What is Wholesaling?

Is it legal to sell my property privately in Ontario?

Absolutely.  You can sell to a buyer directly, you can even auction your property to the public.  When selling privately always make sure you have a good real estate lawyer watching your back.  

What is Property Wholesaling in Canada?

We are starting to see more and more ads that say things like “We buy homes for cash” or “Sell your home fast, any condition”. 

These in many cases are individuals called Wholesalers.  They are unlicensed individuals who create an agreement with the home owner then assign that agreements to a third party for a profit.  

What is Property Wholesaling in Canada?

Property wholesaling is a real estate investment strategy where an investor (the wholesaler) secures a property under contract and then assigns that contract to another buyer for a fee or profit margin. Unlike traditional real estate transactions, wholesalers do not purchase the property themselves; instead, they act as intermediaries between sellers looking for a quick sale and buyers searching for investment opportunities.

How Property Wholesaling Works

1. Finding a Property – Wholesalers look for distressed properties, motivated sellers, or off-market deals (ie. for sale by owner).  They take advantage of lack of market knowledge to convince a seller to allow them to represent the home at a price which allows them to make a markup on the home when they find a buyer.  
2. Securing a Contract – The wholesaler enters into a purchase agreement with the seller,  including an assignment clause allowing them to transfer the contract.  The contracts may also include conditions which allow them to back out of the deal if they do not find a suitable buyer.  
3. Marketing to Buyers – The wholesaler finds an investor or buyer willing to purchase the property at a higher price allowing them to make money.
4. Assigning the Contract – The contract is assigned to the buyer, and the wholesaler earns a fee, usually the difference between the original contract price and the buyer’s purchase price.  Assignment fees may be charged as well.  
5. Closing the Deal – The end buyer finalizes the transaction directly with the seller.

Is Property Wholesaling Legal in Canada?

Yes, property wholesaling is legal in Canada, but regulations vary by province. For example, in Ontario, wholesalers must comply with the Real Estate and Business Brokers Act (REBBA), which prohibits unlicensed individuals from facilitating real estate transactions for a fee. Wholesalers can still operate legally by selling their interest in a contract rather than acting as brokers. Transparency in marketing and contracts is crucial to avoid legal issues.

How to Avoid Wholesaling Scams

While wholesaling is a legitimate practice, scams do exist. Remember if it sounds too good to be true then it usually is.  

Here’s how buyers and sellers can protect themselves:

1. Verify the Contract – Ensure the wholesaler actually has the property under contract and has the legal right to assign it.  Your Real Estate Lawyer can check the agreement before you sign it.  
2. Check Local Regulations – Understand provincial laws regarding real estate transactions to avoid illegal dealings.
3. Watch for Overpriced Deals – Some wholesalers inflate prices beyond market value. Always conduct an independent property valuation.  Before you sign.  
4. Be Wary of Upfront Fees – A legitimate wholesaler makes money at closing, not by charging excessive fees before assigning the contract.  
5. Confirm Property Ownership – Ensure the property owner is aware of and has agreed to the wholesaling arrangement.  This may be difficult unless you have access to the seller directly.  It’s not in the best interest of the wholesaler to connect you with the seller. 
6. Use Legal Assistance – Have a real estate lawyer review contracts before signing anything.  Always have a Real Estate Lawyer assist you in all Real Estate Transactions.  

Always have a Real Estate Lawyer assist you in all Real Estate Transactions.  

Pros and Cons of Property Wholesaling (Buyer & Seller Perspective)

As a Buyer:  When buying from a wholesaler.

Pros:

1. Below-Market Deals – Wholesalers often find distressed properties at deep discounts.
2. Quick Transactions – No long negotiations; wholesaling offers a fast way to acquire investment properties.
3. No Marketing Costs – The wholesaler does the work of finding and securing deals.
4. Scalability – You can quickly build a portfolio if you work with multiple wholesalers. (This is irrelevant as you can build a portfolio by purchasing in any manner not just wholesaling)
5. Less Competition – Many wholesale deals don’t hit the MLS, reducing buyer competition.  

