I recently received an email from an aspiring real estate wholesaler asking me if I could explain to him the steps involved when wholesaling a property. It occurred to me that there were probably many others out there with the same question, so in today’s post, I will be walking you through a wholesale deal from beginning to end.
Step #1: Market for a Motivated Seller
Behind every great real estate deal is a motivated seller, and your job as a wholesaler is to get your marketing message in front of as many of those sellers as possible. This can be done via direct mail, internet marketing, door knocking, bandit signs, or whichever marketing method best fits your time and budget constraints. If you’re light on cash, there are still a number of ways to get the word out that you are a real estate problem solver- some of which I mention in this article.
Step #2: Negotiate a Great Deal
Now that your phone is ringing from the marketing you’ve been doing, it’s time to start talking to sellers and negotiating. Being that you are the middle man (or woman) in the deal, you need to be sure to negotiate your price low enough to leave room for your wholesale fee, while still including enough profit to make the deal attractive to your end buyer.
Step #3: Put the Property Under Contract
Once you and the seller come to an agreement on price and terms, it’s time to write up a purchase and sale agreement that will need to be signed by both parties (you and the seller). Once you have an executed contract, you will want to get a copy to your title company ASAP so they can begin title work. Many times there are liens and/or judgments that pop up and can potentially kill your deal, so you want to check title right away to make sure there are no last minute surprises.
Step #4: Start Marketing for an End Buyer
Once you have the property under contract, you need to start marketing for an end buyer. Call or email all of the investors on your buyers list and let them know about your new deal. Put ads up on free online classified sites like Craigslist.org. Place handwritten signs in and around the neighborhood where the property is located. Attend any and all local REIA meetings and pass out fliers with info about your property. Contact other wholesalers in your market and ask them if they know of any buyers who would be interested. You want to do everything you can to get your deal in front of as many eyes as possible.
Step #5: Assign Purchase Contract to End Buyer and Collect a Deposit
Once you’ve found an end buyer and agreed on a purchase price, you will need to assign your contract over to them by executing an assignment of contract agreement. An assignment agreement is a simple one page document (the one that I use is, anyway), which states that you are assigning your interest in the original purchase contract over to your end buyer for X amount (your assignment fee). So, for example, if your original contract with the seller was for $100,000, and you found an end buyer for $110,000, you would fill out an assignment agreement stating that you were assigning all of your rights in the original contract over to your end buyer for the amount of $10,000.
Make sure to collect a deposit from your end buyer once the assignment agreement is executed (I always get $2,000), and then fax or email a copy of the agreement to your title company.
Step #6: Get Paid
Now the hard part is over and it’s time to get paid!
On the day of closing the seller and the end buyer will show up to sign all of the documents, and the end buyer will bring funds for the purchase of the property, plus your assignment fee. Once everything has been signed and the money has been collected for the purchase, the title company will cut you a check for your fee.
Rinse and Repeat!
I hope that clarifies the mechanics of a wholesaling real estate deal for all of you who have been wondering. If you have any further questions, please feel free to leave them below and I will be happy to answer!