Wholesaler v. Real Estate Professional
Wholesaler v. Real Estate Professional: What’s the Difference and Why It Matters
The world of real estate is filled with different players, each with unique roles and strategies for earning income. Two of the most commonly confused roles are those of the real estate wholesaler and the real estate professional (typically a licensed real estate agent or broker). While both operate in the same space and may work with similar types of properties, their business models, skill sets, and legal obligations are quite different.
If you're an aspiring investor, homebuyer, or someone considering a career in real estate, it’s essential to understand the key distinctions between these roles. Let’s break it down.
What Is a Real Estate Wholesaler?
A real estate wholesaler poses as an investor who acts as the middleman between a motivated seller and an end buyer usually another investor. Instead, a wholesaler is nothing more than a transaction coordinator acting their own behalf. They will utilize various techniques to get the seller to think the property is not worth the price of the current market value.
Here’s how it works:
A wholesaler finds property often distressed or off-market. Motivated to get the property at a significant discount.
They negotiate a purchase contract with the seller.
Instead of buying the property themselves, they assign the contract to another buyer (typically a rehabber or landlord) for a fee. The fee is the difference between the purchase price and seller (e.g. “buys”: $100k; “Sells”: $130k = $30k profit)
The goal: Lock up a great deal and quickly pass it to an investor, making money through the assignment fee or markup without ever owning the property.
Key Differences Between Wholesalers and Real Estate Professionals
Wholesaler Real Estate Professional
Licensing No license required (in most states) Must be licensed
Clients Works for themselves Represents buyers or sellers
Income Model Earns assignment or wholesale fees Earns commission based on sale price
Property Ownership Typically never takes title Never owns the property
Transaction Type Off-market, often distressed On-market or listed properties
Marketing Focus Targets motivated sellers and investors Targets buyers and sellers via MLS
Legal Regulation Lightly regulated (varies by state) Highly regulated by state law/ real estate boards
What Is a Real Estate Professional?
A real estate professional, on the other hand, is typically a licensed real estate agent or broker who facilitates the buying and selling of property on behalf of clients.
Here’s how it works:
Agents list properties on the MLS (Multiple Listing Service) and market them to potential buyers.
They represent either the buyer or seller in a transaction.
They are compensated via a commission (usually 2.5%–3% of the sale price).
The goal: Help clients navigate the process of buying, selling, or leasing real estate, ensuring compliance with state laws and ethical guidelines.
Where the Lines Blur
The gap between wholesaling and traditional real estate is starting to narrow in some markets. Increasingly, states are cracking down on unlicensed activity, especially when wholesalers market properties publicly without having a real interest (i.e., ownership or a license).
Final Thoughts
A wholesaler does not have to comply with a governing body to ensure fairness and/or transparency. Most will pose as the actual investor; instead, they are just the “middleman” in the transaction. Most importantly, the criteria of a wholesaler is to drive the price down on the homeowner while increasing the price for the buyer. The seller will not realize what their property actually sold for in the current market.
