Are wholesalers dishonest? Illegal?

[Nathan Gesner]

I'm looking at wholesaler contracts and they appear to be dishonest, possibly even illegal. Am I missing something?

I'm talking to someone that is interested in wholesaling. I'm reading up on it and trying to refresh my memory because the whole thing appears shady, manipulative, in many cases dishonest, and possibly even illegal. I think many people get away with it simply because the crime is private and nobody bothers to complain.

I've looked at a couple contracts from people claiming to be big-time wholesalers with 10+ years in the business and training programs on YouTube and private websites. The contracts they use are fairly standard purchase contracts, probably lifted from the internet and dumbed down to 1-2 pages. Although they do mention "assigning" the contract, it's literally only 1-2 words conveniently hidden in the contract. Unless they explain what is happening in detail, the contract gives the impression the wholesaler is actually buying the property. But the wholesaler has no intention of buying the property and - in the vast majority of cases - they don't even have the ability to purchase the property. Then the wholesaler is marketing the property to potential buyers, which is illegal because they can't sell something they don't own.

It seems the proper, honest, legal way to do it is this:

1. Have an honest contract with the Seller stating what price and terms the Seller is willing to accept, and that you are not buying the home but you will work to find buyers willing to purchase the property under those terms
2. Market the terms (not the property) to potential buyers
3. When you find an interested buyer, sign a separate contract says they will pay your fee upon the successful purchase of the property
4. Introduce the Buyer and Seller and monitor

Am I wrong? 

Question #2: I have someone that is wanting to find the deals and bring them to me and my potential buyers. More of a bird dog than a wholesaler. I can't legally compensate someone that is unlicensed. How can I incentivize him without violating the law? Can I tell potential buyers that the property is available for $100,000 and include the bird dog fee in the purchase price, to be paid directly to the bird dog?