Many people misunderstand what wholesaling is. Others are jealous of the ‘easy’ money being made by property wholesalers. However, the principles of wholesaling can be seen in banking, supermarkets, the oil and gas industry, recycling plants, and retailers like Costco every day. Invest for value, sell for a profit. It’s business 101. It’s the same concept children use at those lemonade stands.
Done properly, wholesaling houses is perfectly legal. Period.
Is Wholesaling Houses Ethical?
Wholesaling houses often occurs when a real estate investor buys a property from a motivated seller, and then sells it to another investor or home buyer. Today, most wholesale properties often come from foreclosures and REOs. Either homeowners desperately need to sell before the bank takes away their home and leaves them nothing, or the bank already has the property which needs to be liquidated. Wholesalers help individual homeowners by providing an alternative. They help everyone by buying bank properties. If they didn’t, banks would need further bailouts and neighborhoods would keep declining due to ugly and neglected vacant homes.
Then there are those that want and need to sell houses fast when going through divorce, bankruptcy, liquidating an estate, or other financial difficulty. Wholesalers can provide speed of service and terms that other buyers simply cannot. That is a needed service and a very valuable one.
Do wholesalers have to factor in discounts for any repairs needed, marketing costs, and money borrowed? Absolutely.
Four Wholesaling Myths Busted
- All Wholesalers Should Just Become Realtors
Do Realtors really wish every wholesaler got licensed and became competition? Probably not. There are advantages of getting a real estate license. In some scenarios, it might be argued that investors should get licensed. However, the role of a wholesaler is very different from a Realtor. There can be serious restrictions on Realtors that prevent them from actually wholesaling. So no, not every wholesaler should become a Realtor.
- You Can’t Assign Contracts
A lot of people believe wholesalers only wholesale, flip, or assign contracts. Some say that isn’t right. Some just don’t know. It is right, however, as long as investors are completely transparent about their actions. In fact, standard attorney real estate contracts have often long included standard “assignability” clauses. We could get into entire university length lessons on contract management and sales as it applies to dozens of industries, but that is really back to business 101.
- You Can’t Wholesale to Retail Buyers
Of course you can. Many wholesalers exclusively focus on serving other investors that will rehab and hold. However, great incomes can be found in serving well priced properties to a wide variety of end buyers.
- You Can’t Find Attorneys and Title Companies To Help
Not all real estate attorneys and title companies like working with investors. However, there are those that love and specialize in working with wholesalers. Truth be told, there are attorneys and title companies that make a very good living working with wholesalers. If you have invested in your real estate education, and seek companies that are openly advertising that they want to help investors, you won’t have a problem.
The Bottom Line
Once ignorance is kicked to the curb, wholesaling shines as one of the best ways to make money in the real estate business industry. Again, people are scared of what they don’t understand. Don’t let wholesaling pass you by because of a little misunderstanding. It can be just what your company needs to get ahead in today’s environment.