Real Estate Wholesaling

The 8 Most Common Lies Newbies Believe About Wholesaling

Expertise: Real Estate Wholesaling, Personal Development, Real Estate Investing Basics
86 Articles Written
dont-wholesale

In this world of real estate, there are some truths—but there are also many lies. I assume since you’re reading this that you’re interested in real estate wholesaling. Let’s dive into some of the most common real estate lies about wholesaling.

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Lately, I’ve been doing 30-minute free strategy sessions with aspiring wholesalers. I take this time to introduce newbies to the world of real estate investing. During these sessions, they can ask me anything about real estate and wholesaling more specifically. What I’ve found is that there are a ton of misconceptions out there, and I want present the truth.

The 8 Most Common Lies Newbies Believe About Wholesaling

1. Wholesaling is illegal.

This is the biggest question I’m asked. My answer, despite what critics might say, is no, wholesaling, at least how I do it, is not illegal. I am here to clarify that brokering a real estate transaction without a license is illegal. There is a small gray area, and although I do not like to operate in the gray area because I consider myself to be somewhat conservative, I tell aspiring wholesalers to get their license to eliminate that gray area.

Do not broker deals without a license. As a wholesaler without a license, you need to ensure you clarify with your seller that you are purchasing the property and not finding an end buyer. I know this is small semantics, but it is key that you clarify this. Again, I am an advocate for getting your license to help minimize risk. Plus, having a license may also help open other doors.

wholesaling-newbie

Related: 5 Ways to Lose Your Wholesale Deal (After Signing the Contract)

2. Wholesaling is dead.

Yes, I actually heard this. Although in many markets it’s harder to find deals, this strategy is not dead. I have a deal closing next week in one if the toughest markets in the nation.

I agree that it is much more challenging than it was just two years ago. During this time of market saturation, you have to be more creative and liquid to find deals.

3. You absolutely have to have a license to wholesale.

As I explain above, this is an advantage but not a necessity. This is just my advice. You can draw your own conclusions, but you do not have to have a license. Is it more beneficial? Yes.

4. You can be successful without money.

Let’s be clear: You cannot get something for nothing. Keep this in mind. You definitely cannot sustain a business without money. Can you get started with limited money? Yes, but you will have limited success.

5. There’s no risk involved.

This is the most audacious remark I’ve heard. What investment strategy that you know of has no risk and no downside? None. Here is one of the risks: You can be sued. Yes, this is a possibility. I don’t want you to have a false sense of security thinking that you can do this and not face any challenges. I’ve seen and heard of wholesalers being sued by the seller, the buyer, and other wholesalers.

Beware and get educated.

wholesaler-benefits

6. Wholesaling is for beginners only.

I am here to inform you that many seasoned investors still wholesale. Is it their primary strategy? Well, of course not. However, there are times where you have a deal is too sweet to pass up, but the deal does not fit your model. You’re not going to let money run through your fingers. As an entrepreneur, you look at every possibility to leverage your resources.

Many non-beginner investors I know personally wholesale a lot of deals.

7. You can virtually wholesale deals by yourself.

Now, this is a bunch of crap. Virtual wholesaling is difficult, and you cannot do it alone. It’s actually more important to have a team when virtual wholesaling rather than  wholesaling in your local market.

I’ve heard of courses that inform aspiring wholesalers to simply virtually wholesale if the local market is too competitive or saturated. Is virtual wholesaling a possible? Absolutely. I’ve done many virtual deals, but you have to have a strong team in place. This team may consist of a wholesaler in that market, birddogs, attorneys, title agents, etc. This is not a task you want to try and implement independently.

Related: A 60-Day Action Guide to Wholesaling Your First Property

8. Real estate agents hate wholesalers.

I've heard this quite often, and although the real estate agent/wholesaler relationship sometimes may not be the greatest, this isn't always the case.

There are real estate agents who work with investors and who love wholesalers. This is because wholesalers can provide agents' clients with off-market deals. This helps agents show their clients that they are embedded in the local industry. Agents can make a lot of money from wholesalers. I get that many agents believe wholesalers are taking possible listings. However, if wholesalers hand off below-market deals to agents, that is a benefit for the agent and his/her client. We have many agents on our buyer's list, and you should too.

Remember, when you hear a negative statement, you must evaluate the source. Some of these lies are from those who have ulterior motives. When working to be a wholesaler, you will encounter many things that can skew your perspective. By reading this article, you have the upper hand on your competition.

What wholesaling myths and lies have you encountered?

Comment below!

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Marcus Maloney is a value investor and portfolio holder of residential and commercial units. He has completed over $3.3 million in wholesale transactions. Currently, Marcus is a licensed agent who wholesales virtually in multiple states while building his investment portfolio. He has also converted some of his deals into cash-flowing rentals. Marcus holds seven rentals, two of which are commercial units. He’s even purchased a school, which was converted into a daycare center. His overall goal is to turn what is a marginal profit into a significant equity position. He leverages the equity by using the BRRRR (buy, rehab, rent, refinance, repeat) strategy to increase his portfolio without any money out-of-pocket. Marcus has been featured in numerous podcast such as the Louisville Gal Podcast, The Best Deal Ever Podcast, The Flipping Junkie, and many others. He contributes content regularly to his YouTube channel and blog.

