Drive through almost any community in America and you’ve probably seen the signs:
WE BUY HOUSES
CASH FOR HOMES
SELL YOUR HOUSE FAST
Maybe you’ve received the postcard. The text message. The phone call. Real estate wholesaling has become increasingly visible over the past several years. It’s also attracting increasing attention from legislators and regulators across the country. That’s not necessarily a bad thing. I’m an advocate for real estate investors. I understand the important role investors, including wholesalers, can play in the housing market.
But I’m also an advocate for doing business ethically, transparently and professionally. And that’s where the conversation about wholesaling needs to begin.
Wholesaling Serves a Legitimate Purpose
There are properties that simply aren’t good candidates for the traditional real estate market. Some homes need extensive repairs. Others have been neglected for years. A family may inherit a property hundreds or thousands of miles away that they don’t want to repair, maintain or manage. An elderly homeowner may need to transition into another living arrangement. There are situations where a seller values speed, certainty and convenience more than obtaining the highest possible retail price.
That’s where a legitimate real estate investor or wholesaler can provide tremendous value. They can help solve a problem that a traditional real estate transaction isn’t necessarily designed to solve. There is nothing inherently wrong with making money while solving that problem. The problem begins when the homeowner doesn’t understand what is actually happening.
Transparency Shouldn’t Be Controversial
If you’re wholesaling a property, the seller should understand your role in the transaction. They should understand that you may not ultimately purchase the property yourself. They should understand that the contract may be assigned. And they should understand that you’re operating a business and intend to make money from the transaction. That shouldn’t be something wholesalers are afraid to disclose.
If your business model only works when the other party doesn’t understand your business model, you have a problem. Good business doesn’t require hiding the ball. It requires creating enough value that everyone involved understands the transaction and willingly agrees to it.
Regulation Is Increasing
States around the country are beginning to take a closer look at wholesaling. Some have implemented disclosure requirements. Others have moved toward licensing requirements or other forms of oversight. The objective behind many of these efforts is relatively straightforward: consumers should understand who they’re dealing with and what they’re agreeing to before signing away what may be one of their largest financial assets.
I recently discussed this issue with reporter Kevin Hardy for Stateline in his article, “The Signs Offer Quick Cash for Homes. But States Want More Oversight.” As I told Kevin:
“Legislators are responding maybe a little too aggressively, but not by much.”
That’s an important distinction. The answer isn’t necessarily to eliminate wholesaling. Wholesaling can serve a legitimate and valuable purpose. But the industry shouldn’t be surprised when lawmakers react to practices that create consumer confusion or allow unethical operators to take advantage of homeowners.
Ethical Investors Shouldn’t Fear Transparency
The investors who concern me aren’t the ones explaining exactly what they’re doing. They’re the ones trying to disguise it. Professional investors should be able to clearly explain their role, their intentions and how the transaction works. They should use appropriate contracts. They should understand the laws governing their business. They should operate in a way that protects both their business and the people with whom they’re doing business.
And perhaps most importantly, they should recognize that someone’s house isn’t merely another lead in a marketing funnel. For many homeowners, that property represents decades of work, savings and accumulated equity. That deserves respect.
The Industry Has a Choice
Real estate investors can complain either about increased regulation, or we can ask why lawmakers believe the regulation is necessary in the first place. If wholesalers want to be treated like professionals, then the industry needs to behave professionally.
That means transparency. It means education. It means ethical business practices. It means understanding the applicable laws. And it means recognizing that making money and treating people fairly aren’t competing ideas.
Ethical wholesalers can provide tremendous value to property owners, neighborhoods and the broader real estate market. I’ve seen it happen. But protecting that legitimate business model requires responsible investors to separate themselves from operators who rely on confusion, pressure or deception to make a deal. Because ultimately, the future of real estate wholesaling won’t be determined solely by legislators. It will also be determined by how the people practicing it choose to conduct themselves.
Protect Your Real Estate Investing Business Real estate investing is a business, and the contracts, compliance decisions and legal structures behind that business matter. Through Watson Invested, I work with real estate investors who want to build, grow and protect their businesses while navigating the legal realities that come with investing.
