Wholesaling, Sore Topic or Misunderstood Trade?

[Steven Thompson]

Hello everyone.

It looks like when you talk about wholesaling it is a touchy or sticky subject. A lot of people scream its illegal, many people say it’s against the law and you are acting like a unlicensed broker or unlicensed agent.

I get it. There are laws in place that prohibit certain practices, but I also understand that there's a right way and a wrong way to be a wholesaler. As someone who has wholesaled and number of deals and opportunities to investors I would like to share my two cents. My intentions are not to offend anyone but to inform and solicit opinions.

As a wholesaler we are not representing buyers or sellers, we are selling paper not properties. We gain equitable interest in a property (non deceptively) and assign our interest to another investment party for a fee, not too different from the way that mortgages are assigned from bank to bank or bank to investment company, similar concepts. I understand the mortgage process is different, but the concepts are similar. Wholesalers are not trying to take jobs away from agents by any means. I know a number of agents and brokers and we work together, also in some cases I have handed them leads that I couldn’t close because of price difference.

Every seller that I have done business with has been made aware of me assigning my positions and in some cases I have done business with agents and have given them referral fees for transactions through their brokerage firms fully documented.

Wholesaling is not as glamorous as it has been made out to be, it is hard work and you need systems in order to succeed. You will not Get Rich over night and unfortunately lucky strikes do happen, but what do you do when it’s not easy anymore and the luck runs out. That’s when either you really decide to become a wholesaler or you fizzle out and find something else to do.

Now I do understand that there are a lot of would be wholesalers out there that are not doing the business properly and too them I say you that really need to read the laws in your areas, so you have a good understanding and don’t violate them. Fines and fees are bad for business and it’s much better to operate within the confines of the legal system. When wholesaling is done the right way, it provides a great service to real estate professionals and the real estate industry. I hope this has shed some light on this subject and I look forward to seeing everyone’s opinions.