Cons:

1. Little Due Diligence Provided – Wholesalers rarely provide full inspections or reports, meaning more risk.  Remember you are purchasing a contract and the wholesaler may have absolutely no experience and may know nothing about the home.  
2. Assignment Fees Can Be High – Some wholesalers charge significant markups, reducing your profit margin.  Remember.  The wholesaler is making money on the difference they have negotiated with the buyer and the price you are agreeing to.  They do not have ownership of the property at any point in the transaction.  
3. Unverified Sellers – Some wholesalers lock up bad deals or misrepresent the property’s value, condition or ownership.  Buyer beware is exceedingly important when purchasing privately or from a wholesaler.  Wholesalers are unlicensed there are no consumer protections available to the seller or purchaser alike.  
4. Limited Control – The wholesaler dictates the deal terms, giving you less negotiation power.  The devil can be in the details.
5. Cash-Heavy Deals – Many wholesale deals require cash or hard money financing, limiting conventional loan options.  Cash upfront is required because lenders can be suspicious of these deals.  Wholesalers will push for quick turn around as they have made promises to the seller to close quickly.  

As a Seller (Homeowner or Distressed Seller)

Pros:

1. Fast Sale – Wholesalers can close quickly, often within days or weeks.  (Or at lease promise to) Remember:  The wholesaler is not taking ownership of the property at any point.  Your deal depends on whether they have a buyer already lined up.  
2. No Repairs Needed – Properties are sold “as-is,” saving on repairs and upgrades.  Any property can be sold this way.  Properties in need of repair sell at a value commiserate with their condition.  If your house needs work to make it habitable then prepare for that to be reflected in the selling price.
3. Less Hassle – No need to list on MLS, hold open houses, or deal with buyer financing.  Any property can be sold in this manner.  If you do not wish your property to be listed on the MLS then an Exclusive Listing can be made.  This gives and agent the ability to market your property to their network rather than exposed to the public MLS.  As for Open houses and showings.  Open houses are entirely optional.  As for showings, if you expect someone to purchase your home then they will want to see it.  Showing your home is a necessary part of the process.  If you have a particular needs in relation to showing your home,  specific arrangements can be made to accommodate.  In cases of luxury properties or celebrity owned properties strict showing terms are used ie. the listing agent must be present at all showings or perspective buyers must be pre-qualified before they are shown the home.  These discourage “look loos” from wasting your valuable time.  
4. Avoid Foreclosure – A quick sale can prevent foreclosure and protect credit.  There is no guarantee of a quick sale in wholesaling vs traditional real estate.  Realtors can get a quick close in many cases which can prevent further problems with lenders.  Agents can also liaise with lenders to ensure they are aware of a robust effort to sell the home in a timely manner thus preventing further legal action.  
5. Cash Offers – Most wholesalers use cash investors, theoretically reducing deal fall-through risk.  This is entirely speculative however.  Remember Cash buyers are looking to buy at deep discounts.  There are multiple reasons deals fall through.  They best way to limit risk is to have adequate due diligence done during the transaction.  

Cons:

1. Lower Sale Price – Wholesalers offer below-market prices to make a profit.  Remember they are contracting you then immediately reselling your home to a third party.  They make money on re-selling the deal.  You are paying them with your sale price.    
2. No Agent Representation – Sellers miss out on professional pricing strategies and marketing, expert advice.  Most importantly they miss out on consumer protections and errors and omissions insurance and government oversight that Real Estate agents and brokerages are bound by.  
3. Scams & Unethical Wholesalers – Some wholesalers lock sellers into bad contracts without the ability to close.  Remember, a wholesaler is not licensed in any way.  
4. Contract Complications – If the wholesaler can’t find a buyer, the deal may fall through leaving you right back where you started.  Wholesalers will build self preserving conditions into their deals.  These conditions are built for them not you.  
5. No Competitive Bidding – Unlike MLS listings, there’s no competition to drive up offers.  At the moment most properties are not having bidding wars.  This is a marketing strategy that industry professionals do.  

Bottom Line:

Sellers get fast, sales but at a lower price. (If everything goes according to plan)

Buyers benefit from discounted deals but must do their due diligence.

Ontario woman says using ‘cash for houses’ company was costly mistake