Ok, am I an idiot or what?

[John McNamara]

Cliff note version. I get the "end result" of wholesaling. I guess I have a little brain freeze on the actual transaction.

We find an undervalued property, put it under contract, then assign or double close on it to someone else (usually another investor). I know we should have a "pool" of potential buyers lined up (easier said than done). Are we just gambling with the EMD hoping we can find a cash end buyer (investor) and close on the property within a week or two?? I guess my point is, we're buying this house with zero intention of wanting to keep it, so if time runs out and we don't have a buyer lined up before WE are suppose to close, we just lose the grand or two EMD and walk away?? Help. :roll:

[J Scott]

Most wholesalers will include a provision in the contract (generally called a "contingency") whereby they have the right to back out of the deal -- and receive their earnest money back -- for some period after the contract is signed.

There are different types of contingencies in typical RE contracts. For example, if the house doesn't appraise for a high enough amount, the buyer can back out (an "appraisal contingency"). Or, if a buyer can't get his financing, he can back out (a "financing contingency").

What you want is a general contingency that will allow you to back out for any (or no) reason for some period of time. These are generally called "due diligence" contingencies and basically give you the right to cancel the contract for any/no reason for some period of time after it is signed.

The time period is up to you (actually, negotiable between you and the seller), but 7-10 days is pretty typical, and some wholesalers will get the seller to give them much longer to find another buyer.