BiggerPockets

What Is A Real Estate Wholesale Deal?

Here is how a wholesale deal makes you and I quick money deal after deal! Let's break it down!

First: You find a motivated seller, Someone who really needs to sell badly. You make a wholesale priced offer (usually 40 to 60 cents on the dollar) and get that property under contract with that seller. In this example we will say that the house's fair market value is $100,000.00 and we got the seller to agree to sell it to us for $50,000.00. We have it under contract for 50 cents on the dollar!

Second: You find a buyer that wants to purchase the property you just put under contract with the motivated seller, and he agrees to buy it from us for let's say $60,000.00. He realizes that he is getting a $100K property for 60 cents on the dollar and that he is getting a great deal on a property worth 100K when fixed up!

Third: We then go to closing and we buy it for $50K from the motivated seller and complete that transaction. Then, we turn right around immediately and resell that same property to our buyer that we found who wants to buy the property from us at 60K and complete that transaction.

So, what have we done: We paid $50K for the house and we turned right around and sold the house for $60K the SAME DAY, and we make a quick $10,000.00! This was a win-win-win deal for all parties involved, and here's why:

1.) The original seller unloaded a problem house and moved on with their life!

2.) Our buyer just bought a GREAT piece of real estate at a wholesale price that he will now rent for cash flow or fix and resell at a nice profit.

3.) And you (the wholesaler) pocketed $10,000.00 for combining a motivated seller with a motivated real estate investor buyer!

Comments

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  Tiger Sun — over 2 years ago

  Nice and simple. Great for novices =)

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  Curtis Dayson — about 2 years ago

  Hey that was a great explination for novices jst like Tiger Sun mentioned. Myself being a novice, how do you go about finding motivated sellers? And contacting them without seeming pushy or predatory?

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  Donna S. — about 2 years ago

  Sounds good & simple. Please forgive a few questions from a noob: 1. Where do you get the 50K for the first closing? 2. Does our Buyer have to be a cash buyer? 3. Who pays for appraisal & inspections? Seems redundant to for both buyers to pay.

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  Eric Jacobson — almost 2 years ago

  Why wouldn't the wholesale turn around and sell it for full market value? Why settle for 60k?

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  O'Neil B — almost 2 years ago

  Curtis, you can put an ad on craigslist asking for bird dogs to find you motivated sellers or you can purchase leads. I would recomment the bird dog method first. Once you get the seller info just call them and ask them to tell you about their house. They will start talking. If they don't you could ask these questions. 1. Do you know the value of your house? 2. Are there any repairs needed? 3. Why are they selling? 4. If you offered them cash and close quickly what is the least they would take? (This question is very important) Donna, you can get these funds from transactional lenders who don't care about your credit or personal finances. All they care about is that you have a buyer in place for more than what you want to borrow. There is a fee ranging from 1.8% - 2.5%. However, many of these transactional funding co. have a flat fee for funds under a $100k. It's best to have a cash buyer, it makes things much easier and you would have them pay for closing cost. Inspections is also on them. Eric, when you're wholesaling you have to leave most of the profit for the other buyer. Most time the property needs some repairs and we don't have time to do repairs. Just find a cash buyer who is looking for a house that needs minor repairs and collect your money.

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  Marie Simon — over 1 year ago

  Thanks for answering those questions O'Neil very insightful.