The way I understand Wholesaling, it is you go to a seller who is selling at 100k, you offer 80k, they accept. You then take a contract to a buyer you find (we buy houses) and say you can get them a property for 80k but you will charge them a finders fee of 10%. Is this about right or do I have some part of the process wrong?
Hi @Eric Piccione That is one way. Wholesaling is pretty much buying at an under market rate and selling it for a profit. Meaning you can sell it with a finders fee or just mark up the property from 80k to 90k. I hope that helps
Actually, you would determine what is a good price for them. First, get a good ARV. Next, deduct 30%. Then get a good estimate of the repairs needed to get the house to full value and deduct that from the amount. This is what your buyer is going to want to pay.
Negotiate separately with the seller. You want, of course, to pay less than what you calculated for the buyer.
You then find a buyer and assign the contract to them through an assignment contract. At closing, they pay the amount in the assignment contract. The title company takes that, distributes the purchase price to the seller and the remainder to you.
This is WAY WAY WAY over-simplified. Read about wholesaling. Listen to podcasts. Watch videos. Get whatever training you can. There are a lot of moving parts.
Great, I'll have to do more research into this since for now, funds are low. The way I see it, wholesaling is a way to make a rather fast ROI while still having to put in the work for it.
@Barry Pekin thanks for the information. Can the deal be structured for the seller to pay the “assignment fee”? I am looking to finance the deal and the “assignment fee” is considered a non-allowable. I’ve heard mix information from lenders and the title company. Any insight will help!
Is your buyer seeking traditional financing to purchase the property? This is something I would avoid early on because banks will usually lengthen the process and generally make it more difficult.
Can the seller pay the fee? I'd check with a lawyer and your local REIA. The question I would want answered is if this means you're acting as a broker without a license. Also... would the seller even consider this? Also, would the bank balk at this, too, since in reality, it's the buyer's money that's effectively covering everything. The bank would likely see right through that.
This is not how wholesaling works on both of those points.