What is a common risk associated with wholesaling?

Paying too much up front, risking no profit, reflects a significant risk associated with wholesaling. In wholesaling, investors typically find distressed properties and then secure a contract for purchase at a negotiated price before selling that contract to an end buyer, usually without making any repairs or improvements to the property. If a wholesaler pays too much for the property, they may struggle to find a buyer willing to pay a higher price. This scenario can lead to potential losses, as the wholesaler may find themselves unable to sell the contract at a profit or, in worse cases, might have to back out of the deal, leading to forfeiture of earnest money or contractual penalties.

Wholesalers generally rely on a clear understanding of property values and market conditions; hence, overpaying up front can jeopardize their entire investment strategy by erasing the profit margins essential to the business model.