Is Wholesaling illegal or is it a right and wrong of doing it?.

[Barrington Lyons]

I have seen some post shading wholesalers and want to know What exactly the issue is if you get permission from the property owner and technically under contract as the home owner.

[Barry Pekin]

@Barrington Lyons,

Laws vary from state to state. From what I understand, Illinois just made a new law allowing you to do one deal per year without a license. So it’s always good to get the lowdown for your state from those doing it in your state and perhaps a lawyer.

I think there are a few issues.

Wholesaling has a very low bar to get started. As such, it attracts many who are uneducated in the process at best, or down right unethical at worst.

Wholesalers work with distressed owners to get deeply discounted properties. Those who are disreputable may truly be taking advantage of someone who doesn’t know what they’re doing. A good wholesaler would truly try to help the person, letting them know when their best option is to list with a realtor. However, when a good wholesaler finds a truly good deal from a motivated seller who truly wants to trade time and effort for money, they’re doing nothing different than a landlord or a rehabbed would do under the same situation.

And let’s be honest. An agent who might very well work harder and get paid less is likely going to be rather irritated with the wholesaler who appears to have done very little for more money. Of course I say “appears” because they’re not taking into account all of the hard work and/or money that goes into marketing.

I've also heard many investors online and in person at REIA meetings in my area say how invaluable wholesalers are. They say there's no way they could keep their property pipeline going without them.

How about contingencies. I hear people say they are slimy escape clauses for people who have no ability to actually close the deal. Yeah, this is possible, but who doesn’t have contingencies in their contracts. If I’m entering into a contract, and there’s the potential to discover something either known or not known to the seller that would make me lose my shirt, I want and should have a way to back out.

There’s more, but I’ve rambled enough. 😁