Wholesale question

10 Replies

Hi, 

I am a new investor and am just getting started in wholesaling. I have a question about how the seller gets paid in the process. 

Say the house is worth $100,000 and the seller owes $40,000. If I get the house under contract for $50,000 and then sell it to a fix and flip investor for $60,000, does the seller get the whole $60,000 or does $40,000 pay off the loan and $20,000 go to the seller?

As a NEWBIE, please tell me why you have decided to start with wholesaling. Just curious. Thank you

40 to bank holding the note. 10 to you. 10-(whatever closing fees you negotiated) for seller.

@joseph is asking way you want to wholesale and not make money.  

You don't

Here is the breakdown. in your scenario you did not make any money. 

the difference between your contract Selling price -purchase price = Profit

60,000-50,000=10,000 great deal for you good Job. 

the sellers would pay off their mortgage and the left over would go into there pocket

50,000-40,000=10,000

this is just the 3000 ft view of course there is closing cost and other fees that would come out.

Peter MacKercher, Real Estate Agent in MO (#2010004223)

@Joseph

I decided to start in wholesaling because I do not have a lot of capital for other investment strategies such as fix and flipping. 

@Josh and Peter

Thanks for your response. 

I think wholesaling is best to start before you get into fix and flip that way you will have some bread (money) to save up lol ^_^

I think wholesaling is much harder than it sounds.  You say:

Say the house is worth $100,000 and the seller owes $40,000. If I get the house under contract for $50,000

To do that, you have to find a seller with $60K in equity in a $100K house and convince them to sell it to you for $50K.  Sounds good in theory, but, realistically, how many such (extremely foolish or desperate) sellers are out there?  This is not the sort of deal you're going to find, at least without investing  a lot of time, effort, and money into your marketing.  Don't want to pop your bubble, but you're just not going to have deals like this fall into your lap.

@Jon

It was just a theoretical example to get my point across.  I appreciate your input though. (I'm not saying that sarcastically, I really do appreciate your input.) 

@Jon Holdman  

I am a wholesaler and since August of last year, I have closed 10 deals making upwards of 60K in revenue. 

The people that I buy from are not FOOLISH but yes, some are desperate.

Most of the people I buy from have a house that they simply couldn't sell to the normal retail buyer and my marketing has found them at the right time to relieve them from the stress of their house.

Most people are very happy when I see them at closing, even knowing I made a profit.

And the investors I have sold this to are happy that they got a property to rehab and sell.

Everybody wins as far as I am concerned. 

@Jordan Jones   

I think you are confused in the amount that the seller receives at closing. 

If you contract with the seller for $50,000.00. That is what they receive after closing (minus and closing costs negotiated). 

of that, in your example, $40,000.00 will go to the mortgage holder and the remainder will go to the seller.

The $10,000.00 left over will go to you. A GREAT profit.

Hope this helps.

@Mike Flowers  your number seems much more in line with my expections.  You're averaging about $6,000 per deal.  Those seller probably aren't giving up $50K of their $60K in equity in a $100K house, either.

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