How can I remain ethical while just starting out?
Wholesaler · DFW, TX · Member since 2025 · 2 posts · 2 votes
How can I remain ethical while just starting out?
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Greg ScottPro Member
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votesScenario:
You've found a seller that is disorganized, confused, and anxious to sell a property quickly at a good price. They don't have the time, knowledge, or capacity to take care of it themselves.
You explain to the seller that you are wholesaler. You get properties under contract and then work hard to find someone else to ultimately buy the property. You can be honest that you will not be the ultimate buyer. Have in your contract that if you do not assign the contract within X days the contract becomes null and void. Explain that to them.
Even if you do not have enough money to buy the property yourself, how is this scenario unethical?
10 Replies
- 1yGreg ScottPro MemberRental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
Scenario:
You've found a seller that is disorganized, confused, and anxious to sell a property quickly at a good price. They don't have the time, knowledge, or capacity to take care of it themselves.
You explain to the seller that you are wholesaler. You get properties under contract and then work hard to find someone else to ultimately buy the property. You can be honest that you will not be the ultimate buyer. Have in your contract that if you do not assign the contract within X days the contract becomes null and void. Explain that to them.
Even if you do not have enough money to buy the property yourself, how is this scenario unethical?
- New to Real Estate · Metro Detroit, MI · Member since 2025 · 9 posts · 4 votes1y
Hello @Greg Scott. You seem to have lots of knowledge in this field. I'm new to wholesaling and rei all together. I'd love to chat sometime!
- Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes1yWe always have the discussion with the seller up front what we can do and what we can't do.
Quote from @David Goldberg:
Hi everyone.
Hope y'all are having a wonderful day. I'm just getting into real estate and the idea of wholesaling, which I see as a low barrier, cost effective way of getting some deals and learning the ropes of contracts, property analysis, networking, etc.
One question (of many) that I have is how to remain ethical in this business, especially without having much up front capital? The only way I'd be interested in doing any deal is with a high level of transperancy and keeping in mind the best interest of all parties involved. I know that it is unethical - and in my state (Texas), illegal - to get into a contract without proper funds (I am in college with ~$6,000 saved).
I am in no position to buy a house (or so I believe) or act like I am able to buy a house. So, is it possible to ethically and legally enter contracts without much capital? To those who started out without a lot of money, how did y'all handle this?
Thank you for your time and responses.
If they choose to go with us, we disclose everything in writing and they have to sign that disclosure. We tell them we are in this to make a profit, we may keep the property and we may sell the property, we don't really know from property to property until we know more than what we are aware of at that moment. But, we will always keep them informed of what is going on. Now, if you know in advance that you have no intention or ability to buy the property, that is probably illegal. So, find a partner with money and ability to buy and do it as a team.
We allow people to back out at anytime they want to with no penalty. Lawsuits are expensive and not worth it.
We provide them with a bottom line of what we expect them to wind up with in their pocket and time frame, along with what they would wind up and time frame if we were agents listing on the MLS. We provide the information for them how many days it's taking the average house to sell and close on the MLS vs how quickly we can close and explain the process.
Another thing you need to ingrain into your process, you are not selling a house in wholesaling (unless you are an agent), you are selling your contract.
You are allowed to sell your contract, but not the house. If you make representation on how many bedrooms, bathrooms, age of the roof and so on, you are selling the house and are acting as an agent. That will eventually get you into trouble. We, as investors, don't like trouble. So, we stick to the law. You can direct people to Redfin or Zillow or Realtor for them to see what information is posted, but you can't vouch for it. - Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes1y
Quote from @David Goldberg:
Hi everyone.
Hope y'all are having a wonderful day. I'm just getting into real estate and the idea of wholesaling, which I see as a low barrier, cost effective way of getting some deals and learning the ropes of contracts, property analysis, networking, etc.
One question (of many) that I have is how to remain ethical in this business, especially without having much up front capital? The only way I'd be interested in doing any deal is with a high level of transperancy and keeping in mind the best interest of all parties involved. I know that it is unethical - and in my state (Texas), illegal - to get into a contract without proper funds (I am in college with ~$6,000 saved).
