IC Elesson: If I Ruled the World, Wholesalers Would HAVE TO do this…
Being a Libertarian is HARD. First, you have to fend off all the 2 dimensional thinkers who believe that if you aren’t a conservative and aren’t a liberal, you either have no strong political stands, or you’re an anarchist. Then, you have to deal with the crazies in the party who are actually conservatives with beliefs so out there that they can’t find a place in the Republican or Tea Parties, and run to the Libertarian party to have a platform from which to push their “Aliens are among us” agendas.
But the worst part of being a Libertarian is that you often hold two conflicting beliefs simultaneously: the belief that “someone” should do “something” about whatever is bothering you at the moment, and that at the same time you have no right to use the bullying power of the government to make other people act or think like you do, as long as they’re not depriving you of life, liberty, and property by doing so.
Because I’m a freedom-loving person, I’ve always been against the regulation of our business by the government. Every single time the government has stuck its paw into housing, the results have been bad: public housing was a disaster; HUD distorts both the rental market (through Section 8) and the affordable housing market (through FHA guaranteed loans). They’ve created a protected union with taxpayer money via real estate licensing laws, without doing a thing to protect the public that the NAR couldn’t have done. Securities laws have, arguably, made almost everyone who raises private money into a pseudo-criminal.
But at the same time, I often have thoughts like, “If I were in charge, there would be RULES about what it takes to be a wholesaler. Education. A skills test. An IQ test. SOMETHING.” Because, boy oh boy, there are a lot of folks running around giving the rest of us a bad name.
Practically every real estate-related industry, from agents to appraisers to lenders to builders to contractors, have pushed for government oversight of their businesses. And while I think that inviting regulators into your life is a horrible idea that, ultimately, always results in over-reaching and tears, I completely understand WHY. Each of these professionals would say, “Without laws to keep the bad guys out, we’d be overrun with uneducated idiots who do a bad job and make us all look bad.”
In other words, the same way I feel about uneducated wholesalers.
I’ve been taking flack on some of my YouTube videos about how I’m too harsh on newbie wholesalers, that I’ve forgotten that I was once one myself, that I sound bitter, that I shouldn’t judge people who are trying to change their lives but don’t, apparently, have the money, time, or smarts to invest in learning the thing that they hope will make them millions.
But those trolls are just wrong: I LOVE people who are willing and anxious to change their futures. I enjoy being around them and working with them more than just about anyone.
What I have zero tolerance for is people who expect to bumble their way through deals with real human beings—sellers and buyers—who have the potential to be damaged by those people’s bad or uneducated actions. And who, worse yet, expect to make thousands of dollars at a time by occasionally guessing right and doing what they’re supposed to do.
In other words, people who are try, despite all the education available out there, to guess their way to wholesaling success instead of providing real value to the buyers and sellers in the transaction.
Why does this bug me so much? Well, the practical reason is that it’s these idiots—the ones who have no idea how to evaluate a property, and who put 10 deals under contract for every 1 contract they’re able to sell—that make sellers not want to work with wholesalers, buyers not want to work with wholesalers, and states want to license or outlaw wholesalers.
And the impractical reason is that it makes me mad that some folks seem to think that the business I’ve been in for 20 years is so brain-dead simple that it can be accomplished with zero investment or effort.
Thanks to my philosophical beliefs, I’ll never be in favor of regulating wholesaling. But if I were put in charge of the world, MY laws would say:
- Before putting a single property under contract, a wholesaler would have to pass a test to prove that he can come within 10% of a correct after-repaired value, and within 20% of a reasonable repair estimate, an any given property.
- Before offering a single deal up for sale, a wholesaler would need to demonstrate how any usual investor/buyer—in other word, one that buys, finances, and rehabs like a normal person—would make enough money to justify the buyer’s risk and investment he’s putting in a deal.
- Before talking to a single seller, the wholesaler must demonstrate that he understands that selling the property is a big deal to that seller AND that the wholesaler has some level of care for that fact. Wholesalers would be obligated to take this into account by making the CORRECT offer (one that the wholesaler can sell) to the best of that wholesaler’s ability. Wholesalers who offer sellers what the sellers WANT, planning on renegotiating the price down to the correct one when the clock has run down on the offer, would go to wholesaler jail. Wholesalers who offer sellers prices that don’t make sense in the context of a wholesale deal in the hopes that they can find uneducated newbie buyers to which to sell the deal will be forced to buy and rehab those deals themselves.
- All wholesalers would develop relationships with money people, so that they could close deals where the seller had a hard time deadline, but where the wholesaler couldn’t find a buyer fast enough to meet that deadline. Wholesalers without such access to money would not be permitted to put deals under contract that needed to close in less than 30 days.
- All wholesalers would have, understand, and use solid legal documents to tie up and sell deals.
- All wholesalers would be able to answer the question, “Why do YOU deserve to make $10,000 for a deal that you didn’t buy, rehab, or manage?” by stating what VALUE they brought to the deal.
Look, I don’t expect any business or any business person to be perfect. Evaluations are sometimes wrong. Sellers don’t get what they want every time. Buyers do stupid things to good deals and lose money. Especially in the beginning, practice is what you need to get perfect.
But it’s your job to train, and keep training, so that you consistently leave the people who come in contact with your business better off than they were before they met you. THAT’S how you bring value to the transactions you do. THAT’S how you make 6-figure incomes year in and year out. THAT’S how you set yourself apart from the fools in the field who seem determined to ruin the business for you. And THAT’S how you have life that’s both prosperous and meaningful.