    The German
    Replied almost 11 years ago
    I believe that the best real estate sales happen in the country side. It is a win-win situation and that is a market that can never slow down. In an area like rural Germany or France, the vistas are so beautiful that people can’t resist it. And the price is also pretty realistic. Nice article and all the 4 points make sense. Thanks 🙂
    Crystal Tost
    Replied almost 9 years ago
    I find the advertising in other countries and in mediums that are not real estate related a waster of money and time. I think targeted advertising coupled with good pricing and proper presentation will get the house sold to a local buyer that is likely out there as we speak. Why focus on an audience that you are not even sure exists in mediums that are not targeted?
    David Grbich
    Replied over 8 years ago
    Setting a realistic list price at 10% below market may lead to a very lonely existence as a realtor – not many sellers in the California market have the equity to price 10% below market – but yes that should get the home sold. Great point overall – thanks.
    Andrew Syrios Residential Real Estate Investor from Kansas City, Missouri
    Replied over 1 year ago
    Number 4 is important. I see the same thing with people who want to get into BRRRR and sometimes flipping. Yes, there are low cost options, but you need some cash. Even with wholesaling, you need some money for marketing and for lean months.
    Andrew Syrios Residential Real Estate Investor from Kansas City, Missouri
    Replied over 1 year ago
    Gurus have a lot to answer for with the whole “Make a fortune in real estate without having a penny to your name” nonsense
    Marcus Maloney Rental Property Investor from Queen Creek, AZ
    Replied over 1 year ago
    Absolutely Andrew, if everyone could be a millionaire without any money it would dilute the concept of working hard and progressing towards your goals. The gurus are really selling magic beans to the public and its hurting those aspiring to enter this industry.
    Michael Steven Harris
    Replied over 1 year ago
    I’ve found growing ones income and net worth much like getting 6 pack abs the steps are simple and straight forward but most don’t want to do the steps. They want all the wealth of being a rainmaker without having to do the work.
    Jermaine Parker from Philadelphia, Pennsylvania
    Replied over 1 year ago
    So what would you say are the steps… or where does one find the steps? Reply Report comment
    Jermaine Parker from Philadelphia, Pennsylvania
    Replied over 1 year ago
    So what would you say are the steps… or where does one find the steps?
    Oscar Pinto Real Estate Broker from Ontario CA
    Replied 6 months ago
    For abs? Check out a different site, for wholesaling I have $100,000 program I can sell you JUST Kidding! Check out the article mentioned 60-days to your first wholesale deal. I would look for a local wholesaler and try to partner.
    Michael Alan from Baltimore, Maryland
    Replied over 1 year ago
    I’m sure this is going to come off as such a noob question (I’m a noob). What type of license is spoken of in the first and third questions? A Real Estate license?
    Jean Mondejar
    Replied over 1 year ago
    Im a newbie and have yet to find my first deal. I am in the process of getting my real estate license. What are the dos and donts that newbies like me should pay attention to so we can avoid getting sued? Thank you!
    Ty Haas from Lawrence, Kansas
    Replied 11 months ago
    Jean, I have the same question that you do about getting sued. I’m in hopes that my commenting here will stir up more discussion. I would like to know more about the situations that could get a person sued when wholesaling. I do know that it would be illegal, as a wholesaler, to tell a seller that you are representing them to help them find a buyer. That’s the only thing that I have heard about from my attorney or other people here on Biggerpockets. If there are more ways, that people have heard of, to get sued as a wholesaler, please share! Thank you!
    Marcus Maloney Rental Property Investor from Queen Creek, AZ
    Replied over 1 year ago
    Michael, yes a Realtors license. I should have been clear and concise and not speaking in general terms.
    Scott Schultz Rental Property Investor from West Bend, WI
    Replied over 1 year ago
    There is no realtors license, a Realtor is a Member of The National Association of Realtors, the largest Trade association in the world. the license would be Real Estate, sales or Broker depending in the rules of your state
    Marcus Maloney Rental Property Investor from Queen Creek, AZ
    Replied over 1 year ago
    Shall we say Department of Real Estate License
    Michael Alan from Baltimore, Maryland
    Replied over 1 year ago
    I’m sure this is going to come off as such a noob question (I’m a noob). What type of license is spoken of in the first and third questions? A Real Estate license? Reply Report comment
    Marcus Maloney Rental Property Investor from Queen Creek, AZ
    Replied over 1 year ago
    Michael, yes a Realtors license. I should have been clear and concise and not speaking in general terms.
    TITUS LENNON from Lakeland, Florida
    Replied over 1 year ago
    Here’s my two cents. If you have the energy to wholesale, you might want to consider becoming a real estate agent. Both involve a lot of marketing and lead generation.
    Scott Schultz Rental Property Investor from West Bend, WI
    Replied over 1 year ago
