I'm assuming it's because the wholesaler is basically the middleman?

If so, the income on your tax returns will be positive so the whole rational of trying to avoid the income is moot. 

Then you will be informed enough to make a rational offer on the property. 

I have dozens of clients doing this in New Jersey most of which come from no construction background, they simply use preferred vendors we have in place (not GC's) which lowers renovations cost because there is no middle man. 

Do you think my thought is rational or am I too pestimistic about housing market? 

There is no rational debate I could ever have with you, because you ignore everything negative relative to crypto. 

I just do not see any rational/benign reason for them charging so much in deposit up front considering that the house has not sold for 6+ months and I will be able to close relatively fast. 

I prefer to just skip the middle man and do the "hard work" myself.

Real wholesaling is buying something in bulk and or for a middleman’s price and then reselling at a retail price.

well a great and wicked-smart consolidation would look something like get them all borrowing and high leverage, via getting the middle-man to sell your "crack" and for logistical ease, when time comes, do it in a way where your taking over masses by taking over the few "crack-dealers of finance".