@Jonathan Hasan Wholesaling as it is commonly practiced and promoted is done without a real estate license, in spite of the fact that almost every state has language that defines real estate brokering as something to the effect of doing any of the following: offering to sell, rent, lease, exchange, transfer ownership of a property for another party in expectation of anything of benefit.
In other words, marketing a property that you don't already own. If your name isn't on the deed, you cannot market it.
The seller benefits most when they put their home on the open market with a licensed real estate agent. That's because:
1. The agent is subject to a strict NAR Code of Ethics if they're a Realtor (member of NAR).
2. Even if not a NAR member, much of that CoE is replicated in state laws that are designed to protect the consumer.
State real estate commissions, Attorneys General and local Realtor boards can and do enforce discipline on agents who violate regulations. Discipline can include monetary fines (sometimes VERY large fines, especially for Fair Housing violations), license suspension and outright license revocation.
3. The agent is a fiduciary to the seller. That means that they are required by both law and ethics to put the seller's interests first. Wholesalers have no such obligation.
4. In addition to other marketing channels like social media and PPC, licensed agents market homes on MLS, which reaches tens of millions of people. Wholesalers have perhaps a few dozen investors in their database. The licensed agent probably has a 200,000:1 advantage in the number of people he can reach.
Which do you suppose has the best chance of reaching the one person who will pay the highest price with the best possible terms?
5. In order to make money, the wholesaler has to get the property under contract for less than market value.
Let's say a property has a true market value of $100,000. The wholesaler probably wants to make $10,000, but needs to sell the contract to an investor. That investor also wants to pay less than market value - let's assume their target is 25% below market. That means that the investor will pay $75,000 and the seller actually gets $65,000.
Compare that to the same sale with a Realtor. We sell it at $100,000 and charge a commission of approximately 5%. In this case, the seller receives $95,000 vs the $65,000 he would get from the wholesaler.
The key point is that the wholesaler must, by definition, pay less than market value. The difference comes straight out of the seller's pocket and goes into the wholesaler's.
Finally, how does that wholesaler get a $100,000 house for $65,000? He does it by finding sellers who are ignorant of the true market value, easily manipulated, gullible and/or desperate to sell to get out of a bad life situation. And those are the wholesalers that I find despicable.
