Wholesaling can be a gray area some times. While it is mostly legal and done every day, there are certain activities that are not only unethical but also illegal. The biggest thing I have found is that you need to be transparent with everyone involved. If you go to a seller and tell them that you are buying their house, then you need to realistically have the ability to close on that house (i.e. cash in the bank). If you happen to find a buyer before closing that is willing to take over as the buyer on the deal then more power to you. However, if you deceive the seller and tell them you have the ability - and intention - to close on a house when in fact you do not, then that is problematic. Most of the time distressed sellers are banking on the pay-day that you promise them and you should always do your best to hit the deadlines and expectations you have set for them.
Conversely, if you do not have the ability to close on a house, then be upfront with the seller. I'd recommend saying something like this: "Mr/Mrs seller, I understand that you want "x" for the property. Unfortunately, I don't think this house makes sense for my investment strategy at "x". However, I know a lot of investors in the area and there is a decent chance that one of them will find value in this home at "x". So here's what we can do; lets write up a contract for "x" and give me one week to find an investor who can make it happen at that price. If I can't find anyone, we will cancel the contract and you can move forward with listing it with a Realtor or whatever strategy you choose. If I do find someone within a week, we will be ready to close on your house two weeks after that. Sound fair?"
Again, transparency is key here.
