Real Estate Wholesaling

Wholesaling Real Estate Step by Step

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47 Articles Written

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.

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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!

    Nick
    Replied over 10 years ago
    pretty simple
    Coline Wilson
    Replied almost 2 years ago
    Do you walk the property with the seller?
    Stephani Davis
    Replied over 10 years ago
    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…
    Cheryl Westover from Fullerton, California
    Replied over 4 years ago
    Hi Stepani, Can you please tell me if the deposit I get from the end buyer is deducted from my wholesale fee? Thankyou! Cheryl
    Keith Pinster Rental Property Investor from Tucson, AZ
    Replied over 2 years ago
    Cheryl — Yes, the deposit is just that: a deposit against the fee. So it would be included in the total amount you get. Just like if you put down a deposit on anything you buy, it comes out of the total amount you pay, not separate from what you end up paying.
    Paul Caloia from Sterling Heights, Michigan
    Replied over 5 years ago
    The only part of this I am unsure of is What exactly a filled out contract for the sale looks like. There seem to be different ways to do it (different wordings perhaps.) What exactly is necessary to be addressed? If I could see an example of a filled out contract that would be awesome! Anyone to help? Thank you!
    Neil Uttamsingh
    Replied over 10 years ago
    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.
    Jordan
    Replied about 8 years ago
    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
    stephen
    Replied about 6 years ago
    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. 🙂
    Stephani Davis
    Replied over 10 years ago
    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
    Herb VanDyken
    Replied over 10 years ago
    Great article Steph, Once you bring the contract to the title company, who pays for the search, how much and when. ThankYou, Herbster
    Stephani Davis
    Replied over 10 years ago
    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
    Herb VanDyken
    Replied over 10 years ago
    Great article Steph, Once you bring the contract to the title company, who pays for the search, how much and when. ThankYou, Herbster
    Herb VanDyken
    Replied over 10 years ago
    Great article Steph, Once you bring the contract to the title company, who pays for the search, how much and when. ThankYou, Herbster
    Chris
    Replied over 10 years ago
    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?
    Stephani Davis
    Replied over 10 years ago
    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
    Rob
    Replied over 10 years ago
    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
    bienkaa
    Replied over 9 years ago
    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
    Frank
    Replied over 9 years ago
    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
    Thomas Lewis
    Replied about 9 years ago
    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
    bob
    Replied almost 9 years ago
    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
    benjamin
    Replied almost 8 years ago
    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?
    Mark
    Replied over 7 years ago
    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 Report comment
    Mark
    Replied over 7 years ago
    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
    Keith Pinster Rental Property Investor from Tucson, AZ
    Replied over 2 years ago
    Hi Mark. It looks like no one has answered any of your questions yet, so I’ll chime in on a couple of them, just in case other people get to this comment: “What is a good way to come up with the assignment fee?” — This is a straight-forward question without a straight-forward answer. Your assignment fee is the difference between what you can negotiate to buy the property and what you can negotiate to sell the property. For example, if you find a $300k property and can negotiate the purchase down to $150k, and can find a buyer that will pay $170k, your “fee” will be $20k. But if you can only negotiate the purchase down to $155k and can only find a buyer who is willing to pay $157k, then your “fee” will only be $2k. In other words, your “fee” will be completely contingent on your negotiating ability and can be wildly different for each transaction. The bottom line is that you need to figure out what you can sell the property for before making an offer and then stick to it. Keep in mind the 65% rule (there are articles on BP that talk about that) and if you can’t make as much as you are willing to take for the work, pass on the deal. It is probably a good rule of thumb that if you can make at least $10k, it’s a no-brainer. If you can only make $7, it’s probably worth looking into. If you aren’t sure you can make at least $5k, it’s probably not worth your time. Your mileage may vary. “Should I have an attorney draw up the Purchase Contract to the end buyer? As well as the Assignment of Contract Agreement?” — My suggestion is to go to an attorney and buy a boiler-plate set of contracts to use that work for each state you are working in. All states have different laws, so it is well worth a couple hundred bucks to make sure your contracts comply with the state you are doing business in. Make sure you get instructions on how to fill them out from the attorney. Once you do that, you can use those same contracts over and over again. This will endure you are covered without having to pay hundreds of dollars for each and every deal you do.
