Dumb Wholesaling Questions: Please Explain

[Andrew Taylor]

I have a vague understanding of the concept of wholesaling properties - i.e. the wholesaler finds a distressed property and/or motivated seller, puts it under contract with the right to assign, and then finds a buyer willing to pay more than the contracted price, thereby collecting the difference. So far, so good.

I have some questions about the nitty gritty, though. Had someone tell me yesterday that buying a deal from a wholesaler means paying twice the closing costs - one for the wholesaler's closing, and one for your own. That makes no sense to me, as I don't believe the wholesaler actually ever closes on anything. Correct?

Have also heard from multiple sources not to put a non-refundable deposit down on a wholesale property. But I don't think I've ever seen a wholesale lead that didn't say, "$X,000 non-refundable deposit secures this deal." So which is it? I don't think I'm willing to give anybody $X,000 of money I can't get back if I can't inspect the property.

And what are the mechanics of the transaction? Where does that deposit go? To the wholesaler? To a lender? Escrow/title company? If I was able to go by and look at a property, decided I liked the deal, and wanted to pull the trigger...how would I actually do it? (Assume I have cash and/or hard money already lined up.)

Finally, knowing that the general rule of thumb for BRRRR is (70% of ARV) - (Rehab cost) = MAX OFFER, why do none of the leads I see meet that criteria? Is that purely a function of what the market (I'm in the Houston area) will bear? Do wholesalers know that formula and not care? Do they not know it? Is 70% the minimum acceptable target, or is it the ideal, pie-in-the-sky target?

Thanks in advance for your input.