buying from wholsaler...what's the process?

6 Replies

Hey everyone,

I am looking to purchase a rehab property from a wholesaler, and looking for information on the buying process. Can someone explain step by step how to purchase from a wholesaler and what to look out for?

This is what I have so far and some questions:
The wholsaler says he has 30 days to close on the property and a down payment is required to hold the property. So I tell the wholesaler I want the property, sign the contract and give him the down payment. I will be obtaining funds through a hard money lender. We go to the closing and funds are distributed and we obtain the property.

What happens to the down payment if I can't obtain funding?
Is this contract contingent on a full inspection, say I find a major structural issue before closing, can I back out and get my money back.
Who pays the closing costs?

Sorry for all the questions, just trying to make sure I don't miss anything.

Thanks for the help

Those things are dependent on what is agreed upon in the contract. If you signed a contract with no inspection contingency then you will not be able to get your money back with an unsatisfactory inspection. Closing costs are also outlined in the contract. There are "normal" closing costs that the seller will usually pay such as prorated taxes, prorated rents, title insurance, half of attorney fees, and half the escrow fee, but these things are all negotiable and are outlined in the contract.

When I wholesale my properties, I do not allow any contingencies into my contracts. The buyer needs to do all of their inspections before they put a contract on the property. Their earnest money deposit is non-refundable unless it is on my side that we don't close (title issues are the only reason I refund it), and I make them pay it directly to me and not to the title company.

Thanks Ryan, I appreciate the help.

So would the investor sign the contract after both sides agree and give you the deposit/earnest money at the same time? Also, is it practicable to have my attorney look at the contract and make changes.

Thanks again.

Yes, I get the earnest money at the execution (signing) of the contract.

It is probably not practical for your attorney to make changes to the contract, but you might want to have them look over it anyway. Most attorneys are going to want to put in protective clauses for you and change the language of the contract to benefit you, and at least for me as a wholesaler, we do it my way or I'll sell it to someone else. Now there is some latitude in there such as closing costs or tenant issues, but I'm not going to allow a bunch of contingencies and/or protective clauses into my contracts. Your attorney at the very least can inform you of what the contract is saying and what repercussions might happen.

Now again anything is negotiable in a contract, but the more experienced the wholesaler, the less negotiating power you are going to have.

Do you allow the investor to hire an inspection before signing the contract and giving you earnest money? My only concern is there would be some structural damage or something that can't be seen by looking at the problem.


To be honest, I've never been asked. I wouldn't have a problem with it. Most of the properties I sell aren't necessarily normal inspection material. Not all the bathroom, kitchen, and/or electric fixtures, etc. are going to be there to test. I also wouldn't be open to turning on the utitlies in my name if they weren't already on. I would expect that to be on the buyer, also.

Now most structural issues are easily found with a diligent eye. Settling, pier and beam issues, bad roof, etc. are not hard to spot. Now with things like the sewer, water, and gas lines or the wiring, its going to be harder to spot potential issues, but again they are going to be harder to test with most wholesale deals.

There are probably hundreds of ways to buy from a wholesaler.

I am a wholesaler and our normal operating procedures when we have a buyer is to have the buy look at the property. Show them any comps that we have. We do an inspection and subject to appraisal on all of our properties at the buyers expense. Most lenders (in Atlanta) require an inspection and appraisal anyways. I am also a hard money lender. for all deals we require credit check 650 or higher and proof of assets, $1000 earnest money check and $4000 dollars certified funds at closing (which all go to buy down the loan) this is so the investor has a vested interest in the property, we also have the buyer(investor) sign a purchase and sales agreement with no contingencies (I am a licenced agent so this isn't a problem for me). Earnest money is non-refundable, but we will 99% of the time return it to the buyer unless he does something to really throw a wrench in our closing, like walking from the deal the day of closing or out right lying to us about his proof of funds etc and us not finding out about it until at the closing.

So it is not hard to buy a property from a wholesaler and most deals can be closed in 7-14 days. but you should shop around and find a wholesaler that you can trust.