I am in no position to buy a house (or so I believe) or act like I am able to buy a house. So, is it possible to ethically and legally enter contracts without much capital? To those who started out without a lot of money, how did y'all handle this?
Thank you for your time and responses.
Ethical thing to do is to get licensed as an agent or continue to save up and make sure you follow the law. The other thing you can do is become a bird dog where you find the deals and let someone else with money put them under contract and take a smaller fee.
7e investments53 Reviews - 1yDon KonipolBusiness MemberInvestor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votesMost investors fall into one of two categories when it comes to their feeling about wholesalers - either it’s just like any other “service” and the homeowner can either “buy” it or not, OR, it’s unethical, immoral, possibly illegal, and every wholesaler is scamming helpless homeowners.
Quote from @David Goldberg:
Hi everyone.
Hope y'all are having a wonderful day. I'm just getting into real estate and the idea of wholesaling, which I see as a low barrier, cost effective way of getting some deals and learning the ropes of contracts, property analysis, networking, etc.
One question (of many) that I have is how to remain ethical in this business, especially without having much up front capital? The only way I'd be interested in doing any deal is with a high level of transperancy and keeping in mind the best interest of all parties involved. I know that it is unethical - and in my state (Texas), illegal - to get into a contract without proper funds (I am in college with ~$6,000 saved).
I am in no position to buy a house (or so I believe) or act like I am able to buy a house. So, is it possible to ethically and legally enter contracts without much capital? To those who started out without a lot of money, how did y'all handle this?
Thank you for your time and responses.
My feeling is somewhere in between. If a “wholesaler” discloses ALL upfront - there shouldn’t be anything “wrong” with attempting to “flip” a contract. However, many states are enacting rules, regulations and laws placing licensing AND procedural requirements on “wholesaling”, some appear to be quite onerous and set up a situation where anyone attempting to profit on a residential “flip” transaction can be opening themselves up to legal action.
A bigger question is WHY take this path? The failure rate of people entering wholesaling is probably 99%. First, people think wholesaling is real estate work; it’s not, it’s a SALES job. One with no draw or base, 100% commission based. The people I know who have turned this sales job into a sale BUSINESS spend $10,000 + monthly on marketing, data extraction, virtual assistants, etc.
Second, people think wholesaling is good “training” for real estate investment. This is true on a limited basis at best. The best training is to take courses or read books and become knowledgeable concerning real estate principles, real estate law and real estate finance. Once you’ve mastered these areas get a job working for a company involved in real estate investment, management, analysis, or acquisition. - 1yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
slightly different take.
it's not a low barrier, cost effective way of getting some deals. you're going to be up against people and businesses spending thousands or tens of thousands of dollars a month in marketing. competition right now for deals is fierce.
here's a better plan:
1. save up for a house hack.
2. house hack.
3. repeat.
you could easily have a medium size portfolio just by house hacking as many properties in a row as you can stand.
good luck
- Flipper/Rehabber · Bloomfield CT · Member since 2020 · 1k+ posts · 408 votes1y
If you could perform virtual wholesaling targeted towards Hartford Connecticut, I would be more than game to take assignments and help provide legitimate proof of funds for the deal to go through
- 1yRonald RohdePro MemberAttorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
You can also find a partner who does have capital. Only look for deals that fit that person's buy box. If they pass, then you can shop it around.
- 1yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Just be ethical, honest and moral. Have integrity. Follow the existing laws. Go make money and have fun, don't stress about anything else.....
- Member since 2024 · 153 posts · 67 votes1y
Quote from @David Goldberg:
Hi everyone.
Hope y'all are having a wonderful day. I'm just getting into real estate and the idea of wholesaling, which I see as a low barrier, cost effective way of getting some deals and learning the ropes of contracts, property analysis, networking, etc.
One question (of many) that I have is how to remain ethical in this business, especially without having much up front capital? The only way I'd be interested in doing any deal is with a high level of transperancy and keeping in mind the best interest of all parties involved. I know that it is unethical - and in my state (Texas), illegal - to get into a contract without proper funds (I am in college with ~$6,000 saved).
I am in no position to buy a house (or so I believe) or act like I am able to buy a house. So, is it possible to ethically and legally enter contracts without much capital? To those who started out without a lot of money, how did y'all handle this?
