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Wholesaling Real Estate Step by Step

by Stephani Davis on February 11, 2010 · 19 comments

  

I recently received an email from an aspiring real estate wholesaler asking me if I could explain to him the steps involved when wholesaling a property.  It occurred to me that there were probably many others out there with the same question, so in today’s post, I will be walking you through a wholesale deal from beginning to end.

Step #1: Market for a Motivated Seller

Behind every great real estate deal is a motivated seller, and your job as a wholesaler is to get your marketing message in front of as many of those sellers as possible.  This can be done via direct mail, internet marketing, door knocking, bandit signs, or whichever marketing method best fits your time and budget constraints.  If you’re light on cash, there are still a number of ways to get the word out that you are a real estate problem solver- some of which I mention in this article.

Step #2: Negotiate a Great Deal

Now that your phone is ringing from the marketing you’ve been doing, it’s time to start talking to sellers and negotiating.  Being that you are the middle man (or woman) in the deal, you need to be sure to negotiate your price low enough to leave room for your wholesale fee, while still including enough profit to make the deal attractive to your end buyer.

Step #3: Put the Property Under Contract

Once you and the seller come to an agreement on price and terms, it’s time to write up a purchase and sale agreement that will need to be signed by both parties (you and the seller).  Once you have an executed contract, you will want to get a copy to your title company ASAP so they can begin title work.  Many times there are liens and/or judgments that pop up and can potentially kill your deal, so you want to check title right away to make sure there are no last minute surprises.

Step #4: Start Marketing for an End Buyer

Once you have the property under contract, you need to start marketing for an end buyer.  Call or email all of the investors on your buyers list and let them know about your new deal.  Put ads up on free online classified sites like Craigslist.org.  Place handwritten signs in and around the neighborhood where the property is located.  Attend any and all local REIA meetings and pass out fliers with info about your property.  Contact other wholesalers in your market and ask them if they know of any buyers who would be interested.  You want to do everything you can to get your deal in front of as many eyes as possible.

Step #5: Assign Purchase Contract to End Buyer and Collect a Deposit

Once you’ve found an end buyer and agreed on a purchase price, you will need to assign your contract over to them by executing an assignment of contract agreement.  An assignment agreement is a simple one page document (the one that I use is, anyway), which states that you are assigning your interest in the original purchase contract over to your end buyer for X amount (your assignment fee).  So, for example, if your original contract with the seller was for $100,000, and you found an end buyer for $110,000, you would fill out an assignment agreement stating that you were assigning all of your rights in the original contract over to your end buyer for the amount of $10,000.

Make sure to collect a deposit from your end buyer once the assignment agreement is executed (I always get $2,000), and then fax or email a copy of the agreement to your title company.

Step #6: Get Paid

Now the hard part is over and it’s time to get paid!

On the day of closing the seller and the end buyer will show up to sign all of the documents, and the end buyer will bring funds for the purchase of the property, plus your assignment fee.  Once everything has been signed and the money has been collected for the purchase, the title company will cut you a check for your fee.

Rinse and Repeat!

I hope that clarifies the mechanics of a wholesaling real estate deal for all of you who have been wondering.  If you have any further questions, please feel free to leave them below and I will be happy to answer!

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{ 18 comments… read them below or add one }

Nick February 11, 2010 at 6:22 am

pretty simple

Reply

Stephani Davis February 11, 2010 at 6:59 am

Once you’ve done one and gone through the motions it’s simple.

Until then it’s all kinds of confusing.

Was for me anyway…

Reply

Judit January 23, 2011 at 2:44 pm

I am from California. Every title company will support the deal?
Who pays the 3. real estat agent and how?
Original seller has an agent, I have one and the end buyer has one as well.
Thanks for the info!

Reply

Neil Uttamsingh February 11, 2010 at 9:39 pm

Hi Steph,

A very clear, step-by-step guide. Really well written!

I am Canadian and wholesaling is not big at all in Canada, as it is in the States.

I am curious to know who the majority of your end buyers are.

Are they real estate investors, such as landlords, that end up buying the properties from you?

Or are they, the end consumer? For instance, people that end up buying the house and living in it.

Best Regards,
Neil.

