Updated about 2 years ago on . Most recent reply
What happens if a wholesaler can't find a buyer?
I've been reading more (and listening to many great BP podcast episodes) about wholesaling as a strategy but I'm curious as to what happens if the wholesaler is unable to find a buyer. Does the deal simply fall through? Does the wholesaler have to pay the seller a fee? Is that detail negotiable e.g. could vary by state, by deal, by savvyness of the seller and/or wholesaler?
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The wholesaler has to put down an escrow deposit. If they don’t come up with a buyer they would forfeit their deposit - IF (key word) that is what their contract said. It is what the standard FARBAR contract says… but many wholesalers use their own contract which gives them all sorts of outs… options to extend, etc. So it is really just a matter of what the contract calls for. Frequently wholesalers will put some (stupid low) dollar amount like $100 on their contract. They are usually not dealing with realtors who would protect a seller and insist on $1,000-3,000 in escrow for a typically priced house.
Wholesalers get more motivated to find a buyer the closer their contract gets to expiring…. They will negotiate into what was going to be their profit margin if it means getting a deal done. I’ve made a few thousand dollars off a wholesaler when they couldn’t sell our property on time. I’ve also figured out after the close that a wholesaler was trying to make $10,000 on a desk we were the only buyer on. We negotiated a $5,000 discount because they were about to lose the deal due to expiration. They still made $5,000 so they did ok.
All the best!
Randy