Wholesale deal - Due Dilligence Mode

San Diego, California
Rehabbing & House Flipping
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Wholesale deal - Due Dilligence Mode

Trevor Brouelette
Property Manager · San Diego · Member since 2024 · 9 posts · 4 votes

I walked a wholesale deal today with a contractor and I’m in full due diligence mode. He’s putting together an estimate now. The wholesaler is trying to push for a quick decision (which I know is typical), and I want to move fast and smart.

From what I can tell, I’m the only buyer who has walked the property with a contractor so far, so I believe I’m their strongest lead at the moment. I have proof of funds ready and I’ve already asked the wholesaler to send over the purchase contract for review.

This would be my first flip,  about 650 sq ft,  so the renovation is mostly cosmetic and manageable. The upside is realistic and downside is mitigated since we arent playing with massive numbers; this it is mostly for experience. Not trying to hit a home run. 

For those with more experience: what else should I be doing during due diligence? Should I be running title or asking the wholesaler for their title report? How would you use this window of time to protect yourself while keeping momentum?

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  • Matt Devincenzo
    Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
    7mo

    You've done what you need to before funding the EMD. Check your assignment to ensure the EMD, which I'm sure is 'non-refundable', is refundable for failure to perform.

    Title review happens as part of closing after you sign the assignment, as long as the contract says the seller conveys clear title you're fine. Since you say 650 SF it sounds like a condo, so ask about HOA...this can also be after contract as long as the original contract states something about seller to provide. If you have concerns about the HOA then you may want to get a copy of their docs before signing the assignment.

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  • Trevor Brouelette
    OP
    Property Manager · San Diego · Member since 2024 · 9 posts · 4 votes
    7mo
    Thanks Matt. Hopefully the wholesaler sends me the orig contract soon. I have a hard time trusting these wholesalers for some reason. Always feels like theres something shady they are hiding. Checking HOA is a great idea. Should I ask wholesaler about the CC&Rs or reach out to the HOA directly for those?
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  • Alex Morales
    Member since 2026 · 97 posts · 57 votes
    7mo

    Good that you walked it with a contractor first. That puts you way ahead of most first time flippers who sign contracts before knowing what the rehab actually costs.

    A few things I would do in your position. First, run your own ARV comps independent of whatever the wholesaler provided. Pull sold comps from Redfin or Zillow in the last 90 days within half a mile, same bed/bath, and make sure they are actually comparable to your finished product. San Diego condos can vary a lot by building and location so dont just trust the wholesalers numbers. I usually run them through PropLab too just to cross check and see if anything looks off.

    Second, ask the wholesaler for a copy of the original contract between them and the seller. You want to see what the actual purchase price is and what the assignment fee comes out to. If the assignment fee is eating into your margin more than expected, thats negotiation leverage. Some wholesalers will move on price if you have proof of funds and can close fast.

    Third, regarding title, typically you dont need to run title yourself. The title company does that as part of closing. But if you want peace of mind before signing, ask the wholesaler if there are any liens, judgments, or code violations they know about. If they get cagey about that, thats a red flag.

    Since its a condo, definitely pull the HOA docs before finalizing. Ask the HOA directly for the CC&Rs, financials, and meeting minutes. Wholesalers usually wont have these. You want to know if there are any special assessments coming or litigation against the association.

    What market in San Diego? Some neighborhoods have tighter comps than others which affects your confidence in ARV.

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  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    7mo

    I am going to be the 3rd to mention to read HOA docs prior to going hard.

    There can be special assessments.   I am evaluating a property that has a pending lawsuit that is effecting financing and may in the future require a special assessment.

    However, more common is HOA can make flipping difficult. Many HOAs can dictate flooring, have approval of everything viewable from the entry, must approve any drywall changes (this is a smart way to indicate they need to approve any layout changes. Here is something critical, look at how long the HOA can take to approve or reject any proposed changes. 90 days is not uncommon. You can see how this can easily extend the amount of time a flip will take.

    Good luck

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  • Peter MckernanBusiness Member
    Residential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
    7mo

    Agree with above, and really make sure you due your deep dive on it, as you said the wholesaler just wants to close it since his back is against the wall with the timeline he gave the seller. So, if the EMD is refundable great, and you have time to do that, but if not then you need to make sure you do it on the upfront... I have had one deal where the EMD was not refundable, but the wholesaler lied about the litigation on the property between the current owner and property line argument. They released the EMD back once they knew they never disclosed it.

    Because and make sure you cover all your bases! 

    The McKernan Group4.954 Reviews
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