The Choice: Making Money Wholesaling vs Getting Your Real Estate License

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The conversation can get quite “lively” when you put Realtors in a room with a group of real estate investors, especially if those Realtors aren’t investors themselves. And, this is just exactly what happened to me on the 4th of July. Inevitably we end up discussing folks that get their real estate license and the “other group of people” that work in the business as real estate investors.

I went to a celebration on the 4th, and I had a long conversation with a longtime friend of mine who is a veteran real estate agent. I worked with Dave for many years when I owned and operated a home inspection company. Over the years we have talked a lot about ethics and the way people in real estate should conduct themselves. My friend is such a stickler where ethics are concerned, that he won’t even accept a gift certificate for a $7.00 car wash as a thank you. He has a strict no gifts policy.

As usual, my real estate investing business came up during the course of the conversation. I was trying to explain to one of the younger couples there exactly what I did and how that compared to what a Realtor does. They were fascinated to say the least, because they had no idea that you could make money in real estate other than being a Realtor or having rental property. I was explaining to them that there were many ways to make money in real estate.

Dollars and Cents and the Deal

Even my friends that are Realtors, don’t really “get it” when it comes to the way wholesalers are compensated.

The way that they make money is very cut and dry. If you are a Realtor, there are rules you must follow and laws in place that specify how and when you are compensated. Realtors make a percentage of the sales price as their commission which they may have to split with another agent, and possibly with the broker.

From my side of the table, what they make on a transaction can be considerably less than what a wholesaler would make on a typical deal. I happen to like my side of the table better. Real estate investors do things much differently. They put a deal together, attend a closing and pick up a check. In my area that closing is always with an attorney. In general, wholesalers use little or none of their own money to get that big check at closing. How much this check is for is determined by the spread between what they paid and what they sold the property for. If you are a good negotiator this spread can be much larger than the typical Realtor commission. What you earn is more or less up to you, not the Board of Realtors and your state laws.

Wholesalers VS Realtors; Your Business Structure

Does this mean you should go out there and conduct your business in an unethical manner? Absolutely not! Just because there aren’t any rules you must follow, that doesn’t mean you shouldn’t have good business practices and rules you choose to follow.

(This is where the conversation usually gets lively). In any market, there will be those people that just do things badly or are outright unethical investors. Unfortunately, those few people give the rest of us a bad name. My friend and I talked about another well-known investor in our town who is also a licensed real estate agent. He somehow manages to stay in business in spite of the fact he should be “run out of town” as my friend says. Neither one of us can figure out how he has managed to keep his real estate license.

The rest of our conversation was spent explaining to this young couple how real estate investors are able to help a lot of folks that end up in bad situations. Situations such as when someone inherits a house that needs tens of thousands of dollars-worth of repairs; repairs that they can’t afford on a house that is in such bad condition they can’t list it. In most cases, even if they could find a retail buyer, they couldn’t get a mortgage on it.

I have to say that I hate feeling like I have to defend what I do. But I have come to believe that at least for most people, it is just a lack of knowledge about our business that makes them question it at all.

Photo: jarakahansen

About Author

Sharon Vornholt

Sharon has been investing in real estate since 1998. She owned and operated a successful home inspection company for 17 years. In January of 2008 she took the leap of closing her business to become a full time real estate investor.


  1. Hi Sharon. Have you found that agents in your area are actually “familiar” with the term wholesaling and comfortable with the idea, as long as the deal closes? Or is it softer to say “I work with partners and I don’t always take title in my own name/entity”?

    • Some agents especially those that work with investors, know the term wholesaling. But there are a lot that don’t. I usually work directly with sellers so that is not too much of a problem for me. I would most likely say that I am a real estate investor, and I have a money partner if I were working with an agent which is exactly what I say to a seller. (I write all of my contracts subject to partner approval.)

      I have found that the fewer details you provide, the less confused they are. Just present yourelf as a professional and you won’t have any problems.

  2. “Lively” is a polite way to describe it. My theory is that before 2007, wholesalers and licensed agents were targeting different categories of owners. When the housing crisis kicked in, some legislatures – like California – went into overdrive to protect homeowners from scams. They exempted licensed agents, but made it otherwise illegal for wholesalers to operate under some conditions. Problem was that most licensed agents had no training or understanding how to do the deal unless “normal” parameters were in place, and HAMP, HARP, and other programs were failures. With the number of homeowners in distress or underwater, wholesalers and agents are now working the same crowd but under different rules, at least in California. Each views the other with suspicion and envy!

    • Jeffrey –

      I think this only shows how important it is for real estate investors and agents to work together. It is very helpful for agents to belong a local REIA group. I know that in my group, there are a lot of licensed Realtors. I have learned a tremendous amount from the agents and the closing attorneys in our group. A lot of problems have arisen in the past. from a lack of understanding of what each of us did. Whenever I need the services of a Realtor, I always choose one that is either an active investor or one that works routinely with investors. They understand how things work on “both sides of the fence”.

      There have always been uscrupulous real estate investors as well as the honest one. But I have to tell you that after working in the home inspection business for 17 years and working with agents on a daily basis, there are at least as many agents that fall into that category as real estate invetors. I once got a call for one of the assistants telling me that the agent was whiting out parts of the home inspection report.

  3. Hi Sharon!

    I think its been a great discussion and I have to say learned few things from the post and your discussion and I think its been the advantage having two best of the real estate enthusiasts on the same place and surrounding people can get benefit from their discussion.

    • I think it’s great to start early John; I wish I had.

      First I would start by reading all of the articles here and on my blog about wholesaling and double closings. You really can get started without any money. I have several resources on my blog such as free forms and a free report on working with probates and absentee owners. Next you need to study the articles on marketing. You have to learn to find the deals. The forums here on BP are also excellent places just to ask questions whether you are new or an experienced investor.

      Secondly; if you don’t already belong to a REIA club, you should join immediately. That is where you will find your first (free) mentors. There is a terrific seminar every year in Ohio at the first of November that is very reaslonable. It’s under $100 for 3 or 4 days of training. You can look it up for next year under “OREIA’. It used to be in Columbus, but it was in Cincy this year. BIggerPockets also has a really good seminar in the spring so watch out for that. Josh Dorkin or Brandon Turner will know about that.

      If you want to work with REO’s or bank owned property, I also have a resource on my blog for that. I would spend the next few months every night learning rather than watching TV. It’s a choice and it will determine your success.

      Good luck John.

  4. Sharon Vornholt

    Kevin –

    Most of what you invest is your time except for marketing. I have been investing since 1998, full time since Jan of 2008. Spend some time learning here. I also have a ton of stuff on my blog

    Happy Investing

  5. Great article again Sharon. Thank you for the insight. Question for you, and or anyone else….my biz partner is considering getting RE agent license, I’ve been considering getting mortgage writers certification/license. We’re in CA. If we do this, how does that affect our ability to contract wholesale deals?

    • Sharon Vornholt

      Hey Brad – I’m not sure how I overlooked this. Sorry.

      I don’t think there is a problem so long as you disclose that. I would just check with your local boards without mentioning “wholesaling”. I would just use the term “real estate investor”.


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