    There is no realtors license, a Realtor is a Member of The National Association of Realtors, the largest Trade association in the world. the license would be Real Estate, sales or Broker depending in the rules of your state
    Scott Schultz Rental Property Investor from West Bend, WI
    Replied over 1 year ago
    the key is intent, if you find a seller and write an offer with no intention of closing if you dont find an end buyer, this is where potential problems arise, now if you cant sell the contract, and you still intend to close, you are well within the law in most jurisdictions. but if you offer with no intention to close, tie up a deal and then let it fall apart, now you open yourself up to all kinds of issues.
    Marcus Maloney Rental Property Investor from Queen Creek, AZ
    Replied over 1 year ago
    As a licensee you do have to disclosure you’re licensed. The seller is unrepresented and this has to be disclosed as well. From what Ive discussed with aspiring investors they are fearful of their profits being marginalized by the broker and the fees associated with having a license. I always encourage those desiring to wholesale to be licensed. Reply Report comment
    Marcus Maloney Rental Property Investor from Queen Creek, AZ
    Replied over 1 year ago
    As a licensee you do have to disclosure you’re licensed. The seller is unrepresented and this has to be disclosed as well. From what Ive discussed with aspiring investors they are fearful of their profits being marginalized by the broker and the fees associated with having a license. I always encourage those desiring to wholesale to be licensed.
    Marcus Maloney Rental Property Investor from Queen Creek, AZ
    Replied over 1 year ago
    As a licensee you do have to disclosure you’re licensed. The seller is unrepresented and this has to be disclosed as well. From what Ive discussed with aspiring investors they are fearful of their profits being marginalized by the broker and the fees associated with having a license. I always encourage those desiring to wholesale to be licensed.
    Isaac Sanchez from Hayward, California
    Replied over 1 year ago
    I do not wholesale but I know some people that do. One person I know has a real estate license. I wonder how they handle the transaction. Being that you are an agent your have a fiduciary duty to represent the clients best interest. DO agents that wholesale have a disclaimer stating they are not representing the seller and have no fiduciary duty? I also wonder why new wholesalers do not just become full time agents. Seems to me its an easier path to success than narrowing yourself to just distressed homes. Thank you for sharing your article
    Eric Carr Real Estate Broker from Los Angeles, CA
    Replied over 1 year ago
    Nice work. Concise and full of experience.
    MAI K MOUA from SAINT PAUL, Minnesota
    Replied over 1 year ago
    Number 8 could not be any truer. But in this business (and most), everyone is full of ulterior motives. It all just comes down to if everyone is on the same page and have align interests. Good article Marcus.
    Jermaine Parker from Philadelphia, Pennsylvania
    Replied over 1 year ago
    Thank you…!!! Do you have any advice on becoming a Real Estate Salesperson? Class, online, practice tests, etc…
    Evin Lederman Flipper/Rehabber from Hyde Park, NY
    Replied about 1 year ago
    I’m not a lawyer. If you have an equity interest, you can act as a middle man or woman. If you don’t have an equity stake in the deal then you are acting as a broker and need a real estate license. This is an incomplete answer, as it doesn’t define equity interest; perhaps a lawyer can do that. I think an option or a lease (a contract interest that conveys rights) qualifies.
    Evin Lederman Flipper/Rehabber from Hyde Park, NY
    Replied about 1 year ago
    I’m not a lawyer. If you have an equity interest, you can act as a middle man or woman. If you don’t have an equity stake in the deal then you are acting as a broker and need a real estate license. This is an incomplete answer, as it doesn’t define equity interest; perhaps a lawyer can do that. I think an option or a lease (a contract interest that conveys rights) qualifies.
    Melanie Hartmann Flipper/Rehabber from Baltimore, MD
    Replied 11 months ago
    Posing this question to the masses: Would putting an earnest money deposit down to hold the contract suffice as having equity interest? Then potentially have a clause in the contract that if you are not able to close by the predetermined date, you as the wholesaler, will loose your deposit and the contract becomes void? (All of this being clearly explained and spelled out yo the seller of course)
    Melanie Hartmann Flipper/Rehabber from Baltimore, MD
    Replied 11 months ago
    Posing this question to the masses: Would putting an earnest money deposit down to hold the contract suffice as having equity interest? Then potentially have a clause in the contract that if you are not able to close by the predetermined date, you as the wholesaler, will loose your deposit and the contract becomes void? (All of this being clearly explained and spelled out yo the seller of course) Reply Report comment
    Melanie Hartmann Flipper/Rehabber from Baltimore, MD
    Replied 11 months ago
    Posing this question to the masses: Would putting an earnest money deposit down to hold the contract suffice as having equity interest? Then potentially have a clause in the contract that if you are not able to close by the predetermined date, you as the wholesaler, will loose your deposit and the contract becomes void? (All of this being clearly explained and spelled out yo the seller of course)