Correcting the Top 10 Mistaken Beliefs About Wholesaling

[Don Konipol]

1. It’s WHOLESALING, not WHOLE SELLING

2. It’s a job/business, not investing 

3. You CAN’T be successful doing it without capital

4. “Driving for dollars” is not a viable strategy; the people successful at wholesaling spend $10,000 + monthly on marketing 

5.  You need to know real estate principles, real estate law, and real estate finance.  None of these subjects are taught by wholesaling gurus 

6. You can’t be successful part time; it requires a full commitment.

7. In most common methods of wholesaling you are NOT a principal, you are an intermediary.

8. The law is not on the side of the wholesaler; states are attempting various ways of limiting wholesalers profitability.

9. Only a small minority of people getting involved in wholesaling are in any way competent 

10. Wholesaling does NOT lead to investing, studying real estate finance, principles and law and working for an investment real estate company leads to successful real estate investment. 

[David Ramirez]

Quote from @Account Closed:

Quote from @Don Konipol:

1. It’s WHOLESALING, not WHOLE SELLING

2. It’s a job/business, not investing 

3. You CAN’T be successful doing it without capital

4. “Driving for dollars” is not a viable strategy; the people successful at wholesaling spend $10,000 + monthly on marketing 

5.  You need to know real estate principles, real estate law, and real estate finance.  None of these subjects are taught by wholesaling gurus 

6. You can’t be successful part time; it requires a full commitment.

7. In most common methods of wholesaling you are NOT a principal, you are an intermediary.

8. The law is not on the side of the wholesaler; states are attempting various ways of limiting wholesalers profitability.

9. Only a small minority of people getting involved in wholesaling are in any way competent 

10. Wholesaling does NOT lead to investing, studying real estate finance, principles and law and working for an investment real estate company leads to successful real estate investment. 

Right on @Don Konipol: And another big one is that advertising a property for sale that you don't own, is called "being a real estate agent". Most of them are selling the property, not the paper. There's a Big Difference in the eyes of the authorities. 

And yet another, recording a memoradum of purchase agreement to cloud title and then not releasing the memorandum in order to hold the property hostage for a fee, is a serious legal issue.

And another, signing a purchase and sale agreement without the intent or ability to close, is fraud.

And another, in some states now, you have to disclose, in writing to the seller, that you are not the end buyer or be fined with a hefty fine.

These may get glossed over by the "community" but they are starting to be cracked down on in a bunch of states. There are new laws being implememented in some states as well.

Hey Ken, I agree with you on people doing business the wrong way, just like in the creative side with people not properly disclosing how liable the seller is in a sub-to transaction.

There are indeed people promoting a property instead of the contract, which they do not have the right to do so. You can include a marketing clause in the purchase and sale agreement that will give you the rights to promote the property, which is the right way to do it.

Unfortunately, memorandums are a necessary tool for our business because we usually work with very distressed property owners who might go for a higher offer even after executing an agreement. The right way to do it is by adding to the paperwork a copy of the memorandum that will be recorded with the county, and also the release to ensure the sellers know they have to get a receipt of the release if a cancellation happens and it's approved by both parties. I don't always fill them, but sometimes it is indeed necessary.

I agree with not signing a purchase agreement without the intent to close. I started out flipping and then transitioned my business to wholesaling so I can easily close on any transaction if I have to.

I don't like the bad reputation that wholesaling has because of people jumping into it with no idea or understanding of best practices, but hopefully, with regulations, we can clean out the bad ones.