What if I cannot find an end buyer?

Question

I've been researching real estate investing (specifically BRRRR) for a couple of years now, but cannot gain the capital required - yet. So, I'm considering wholesaling for the next few years. But, once I get a property under contract, what if I cannot find an end-buyer? Does the contract expire? Am I on the hook for buying the property myself? How do I even find a buyer? (Just by networking?)

Thanks!

Jim K. · Answer

Just screw the seller. That's what wholesalers do as a matter of course.

Tom Shallcross · Answer

Everyone looking to potentially wholesale should go back and re-read @James Heller's first comment:

"1. You should never enter into a contract that you don’t believe can be executed. This is the sole responsibility of a good wholesaler, because many of these sellers really need the sale to go through! Hence they are willing to sell off market and sometimes at a substantial discount."

These are people's lives and a lot of times they are truly counting on the deal happening.

James Heller · Answer

Hi @Kristi Wolfe! Couple of thoughts on this

1. You should never enter into a contract that you don’t believe can be executed. This is the sole responsibility of a good wholesaler, because many of these sellers really need the sale to go through! Hence they are willing to sell off market and sometimes at a substantial discount

2. Just like any real estate transaction, there are contingencies that allow a buyer to back out with their earnest money returned. The most common is an inspection period which allows you some time (I’ll generally do 10 business days) to do your due diligence. Use this period to find an end buyer, bring in and inspector/contractor, etc. If there are issues with the sale, this would be your protection.

3. Yes, absolutely have some buyers lined up first if possible. There are many creative ways to do this, reaching out here or on other social media platforms (although you will run into plenty of other wholesalers that might be happy to snake your deal — tread lightly), looking for homes that have recently sold in the area that look like flips and reaching out to the seller (they are probably looking for another deal!), or partnering up with an agent.

I hope this helps, wholesaling is by no means a get rich quick scheme and involves a lot of strong relationships. Let me know if you have other questions

James

Eliott Elias · Answer

Worst case you lose your option, if you go over option period you lose your earnest. If the deal is good enough try and partner with someone on it. We wholesale to make enough money to buy RE ourselves!

Jonathan Klemm · Answer

@Kristi Wolfe - Sounds like you need to connect with some active wholesalers to understand the process a little better.

Typically, as a wholesaler you will get the property under contract (likely put up the earnest money, we only put up about $500/deal or less) and then look to assign the deal to another investor.  The only thing you are on the hook for is your EM if you back out of the deal.

If you have a good deal-finding an end buyer will not be too hard.  You can post on BP in the marketplace or even better is the Facebook groups.  Either way, if you find a great deal definitely reach out and we can help sort through the rest.  We work mainly in Chicago, but are happy to help if the right deal comes along.

Tyler McVety · Answer

@James Heller and @Tom Shallcross get it.  The biggest challenge can come from knowing what your investor clients will buy.  Go to meet ups and build your buyers list, and follow up with those investors.  Get to know them and build up those relationships, along with their investing goals, strategies, and where they are in their investing journey.  Knowing what your buyers are looking for will give you confidence when you are writing your offer.  In addition, it doesn't hurt to call an investor on your way to make an inspection to see if it would be a property they would be interested in, and verify what they would be willing to pay for it.

Understand your investor's buy boxes, and build relationships with your investors.  With this you will be able to make confident offers on properties with out screwing anyone over.

Andrew Syrios · Answer

If you can't find an end buyer you either need to renegotiate and lower the price/extend the close or lose your option and hand over the earnest money. You should be honest with the seller about what you're doing so they know it's not 100% that you'll be able to close. You'll lose some deals this way, but it will make it easier when if you can't close and it's just the right thing to do to be honest.

Kerry Noble Jr · Answer

There should be something in your contract letting you out during your inspection period

Katherine Blazer · Answer

If you are putting properties under contract at the correct price, moving the deal should not be a problem, at least in the markets I work in. We have a hard time finding properties priced well. Wholesaling and finding properties is a great way to find the best deals for yourself also. Now, your inspection time period is a number you never want to forget, that is where you can get out of the contract without losing your escrow.

You should find a local real estate attorney that works on the investment side of the business so you fully understand the contract you are using, and what local laws are.

What if I cannot find an end buyer?

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