BIC TIP #1303: The Wholesale
Wholesalers, here is what you need to know. Stephen Long, your Notorious BIC, breaks down the wholesaling process because more and more listing brokers are getting the call. A wholesaler finds a seller willing to sell below market value, then asks you to list the property at market value so they can keep the difference. There is a right way and a risky way to do this.
How Wholesaling Works
The basic model is simple. The wholesaler locates a seller who is willing to accept less than market value, usually for speed or convenience. The wholesaler then wants to resell at market value and capture the spread.
When they bring that deal to a listing broker, the question is how the wholesaler’s interest is structured, because that determines whether you should be involved.
The Ideal Way: Close First
The ideal situation is that the wholesaler closes on the property with the current seller before you sell it to the next buyer. Then, when you list it, the wholesaler is the seller. You are listing their property and their interest in it, which you are allowed to do.
This is clean. The ownership is clear, the seller is your client, and the transaction looks like any other listing.
The Risky Way: The Assignment
The other approach is an assignment. The wholesaler does not close. Instead, the original seller sells straight to the buyer you procure, and the wholesaler just collects a fee.
Stephen says that is probably not the best way, because connecting a buyer and seller for compensation typically requires a real estate license in North Carolina. If the wholesaler is licensed, it could be okay. If not, you may have a hard time finding a closing attorney willing to close it. When in doubt, consult a real estate attorney and your broker-in-charge.
The Practical Takeaway
Wholesalers are a thing, and you will hear from them. Before you agree to list a wholesale deal, find out whether the wholesaler will actually close on the property first. If it is an assignment from an unlicensed wholesaler, slow down and get advice before you get involved. Clean ownership makes for clean listings.