Reply

Jordan May 17, 2012 at 10:17 pm

Hey Neil!
I am a fellow Canadian real estate wholesaler :) where are you wholesaling out of and have you had any legal issues assigning the rights of the contract?

Jordan

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stephen June 25, 2014 at 8:54 pm

Hey Jordan and Neil and Steph, my name is Stephen I’m just getting started as a wholesaler in guelph ontario and am looking for others in canada to talk to or bounce ideas off. I got a lot of questions and seems like the lawyers and real estate agents I talk to have no idea what I’m talking about. Seems almost impossible to run comps without MLS/an agent. Any tips or help from anyone would be great. :)

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Stephani Davis February 12, 2010 at 7:16 am

Hi Neil,

The majority of my end buyers are landlords, with a few rehabbers sprinkled in. Every once in a blue moon I’ll sell something to an owner occupant, but it doesn’t happen very often.

Take care,
Steph

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Herb VanDyken February 14, 2010 at 5:42 pm

Great article Steph, Once you bring the contract to the title company, who pays for the search, how much and when. ThankYou, Herbster

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Stephani Davis February 15, 2010 at 6:06 am

Hi Herb,

The title search will be added into the closing costs and paid at closing. It will say in your contract who is responsible for paying title fees, which is something that you can negotiate with the seller.

Steph

Reply

Chris February 14, 2010 at 7:43 pm

Great article Steph!

Have you ever had problems with the original seller during/after closing? I haven’t yet wholesaled a property but it would seem to me that at some point a seller would object to an assignment fee ($10,000 in this case) that they knew nothing about when the contract was first negotiated… Have you ever had to put out a fire in this case?

Reply

Stephani Davis February 15, 2010 at 6:08 am

Hi Chris,

No, I’ve never had a seller say anything about an assignment fee. Keep in mind that you are dealing with motivated sellers who want nothing more than to get the property out of their hair and move on with their life.

If you are concerned that the seller will care that you are making a large fee, you can always do a double close so they do not see how much you are making. You would just have to account for the extra set of closing fees as well as the cost of borrowing money for the sale.

Steph

Reply

Rob February 15, 2010 at 4:47 am

Very nicley and clearly explained. Does the seller know that you will be flipping the property to an end buyers- you really are only a middle man?
Does the buyer know that he has to pay you on top of the seller to get legal title to the property

thanks
Rob

Reply

bienkaa December 6, 2010 at 1:22 am

Hi Rob.
Can you please give me a step- step how to
do a mortgage assignment, owner finance to an end buyers?
I am a wholesaler, however I haven’t done a mortgage assignment yet.

Thanks,
Bienkaa

Reply

Frank February 21, 2011 at 6:53 pm

Hi Stephanie,

Great advice and article. My questions is:
Do you always have to do a purchase agreement and follow it by an assignment agreement or can you enter into an option to buy agreement and have that assigned and does offering a dollar or even ten dollars have to go into escrow or howdo you prove that you gave consideration. Please advise because i’m ready to take on a property but am not sure how to approach the seller.

Thank you soooo much!

Frank

Reply

Thomas Lewis August 6, 2011 at 8:45 am

what is the best way to get a buyers list is that the 1st thing i need 2 do. been trying 4 2yrs now and nothing yet

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bob October 12, 2011 at 10:09 am

if a seller does’nt want to pay any closing cost is it ture that on the purchase and sale contract
you can ad the net so the end buyer knows he will responsable for all closing cost or is on the assignment contract and if so where is this on the contract

Reply

benjamin September 1, 2012 at 3:22 pm

Ive been interested in getting into flipping contracts and assignments. Ive seen alot about you get it for so much on the dollar then mark it up to where you can still find a cash investor and you pocket the difference. The question i have is how does the title company get paid and by whom. I can only assume they arent working for free, how does this factor into the equation?

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Mark March 3, 2013 at 2:23 pm

Great “How To” guide. A couple of questions here:
1. What is a good way to come up with the assignment fee?
2. What information would be included on the flyers of the property to be handed out at REI meetings? Or what not to include?
3. Should I have an attorney draw up the Purchase Contract to the end buyer? As well as the Assignment of Contract Agreement?

Thanks again for the good information.

Mark

Reply

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