxes, repairs, etc...and simply don't have $30-50k+ to renovate the property back up to market value.  I've purchased a house where there was a suicide and the family wanted to close that chapter and move on asap, while the property needed a lot of repairs.

There's certainly a need for it.  But it does capitalize on a distressed situation.

This is a good explanation. It's a questionably ethical practice at best. A lot of the wholesalers are the ones capitalizing on people who do not know the value of their property (i.e. elderly, senile, people who have passed away, etc.). That, and wholesalers tend buy properties with no mention that they don't actually have the money to buy them. Rather, they're assigning the contract to another person for a fee. They don't actually have the funds whilst committing to the purchase. You can quickly see how shady this business model can become.

These are the same people who put bandit signs out with the whole "We buy houses cash" verbiage with no regard for local property and signage laws.

You can definitely see where my bias is here, but there's a lot of money to be made in real estate by helping people, not taking advantage of them. Steer clear of BiggerPockets - the hosts of that website/podcasts give wholesalers a platform and glorify their practices.

What’s funny is that if you go to a local RE investment association meeting, it’s so so so easy to pick out the wholesalers. Just look for the sketchiest guy in the room! They might even have a Bluetooth headset in. For some reason all of the wholesalers at the meetings I’ve been to tend to wear suits, usually cheap ones.

The big time buy and hold guys all look like farmers here, people in well fitting business casual tend to be realtors, and people dressed “normally” probably are newbs with no property or money.

Ah REI clubs. The best people watching EVER.

[Fishindude]

I've gotten those letters from realtors and also from individuals.   There is a farmer in the neighborhood that sends letters out periodically about buying your land.

[Archipelago]

You mean this one?

https://www.biggerpockets.com/

:)

You got it!

What used to be a unique resource for RE investing...now heavy laden with ads, "guru" types, sales pitches, and platforming of people who will say anything to justify the manipulation of distressed property owners. It's really a shame.

[Archipelago]

I've gotten those letters from realtors and also from individuals.   There is a farmer in the neighborhood that sends letters out periodically about buying your land.

See, this is fundamentally different than wholesaling. Real estate agent wants to send out letters saying they have a buyer for your place? Sure, go right ahead.

Farmer looking to buy up land to expand a business? Sure, I respect the hustle.

Wholesaling is a horse of a different color. Not even remotely close.

[sammybiker]

There are some solid wholesalers out there but I agree, the vast majority are no different than someone in the low end used car sales business or worse.

Wholesaling is the lowest barrier entry to the real estate business and is consistently marketed to newbies w/laughable youtube characters next to Lamborghini Huracans. 

I've ran into both ends of the spectrum and these days only communicate with a couple of the solid folks in the business.  The solid guys do a good job and perform as ethically as possible given the nature.  More so, the solid guys are usually very well capitalized and often cherry pick the best deals for their own portfolios or flips. They do provide a service to the market that the banks/others have not yet filled and they'll continue to do so. 

btw @Archipelago how about an update to your journal man?? :)

[LiveLean]

I have a second home/rental property in a hot area. I get these constantly, along with texts and calls. For a while, I would have fun with the calls, playing along, asking them to make me an offer or just throwing out an outrageous one myself. "Sure, I'll take $1.7 million. Can you close at the end of the month?"

It eventually got old and I began blocking numbers. For now they seem to have gone away.

[SwordGuy]

They are also folks who want to buy the house at a VERY reduced price.   Ludicrously low if you aren't financially distressed enough to grab that offer with both hands.

[AccidentialMustache]

I've gotten those for a property we plan to eventually greenfield and build a home on. I've called a few back and offered to sell them the house -- no land, just the house -- for dirt cheap. $1. None ever take me up on it though. :-(

[Paper Chaser]

Seems like other posters have explained it pretty well, and shared some of the good things as well as the bad.

I've got family members that wholesale like this. They do it entirely through their self directed Roth IRAs, so the profits are never taxed. It's pretty lucrative, but they're constantly on the phone trying to lock in their next deal, close the current deal, etc. There's a lot of legwork and dealing with people, and you need connections with other RE investors that will be your "buyers" network.

They feel like they're helping people in bad situations by offering an out that's not as bad as bankruptcy. There's some truth to that I suppose.

I've had the opportunity to become a financial backer for them, but have declined thus far. Mixing family and money seems unwise, even though I trust them. And while the returns are tempting the whole thing just feels a little slimy to me. Not illegal, or necessarily immoral, just slimy like a stereotypical used car act. You're constantly hunting for potential deals, trying to sell distressed buyers on the benefits of selling to you, and then trying to sell the property to your network of RE investors for their purposes. Too much schmoozing for me. I'll stick with antisocial index funds

[aasdfadsf]

It's not clear to me why anyone would want to sell to these people as opposed to going through the typical listing process. If you need to sell quickly, then fine, tell your agent to price it low to move it fast. There are better ways of off-loading an unwanted property than entertaining an army of con-artists trying to low-ball you. And even if they were providing a useful service in some cases, this must be a minuscule part of their market -- there wouldn't be enough margin to keep this gig going if people weren't getting ripped-off.

After having bought an investment property several years back, I somehow got on their lists and I get a constant stream of letters and even texts and cold calls. I hate these people. They are stealing my valuable time and attention in the hopes that they can steal my money too. Fuck 'em. The letters go straight to the trash and the texts and calls always get flagged as spam. I would demand restitution for even that use of my time if I could.

[Archipelago]

If you need to sell quickly, then fine, tell your agent to price it low to move it fast. There are better ways of off-loading an unwanted property than entertaining an army of con-artists trying to low-ball you.

And this is exactly what I say to wholesalers trying to justify their actions. You can always help people AND make a lot of money. They are not mutually exclusive.

[Montecarlo]

It's not clear to me why anyone would want to sell to these people as opposed to going through the typical listing process. If you need to sell quickly, then fine, tell your agent to price it low to move it fast. There are better ways of off-loading an unwanted property than entertaining an army of con-artists trying to low-ball you. And even if they were providing a useful service in some cases, this must be a minuscule part of their market -- there wouldn't be enough margin to keep this gig going if people weren't getting ripped-off.

I was going to post something similar.  If you're distressed, get an agent and list it 5% under market value.  Or for sale by owner and list it at 10% below market value.  Selling 20%+ below market value seems insane even in the worst circumstances.

[Jon Bon]

These guys are 99% scum.

Yes I would like to buy your assets at 60% of their FMV. No shit Sherlock!I get calls/texts weekly my normal response is profanity and telling them to get a real job.

It even happened to my neighbor across the street, probably left 50-75k on the table because one of these parasites got hold of him. I would have gladly paid 50k more than the wholesaler/flipper did. I just did not know he was going to be so foolish as to give his house away for about for 2/3 its value.