In late January, the Texas Real Estate Commission launched an online survey to gather information from wholesalers, consumers who have purchased from or sold property to wholesalers, and license holders who have represented a party in a wholesaling transaction.

Wholesaling is a model where a person enters into a contract to buy real estate and then sells their contractual interest in the property to a third party prior to closing. Individuals engaged in wholesaling are not required to hold a real estate license as long as they disclose the nature of their interest to potential buyers and do not otherwise engage in real estate brokerage activity.

The survey closed in February with more than 4,500 respondents and more than 3,200 open-ended comments with wholesaling experiences. Here are some takeaways from the results.

Types of Respondents

• Agent/Broker: 52%

• Wholesalers: 24%
  • 36% of wholesaler respondents are also licensed by TREC as broker/agent
• Consumers buying property: 17%
• Consumers selling property: 7%

Top MSAs Where Wholesaling Transactions Occurred

1. Dallas-Fort Worth-Arlington
2. Houston-The Woodlands-Sugar Land
3. San Antonio-New Braunfels
4. Austin-Round Rock
5. Dallas-Plano-Irving

Wholesalers' Comments

Wholesalers' open-ended comments are positive, with most expressing their commitment to transparency and disclosure of their model. There are several mentions of how wholesaling benefits sellers who may have properties in disrepair, who have had difficulty finding an agent to represent them, or have been in complicated financial situations for which wholesaling was an easy method to avoid foreclosure or other hassles.

License Holders' Comments

Most open-ended comments from license holders expressed a negative perception of wholesaling. Many respondents referenced consumers who had come to them after being confused about their relationship with or nature of the wholesaling transaction, or had been under contract to sell to a wholesaler but it fell through when the wholesaler did not find an end buyer.

Sellers' Comments

Respondents who identified as consumers who sold their property to a wholesaler had mixed open-ended responses.

Those who reported a positive experience tended to say they appreciated options outside of a typical home sale experience. In addition, they expressed the general ease of offloading property when being faced with stressors like foreclosure, or a perceived sense the property was in too much disrepair to do well in the traditional market.

Those who reported having a negative experience tended to express feeling they were misled about the nature of the transaction or confused about whether the wholesaler was the end buyer or a real estate agent. A few mentioned that the sale was never completed since the wholesaler did not find a third party to purchase the interest in the property.

Buyers' Comments

Respondents who identified as consumers who purchased a property from a wholesaler had mixed responses, but many identified as real estate investors or license holders who have frequently purchased properties. Generally, these respondents seemed positive about the wholesaling experience, though many who said they had done multiple wholesaling transactions have encountered inexperienced wholesalers.

Respondents whose comments seemed to reflect a typical homebuyer experience were less positive about purchasing property from a wholesaler. They noted a lack of transparency around how the wholesaling transaction is conducted; for example, several referenced costs they didn’t expect or confusion around closing.

Insights from Title Company Professionals

In February, TREC coordinated with the Texas Land Title Association (TLTA) to distribute a TREC-conducted survey specific to title company professionals. Respondents were asked about their primary role in the title industry; the Metropolitan Statistical Area (MSA) of Texas in which they primarily work; the number of transactions they have been involved in where a party engaged in wholesaling; and a final open-ended comment section to provide their observations of wholesaling transactions in Texas.

Of nearly 400 respondents, 44% identified as escrow officers/closers and 25% identified as title agency owner or managers. The remaining respondents included legal counsel, underwriters, fee attorneys, escrow assistant, curative/backup closer, abstract/exam professionals, and other support staff.

Top 5 MSAs Where Title Company Survey Respondents Are Located

1. Houston-The Woodlands-Sugar Land 
2. Dallas-Fort Worth-Arlington 
3. Dallas-Plano-Irving 
4. Austin-Round Rock 
5. San Antonio-New Braunfels

Respondents Number of Wholesaling Transactions

• More than 20: 34%
• 0: 24%
• 1-5: 21%
• 6-10: 13%
• 11-20: 8%

Title Company Professionals' Comments

Several respondents feel wholesaling transactions are more time-consuming than others. They also note sellers are often unaware they are ultimately selling their property to someone besides the wholesaler. Other respondents said wholesaling contracts were more likely to cancel than other types of transactions, and a contingent of respondents say their title company will not accept wholesaling transactions because of risks associated with them.

What's Next?

These surveys are only part of our research into wholesaling in Texas and how it is used by consumers. The Commission is connecting with stakeholder groups to further study the results of the survey, following up with individuals who have reached out via the survey, and considering additional opportunities for discussion.

If you did not have a chance to complete a survey, it’s not too late to email your comments. Thank you to all who have contributed to our research so far.