The Ethics of Wholesaling

Wholesaling is one of those real estate concepts that people tend to have strong feelings about whether they are all for, totally against it, or feel it should be done a certain way.

Investopedia defines wholesaling as a good or service sold to a middleman, other than the end user.  In real estate, this normally involves someone finding a good deal, getting it under contract and either assigning the contract or conducting some form of double closing to get the title to the end buyer.  So, how does such a simple transaction of properties or rights to real estate generate so much controversy?

I personally do not think wholesaling is the issue, as much as it is how it is done. I can't see how someone has an issue with someone working to find a good deal and assigning that contract or reselling to someone else for a profit (and I know some people do, please let us know in the comments).  The part where it goes south for me is people utilizing sleazy escape clauses to escape the deal if the can't find a buyer.  When you sign a contract, your intent should be to buy pending any contingencies you have or spell out that you do intend to buy if you cant find a buyer.  This practice is not only inconsiderate to the seller and any agents involved (not likely a good wholesale situation in this case), but also reflects poorly on the individual failing to close and can ruin the would be wholesaler's reputation. 

Below are a few other hot button wholesaling arguments and my thoughts on them:

- Wholesalers are not adding value

• Finding discounted properties that investors can make money on create a win-win

- Wholesaling is illegal

• Selling your own interest in a property is not illegal

- Wholesaling is a good way to get started in real estate

• Although this has worked for a few, many getting started in real estate do not have the connections or knowledge to identify and resale at a value for all parties involved

At the end of the day, doing the right thing should always be the focus.  If you have a good deal, there is no need for any type of misrepresentation. If you are serious about moving into wholesaling, look for a mentor and learn the market.  Nothing will sink you faster than sending out bad deals or failing to close.