Understanding Wholesale Deals

Key Takeaways


If you’ve been wanting to pursue a career in the real estate investing industry but don’t know where to start, consider wholesale deals.

The wholesaler’s motto is buy low, sell low. Wholesaling is the process of getting a property under contract and then assigning that contract to another buyer – one who plans on rehabbing it themselves.

While the commission check for a real estate wholesale deal won’t be as large as the one for a flip, rental property, or buy and hold; if you complete a few successful wholesale deals, you will have enough to put a down payment on a rehab property.

Wholesaling real estate for beginners

What Is A Wholesale Deal?

A wholesale deal is a type of real estate closing strategy in which an investor facilitates a deal between a buyer and a seller, essentially acting as a middle man. When a seller is motivated to get their house off the market but does not have the means to find a buyer willing to purchase the property fast, they often rely on wholesalers to close the deal. When a profitable deal arrises, wholesalers will contract the home at the seller’s agreed-upon price. Then, the wholesaler will identify a buyer who agrees that the home’s value is greater than the seller’s price, and the wholesaler will assign the contract to the buyer. The buyer will ultimately purchase the home for more than the seller agreed to, and the wholesaler receives the difference in the price as their profit.

Wholesale Deals In 4 Steps

Now that you’ve received an overview of what wholesaling means in real estate, you must be wondering exactly how to break into the industry. The steps of wholesaling itself are actually easy, but its the mastery of the individual steps that can be the hard part. However, those who are willing to mind their due diligence, spend time conducting research, and putting an effort to master their marketing and communication skills are well positioned to achieve great success. If this sounds like a challenge that you’re up for, then get started by familiarizing yourself with these 4 steps:

  1. Find a property

  2. Build a buyers list

  3. Negotiate

  4. Close the deal


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Wholesale deal

Find A Property

The main goal of wholesaling is to find properties that are being sold low enough under market value that you can assign the contract quickly to an end buyer, while leaving enough room for your finders’ fee. The most effective method of finding such properties is to search for motivated sellers through marketing. Marketing campaigns can include channels such as social media or direct mail, but keep in mind that following up on leads routinely is just as important as the initial launch. Also try going to your local Board of Realtors to obtain the right contracts. For more help, watch our video on how to find motivated sellers.

Build A Buyers List

Finding a great property is no use if you don’t have an end buyer ready in time. Successful wholesalers encourage the momentum of their businesses by building and maintaining an active buyers list. You can think of this as a rolodex of real estate professionals who are actively interested in purchasing off-market properties. Buyers lists are generated by extensive networking, such as attending auctions, meetings and events, and marketing campaigns. Visit this resource on how to best go about building a wholesale buyers list.

Negotiate

Once you’ve identified a motivated seller who is willing to sell their property for below market value, it is time to try your hand at negotiation. First, do your research and find out what the owner owes on the property, if they have any outstanding liens, and if there are any additional moving costs. Then, get ready to make an offer on your wholesale deal. You’ll want to leave plenty of room for negotiation, so make your initial offer low. Experts recommend anywhere from 40 to 60 percent below the asking price. Just remember, distressed homeowners want to sell their property at the end of the day. It’s always possible to come up with a mutually beneficial agreement. Brush up on your negotiation skills by studying the psychology of real estate negotiation.

Close The Deal

Last but not least, you will get ready to close your wholesale deal as soon as you reach your agreement with the seller. You will need to make clear to the seller that you are not buying the property yourself, but will be selling the contract to a third party.The contract should include an assignment clause that allows you to do so. If you are unable to find a buyer within a set amount of time, the contract will expire. Once you find your buyer, it is time to collect a deposit and assign the contract. Then, work with a reliable title company who will order title insurance and prepare all of the necessary paperwork for all parties to sign. Once you have reached your real estate closing, you can expect to be paid your portion within 30 to 60 days.

Summary

To complete successful wholesale deals you must have a solid grasp on how the process works – make sure to do your due diligence and educate yourself. A wholesaler must also be disciplined and take their marketing campaign seriously. Finally, all expert wholesalers are great communicators and always make sure that they have the proper legal documentation.

Ready to get started building your real estate business and take control of your financial future?

Wholesaling real estate is one of the best strategies that can help new investors familiarize themselves with the real estate industry. Learn how to get started in wholesaling— even with little to no capital— with our new online real estate class hosted by expert investor, Than Merrill.

So if you’re considering real estate investing, register for our FREE 1-Day Real Estate Webinar and get started learning how to start a successful investment business today!

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Real Estate Investing Strategies
Real Estate Investing Strategies
Real Estate Investing Strategies
Real Estate Investing Strategies
Real Estate Investing Strategies
Real Estate Investing Strategies