    Tiffany Higgins from Boston, Massachusetts
    Replied over 5 years ago
    Thanks for the article! You always hear how with wholesaling there are little risks, however, what would happen if you buy a place, have it under contract with the seller, and are unable to find a buyer? Is there a contingency within the contract that will allow you to back out? I am assuming it is a pretty obvious answer, but I haven’t come across this yet. Thanks! Tiffany
    Keith Pinster Rental Property Investor from Tucson, AZ
    Replied over 2 years ago
    You can also have a clause that says it is contingent on financing, so if you can’t find a buyer and can’t finance it yourself, you get to walk away. But, as Allan said, you will lose your earnest money unless you use one of the sneaky, dishonest moves that some gurus teach, of your conscience will let you do that.
    Allan C
    Replied over 5 years ago
    Hey Tiffany, I think usually there is a clause in your purchase contract that says something to the effect of ‘this offer is only contingent on my partner’s approval’. Your partner would be your investor or buyer. So if you end up not being able to find a buyer, you can walk away and I believe you would only forfeit your deposit or ‘earnest money’.
    Clifton Walker from montreal, quebec
    Replied about 5 years ago
    what kind of closing costs can I expect from the title company? and who pay’s them? I dont want my seller to freak out by asking them to pay the fees!
    Tomas Chao from Gastonia, North Carolina
    Replied over 4 years ago
    Short simple and to the point. Thank you for the information
    Account Closed from Cape Girardeau, Missouri
    Replied almost 3 years ago
    Great article and a lot of good questions in the posts. I’m brand new and learning.
    Christine Johanns Rental Property Investor from Jersey City, NJ
    Replied almost 3 years ago
    No realtor or agent involed!?!??! It almost seems too easy….. Why havent I ever know this before!!!!!!!! I have to find out if this is legal in NJ. !!!!! 🙂 Great article
    Christine Johanns Rental Property Investor from Jersey City, NJ
    Replied almost 3 years ago
    One more question… How much time do you have to find an end buyer? Is contract good for 30 days?
    Shantelle Pace from Chino, California
    Replied over 2 years ago
    This is simple and does give some new information! I do have a question. When you collect your deposit from the buyer, is it possible that you can just collect your whole fee there? Is that common practice?
    ANTHONY MADENA computer tech from san jose, ca
    Replied over 2 years ago
    I would like to start wholesaling properties, but don’t know if it’s legal in California , if so were can I get a purchase and assignment contracts that I can use and trust. please help
    Keith Pinster Rental Property Investor from Tucson, AZ
    Replied over 2 years ago
    Hi Anthony. Your first and best resource for something like that is a real estate attorney. Yes, it’s cost you a couple hundred bucks, but that is part of doing business. If there is a real estate investment group close to you, join it and start going to the monthly meetings. You’ll either be able to find one there or find someone who knows a good one. Having that resource will save your life! It’s well worth the cost.
    Travis Zuehls from Bremerton, WA
    Replied over 2 years ago
    Also, with finding a motivated distressed seller for free you can just utilize public records to find property owners that are delinquent on property taxes, pre forclosures, probates, etc… Majority of real estate agents won’t use this free source. No auctions required. Check with your local county to see if you can acquire the list for free.
    Shon LaRoi from 46231
    Replied about 2 years ago
    Do you have suggestions on finding a good title company?
    Travis Boyd from Manassas, Virginia
    Replied over 1 year ago
    In regards to Step #3. What happens if you can’t find a buyer? If submitted your contract to the Title company and they’ve done the necessary title search, are you now obligated to pay them if the deal falls through?
    Ana Dexeus Aleixandre
    Replied 5 months ago
    Hi Steph, very useful guide. When you first sign the contract with the seller for x amount, does he/she need to know you are not the end buyer and just a middleman? So to give you time to find the end buyer. Does this agreement state a specific period of time for the money from the purchase to be received by the seller? Does he/she not ask you for a ‘down payment’ when signing the agreement? Thanks Ana