Thank you for your time and responses.
How to Wholesaling Ethically in Real Estate: A Step-by-Step Guide
Wholesaling in real estate can be a profitable venture, but it’s essential to approach it ethically and legally. If you want to build a sustainable business, it’s important to avoid common pitfalls, maintain integrity, and protect yourself from dishonest parties. Below are key guidelines to ensure you operate in an ethical manner while minimizing risk.
1. Don't Steal Deals or Undercut Other Wholesalers
One of the most unethical practices in real estate wholesaling is stealing deals or undercutting other wholesalers. It's crucial to avoid directly going to the buyer and bypassing your wholesaler in an attempt to pocket their fee. Always respect others in the industry and be transparent with your actions. Maintaining positive relationships with other investors and wholesalers will serve you well in the long term.
2. Be Honest About Your Intentions
If you're not planning on buying the property yourself, but rather intend to assign the contract to another buyer, it’s important to make this clear from the beginning. Always include language in your contract stating that you have the right to assign it. Make sure the seller understands that you may not be the end buyer. This protects both you and the seller and helps avoid misunderstandings later on.
3. Protect Yourself from Unethical Sellers
Not all sellers are ethical, and some may attempt to backtrack on agreements or accuse you of being dishonest. They might even claim that you acted as an agent, which can create legal issues down the line. To avoid this, make sure all terms of the deal are explicitly outlined in the contract. This will safeguard you from sellers who may later try to claim you misrepresented yourself.
4. Use a Reputable Title Agent and Attorney
Having a trusted, investor-friendly title agent and attorney is essential. They'll ensure the legal aspects of your deal are properly handled. Once you've secured a ratified contract with the seller, send it to your title agency and place your earnest money deposit (EMD) into escrow. This makes your contract enforceable and legally binding. Additionally, consider filing a memorandum of contract with the county to protect your interests. This step helps prevent unethical buyers or sellers from attempting to undercut your deal.
5. Include an Inspection Period
A study or inspection period is a valuable addition to your contract. It gives you the right to cancel the deal within a specific time frame, for any reason—or for no reason at all. This provides flexibility if you find that the property isn’t worth what you initially thought. Without an inspection period, you may find yourself stuck with a deal that no longer makes sense.
6. Funding Your Deal: Hard Money and Private Lenders
If cash flow is a concern, consider reaching out to hard money or private money lenders. Many of these lenders operate on an asset-based model, meaning they’ll evaluate the property’s value rather than focusing on your creditworthiness or income. With a relatively small down payment, you could secure a loan to purchase a property worth hundreds of thousands of dollars. If you’re short on the down payment or closing fees, consider partnering with another investor who can provide the capital.
7. Wholesaling vs. Buying and Flipping
Wholesaling is not the same as buying and flipping a property. If your primary goal is to assign a contract to an end buyer, all you need to do is find a buyer within the inspection period, or back out if you’re unable to. Wholesaling is legal and ethical as long as it’s done correctly, following state regulations. The key is being transparent with all parties and sticking to the terms outlined in your contract.
8. Understand State-Specific Laws
Some states have specific laws that regulate or even prohibit wholesaling. It’s crucial to do your due diligence and consult with a reputable real estate attorney before starting any wholesale deals. Wholesaling isn’t inherently unethical, but some state legislatures have passed laws limiting the practice—often with the support of larger, established real estate players who want to reduce competition.
9. Avoid Illegal Activities
Whether you’re wholesaling, flipping, or engaging in any other type of real estate investment, always make sure you are operating within the law. Engaging in illegal activity, whether intentional or not, can lead to significant legal issues. If real estate contract assignment is legal in your state, proceed with confidence, but always follow the law to the letter.
Conclusion
Wholesaling can be a highly profitable real estate strategy when done ethically and legally. By being transparent, protecting your interests, working with reputable professionals, and following state-specific laws, you can avoid the pitfalls that many new investors face. As with any business, doing things the right way will set you up for long-term success.
Before diving in, always consult with a real estate attorney to ensure you’re on the right path. Good luck, and happy wholesaling!
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