The Art Of Wholesaling Real Estate
Friday, October 11
Real Estate Wholesaling - What It Is, What It Is Not, and How It Works
I give up! For the last few years infomercial gurus have been touting what they call "wholesaling real estate." And for the last few years I have spent mega-hours explaining to my students and prospective students that it's not really "wholesaling". It is actually ASSIGNING.
And now I give up. I'll no longer waste time setting anyone straight on the terminolgy - what is important is the strategy of real estate wholesaling, itself.
And, yes, I do realize that some "gurus" misrepresent real estate wholesaling to include many flipping strategies that actually require a closing on the part of the investor. But I'm not going there today. Today, it's all about the "assignment" type of wholesaling real estate, as it is the only real wholesaling, and is simple enough for a third-grader to do (if the law would allow a child to enter into contracts).
Wholesaling real estate is broken down into three parts - 1) obtaining a contract on a property on which you negotiated a real bargain, 2) finding someone who wants that property more than you do and wants that bargain, and 3) selling (assigning to) that person your contract.
Too bad it is just a little more complex than that. There are a few details the investor must pay attention to.
For beginners, to wholesale real estate it is necessary to choose a property in a decent neighborhood. It must be the type of property that is in demand in your area. For example, in a blue-collar family area you might want a 3+ bedroom 2 bath home, while in a retirement community such as Winter Haven FL, you may want a 2 bedroom one level, or a condo. And you must get it under contract at a real bargain (either price, or terms or both). In other words, your contract and the property must be attractive to other buyers.
Once you have it under contract, you must find a buyer. You can make Realtors aware of your contract, and that it is for sale. After all, buyers usually look to Realtors. You can also advertise in the newspaper, and online. Also notify any local investor groups/clubs.
Once a buyer is found, here is where a lot of investors make their mistake. Too often they assign the contract to the new buyer with an agreement that the buyer will pay you the assignment fee at closing. And that is a huge mistake - at closing, the buyer is not under any obligation to pay you anything. You cannot even attend the closing. Nope - get your fee at the time you assign the contract - do not assign it until you see the Benjamins. And it needs to be either cash, or certified bank check.
Once you have the money, you fill out three copies of the assignment form - one for you, one for the buyer and one for the escrow agent handling the original purchase between you and your seller. These must be either notarized, or witnessed by two unrelated parties. The escrow agent needs to know that a new person is to be listed on all the paperwork.
That's the gist of it, but there is more.
First, you need to know how to negotiate a deal on a property, and what to look for. You also need a purchase agreement that is worded in such a way that permits assigning. You also need a qualified ASSIGNMENT form to use. And, if you are a "newbie", you need a good coach to help you evaluate a potential property, walk you through the negotiations, the sale of the contract, and help you spend your profits (~.^) Actually, I just made up that last one to see if you were paying attention.
"The Simple Man's Guide to Real Estate" was developed specifically to provide everything you need (above) to wholesale real estate, as well as 21 other simple strategies of real estate investing. It's a great place to begin a career in real estate investing.