What do I have to fully understand to get into Wholesaling?

Question

After doing more and more research about REI, I have decided a good starting point for someone in my situation is wholesaling. I have been reading this site, and articles for a few days now, but there are some things that remain cloudy to me.

1) The base concept of wholesaling is simple - find a good deal for another investor to fix up, and mark up the price to make a small profit. My problem is how this actually gets done without any money I have to spend involved in the transaction for me, the wholesaler. Assuming I have a list of prospective buyers lined up, when I manage to find a good deal, how do I tell the seller that I am willing to purchase their property even though I plan on simply handing a contract over to someone else? Am I taking over the sellers mortgage, only to hand it over further to another? Or am I taking out my own loan only to pay it off in full as soon as I give the contract to the investor? OR am I not taking any financial responsibilities at all and only acting as a middleman for a transaction between the seller and buyer? Haha I need help :)

2) The contract itself: How does this work? Is there a default contract that everyone has to sign when transferring ownership of a house, or is this a specific contract designed for wholesaling by me? Obviously I have no experience in the buying or selling of property, and this is a topic that not many people explaining wholesaling go over because they assume that I have knowledge of how a transaction works. Maybe I just need to read about the process of a normal property being sold, but I would like to know how this differs from a wholesale.

3) Are the main targets for a wholesaler Forclosures or HUDs? How do you beat a realtor to a "normal" property? It seems to me the wholesaler is basically an unliscenced realtor who is focused on selling to an investor rather than a potential homeowner. Is this a fair assessment?

I'm sure I have millions of other questions, but I want to start with these 3 basic ones first.

Anthony Sulecki · Answer

Good point. I take high-res digital photos of all junkers I put under contract, and I send a mass email, with links to the pics in photobucket. That way, they have a very good idea whether or not they even want to come see it.

Works well, and my buyers like me for it. The more you do for your buyers, the more they will do for you. Same thing with sellers.

Also, I don't do their job for them. Ill get them loan info., the number of bedroom and baths, take pics etc, but I don't do their math, because im not actually buying the house, and my contracts with the seller are set to expire, if no buyer is found in X days. (also, I would be way off, because I dont rehab homes, and don't know what contractors/jobs/home items cost. )

Anthony Sulecki · Answer

Yes, its a good idea. I actually highlight the heavily damaged areas the most, again, just so they know.

The last thing I want is a potential buyer driving 1 1/2 hours, and saying, "Well if we knew this, we wouldnt have driven out." This rarely happens, but pictures usually take care of any of those type reactions.

Aaron Schwartz · Answer

reicoach ..your right ....if you get 200 leads per month....absolutly you wont have to look at all of them...thats why i said "potential"..
And Im not saying your way is wrong...
But if a property qualifies over the phone.....the seller tells you it needs 5k in repairs.....so you put a contract on it ....and try to sell it to your buyer...and your buyer goes and looks at the property and sees that 2/3 of the houses floors are bulked up due to a seriouse plumbing leak from a pipe busting under the house.  You got your self in a bind.  Sure you may be able to get out of the contract. But if you continuesly try to sell a house you have undercontract that need more repairs then you thought ....you going to lose your buyers. or atleast there not going to jump at your deals.

and your right ...whatever works for one wholesaler might not work for another.
 
just be careful putting a contract on something you havent seen.

Aaron Schwartz · Answer

i personally disagree that you shouldnt even look at the properties.  Once you find a potential deal....go look at it!

but before that....make sure you know your market. spend time learning the market you are going to be doing deals in.  Know what price investors are buying at in each area ...know what the retail value is in each area..take a few days and look at some homes on the market and find out how long they have been on the market and the details of each home ...(price per sq ft etc.)  may take a few weeks..found out what price homes are SELLING FOR!

once you know your area and what price investors are buying at....it is much easier.

Now as for your expenses ....you will need to spend a little money on some marketing...doesnt have to be a whole lot ...get creative!  and a little gas money!

Target motivated sellers in your marketing!  again be creative and simple!
Foreclosures and Huds are going to have alot of competition.
when starting out i personally would stick with bringing in highly motivated sellers.
do a search on who motivated sellers are.

As for the contract....i would find another wholesaler in your area ...and see if he/she would lend you a copy for you to use and change it alittle to what fits you.

Again research your market hard!  Read Read Read! And you can do what i did and read all 1300+ of (Ryan Webber's post) losts of good, real knowledge about wholesaling

hope this helps