Real Estate Wholesaling

The 8 Most Common Lies Newbies Believe About Wholesaling

Expertise: Personal Development, Real Estate Wholesaling, Real Estate Investing Basics
96 Articles Written
TRUE versus FALSE written on the white arrows, dilemmas concept.

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—a strategy that’s often misunderstood.

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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 to set the record straight here.

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 that 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 compared to 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 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. But even by reading this article, you’ll have the upper hand on your competition.

What wholesaling myths and lies have you encountered?

Comment below!

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 ...
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    Eric Carr Real Estate Broker from Los Angeles, CA
    Replied over 2 years ago
    Nice work. Concise and full of experience.
    MAI K MOUA from SAINT PAUL, Minnesota
    Replied over 2 years 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 2 years 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 2 years 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 almost 2 years 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)
    Nick Peraino Rental Property Investor from Pensacola, FL
    Replied 7 months ago
    Thanks for the article Marcus. How do you feel about wholesaling right now? In this market? Regarding level of difficulty.
    Marcus Maloney Wholesaler from Queen Creek, AZ
    Replied 4 months ago
    Nick, wholesaling is still profitable but a bit more competitive some time expanding your opportunities like virtual wholesaling is always an option as well. Thanks Nick for reading
    John Atkinson
    Replied 4 months ago
    When he says "license" is he talking about an agents license or a brokers license?
    Marcus Maloney Wholesaler from Queen Creek, AZ
    Replied 4 months ago
    In other states a broker is considered a agent, however some states a broker only mean managing broker. For example in Illinois there's no such thing as real estate agent license anymore its only broker license.