Seller Beware: There are Wholesalers in the Area!

How do I know this? I got a text from one the other day telling me they were wholesaling a particular house. Well, that’s a pretty open-and-shut case! Of course when asked who this person was, they responded with a name and a company, neither of which are licensed to sell real estate in Kansas. 

This is important, of course, because it highlights the fact that wholesalers in the real estate industry operate at worst, outside of the law, and at best, in a murky grey area. Either way, I believe that what they do constitutes a scam that every home-owner should avoid, no matter what their situation is. Everyone should understand that to offer a property for sale on behalf of another person, you must have a real estate license. Offering a home for sale at a price while not holding a license is breaking state law. Pure and simple. 

I don’t want to bore everyone too much by going into the weeds, but let’s start with what a wholesaler does, and what’s referred to as a “net listing.” A wholesaler works to find a seller, usually one in distress and promises to find a buyer for their home at a price. They then go out and try to find another buyer at a higher price. Whatever the difference is, they keep. It would be like me making an agreement with a seller that I’m going to list your home for $150,000 and whatever I sell it for over that, I keep the difference. The problem, beyond the obvious ethical issues, is that this practice is flatly illegal in Kansas. 

Why would any home seller sell at wholesale? The retail market is right at their fingertips. Why not just sell for retail? Well, that’s part of the scam. Often wholesalers identify distressed home owners. Maybe they’re in financial distress. Maybe the home itself is distressed and the lack of maintenance leads the owner to believe they don’t have a better option than a quick sale via a wholesaler. 

How do they get away with this? Well, for one thing, the Kansas Real Estate Commission only has jurisdiction over licensed individuals. And because wholesalers are rarely licensed, they fall outside this. It therefore falls to the jurisdiction of the local district attorney, and for reasons that are probably obvious, going after wholesalers doesn’t land too high on their to-do lists. 

No matter, there’s something all of us can do! Be educated. Spread the word. Know that this practice exists right here in our own community. If you find out a loved-one is considering doing business with wholesaler, send this article to them. Get in touch with a licensed real estate agent. Talk with several. Know that you have options besides the malarkey these clowns are peddling. They are scam artists looking to do what scam-artists do: take advantage of people who feel like they don’t have another option. 

When a listing agent takes a listing, they are working in the interest of their seller. They have a fiduciary duty to serve their client’s best interest. A wholesaler only has one person’s interest at-heart: their own. I refuse to do business with anyone like that; I am a huge proponent of two things: higher standards in the real estate industry and educating the public about practices in the industry that I disagree with…and I will always defend consumers against predatory practices like wholesaling! 

-Ryan Desch, Broker/Owner

This content is not the product of the National Association of REALTORS®, and may not reflect NAR's viewpoint or position on these topics and NAR does not verify the accuracy of the content.