Evaluating a Real Estate Wholesale Deal: A Deal in Progress

by | BiggerPockets.com

My partner and I recently got a call from a highly motivated seller. They will soon be meeting with the seller to walk through the house and will begin negotiations if things look good. I thought I’d show you the numbers on this deal so you can see how I evaluate a wholesale opportunity.

First, let’s start with the seller. He’s motivated because he can’t afford his payments anymore and he’s facing foreclosure. Remember, the name of the real estate game is “motivation,” because if a person isn’t motivated, they’ll never be worth your time; unmotivated sellers will drive you insane in this business (if you allow them to.)

The seller says the house is in great shape, but of course they all do. The few repairs he mentioned we’ve estimated on the high end at about $10,000. Of course, I’m sure after my partner sees the place that will easily double so we might as well call it $20,000 in repairs.

Comps in the area for the house are about $315,000. The seller only owes $53,000. Now, if the seller just wanted us to pay off what he owed this would be a home run, but this is not the case. He has several other bills and needs $16,000 to pay expenses and then wants $25,000 in walking money.

So when you add it all up he wants $94,000.

Since the comps are $315,000 you can see that there’s still a good amount of equity. But let’s break down the numbers even more from a wholesaler’s perspective. If I can get this property at .50 cents on the dollar that’s $157,500. Of course, I also need to subtract repairs which I’m going to go with a high $20,000 estimate. That brings us down to $137,500.

In other words, I believe that I will have no problem at all wholesaling this property for $137,000, which would be a great deal for a rehabber. So, if I can get it for $94,000 or even $104,000 it will make us a good amount of money.

Keep in mind that I’m being very conservative with all these numbers too. The repairs might be only $5,000 and I can probably wholesale this property for .60 cents on the dollar. But, in today’s economy it’s always better to be conservative.

I’ll keep you posted on what happens with this deal and hopefully by the end of the week my partner and I will have a signed contract and a buyer locked in.

Photo: Horia Varlan

About Author

Jason R. Hanson is the founder of National Real Estate Investor Month and the author of “How to Build a Real Estate Empire”. Jason specializes in purchasing properties “subject-to” and has purchased millions of dollars worth of property using none of his own cash or credit.


  1. Hey Jason — I’m wondering why the seller can’t simply hire a local, competent real estate agent who should be able to sell it easily and quickly for say, $225-250,000 to an owner/user. I’m not a wholesaler, so I realize I must be missing something here. A home with an empirically provable value of over $300,000 would go in a weekend with multiple offers over asking price if marketed at $250,000 or less.

    What’s the elephant in the room I’m not seeing? Thanks for your insights on this.

    • Geoffrey Westerlund

      Wholesalers are targetting motivated sellers as he stated. As mentioned there is probably more to the story and from the blog I’m guessing he got this in pre-forclosure which means the person needs to sell it by a certain time. Going through a realtor and sending it to market could take much longer than he has before it is foreclosed on. He could sell it to a contractor directly, but more than likely doesn’t have any connections. I would also guess that the house is in a significant amount of distress. If the seller estimated $10,000 in repairs and is willing to sell it for a third of the price of the comps I would predict that there is a lot more work to be done than you would expect as homeowners tend to not know how much things cost to fix and don’t want to say their house is trashed because it would give any leverage they have.

  2. Jeff is expressing my viewpoint more kindly. Rather than highlighting your “wholesaling process”, you come across as a vulture who must be dealing with a mentally incompetent, or senile individual, w-ho shouldn’t be permitted to enter into contracts. AS PRESENTED, and trying hard not to sound pious, and caveat emptor and all, but this transaction sounds unconscionable.

  3. I share some of the concerns above. Something about the story may be missing.

    With comps at $315,000, seller wanting what he wants based on your numbers in your story, the spread is quite large.

    The statement he is motivated because he is facing foreclosure, leaves me to suggest you do your due dilligence on mortgages and liens and late fee’s, on the property.

    There are so many options available to the sellers and the lenders when there is massive equity available.

    I cannot tell you the number of times sellers have sort of forgotten all the liens they have on title or the extent of late fee’s due. It is almost exponential how fast they grow.

    Happy Investing!

    • jordan c.

      ZACHARY I’m curious too!

      JASON What a deal that could have been! $33k-$43k would be an amazing opportunity I hope everything went favorable. You get a great check and help this guy out by getting him exactly what he needs and are able to close quickly!

      That sounds like a win-win to me

  4. I believe the missing piece to mention is that the value of comparable homes in the area that are holding higher values are most certainly in better condition than this sellers house. Thus, this seller would have to invest in his/her own home to gain that equity. Being that a foreclosure is pending, it’s safe to assume he/she doesn’t have the means to do that. Enter wholesaler – takes the job of selling the property off the hands of the seller and in turn charges an assignment fee and ideally the future buyer/investor will rehab the property to gain the equity potential it holds. Like Jordan said, it’s a win, win, win for everyone involved.

  5. David Nelson

    I’m just curious who (As wholesalers) has had deals 50-60 percent on the market. I assume there are motivated people, but is this like a 1 in a 1000 chance, or 1 in a 100? Just curious for those in the wholesale industry, how often do you see this?

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