Five Things to Keep in Mind Before Wholesaling Real Estate

As an attorney, I have quite a few investor and wholesaler clients. Here are some things to keep in mind before wholesaling real estate (please be aware that no part of this is meant to provide legal advice to the reader):

1. Do not expect people to work for free.

We all need to make a living. If you are asking an agent to run comps for you, offer to pay them. If you have a contractor walk the property and give you an estimate on repairs, offer to pay them. If you are asking an attorney to prepare or review contracts for you, open escrow, handle a closing, etc., you guessed it, offer to pay them!

I’m shocked by the number of times I have been asked to provide free legal advice or prepare a document free of charge. I don’t mean to sound like a jerk, but would you ever work for free? If someone offered you a job with no pay, would you take it?

As a wholesaler, you should be looking to build a reputable business and no one is going to want to help you or take you seriously if you tell them you aren’t willing to pay them for the service they are providing you.

2. Not all contracts are created equally.

I often see people posting in the forums or on social media asking for contract templates. Keep in mind that different states have different laws and no contract is going to work for every state. Reach out to a local attorney and ask them to assist you (again, offer to pay them for their time).

Most of the wholesale deals I work on start out with awful contracts. They are missing key terms, don’t comply with state law, and are just a mess. A bad contract is an easy way to find yourself in trouble on a deal.

3. Be aware of deadlines and terms in the contract.

I have seen wholesalers get themselves into hot water by not paying attention to deadline in the contract. Make sure you have enough time to find an end-buyer and make sure you are meeting deadlines set in the contract. If you need more time, it can’t hurt to ask for an extension.

4. You need funds for double closes.

I often see wholesalers trying to double close in order to keep the amount they’re making from the deal a secret from both the seller and the end-buyer. They fail to realize, however, that they still need money to fund the deal from A to B and cannot just use the funds from B to C to fund that first transaction. It’s also important to keep in mind that both transactions will be public record and easily accessible to both the seller and end-buyer.

5. Don’t try to keep things a secret from the seller or end buyer.

Building off of point number three, don’t try to keep things a secret! As a wholesaler, you are solving a problem: the seller needs to sell and the end-buyer is looking for a deal. You are helping both of these parties. It’s also better for the seller to find out about an assignment fee at the beginning of the deal than it is for them to find out at the closing table. Explain to the seller that your goal is to make money on the deal and that you plan to either flip the house and sell it, fix it up and rent it out, or assign the contract to someone else for a fee.