I don't understand wholesaling

[DeMarrius Payne]

I've read quite a bit on wholesaling but I still don't understand it. Can someone break it down for me a little bit and tel me how income is made?  Thanks

[Jeff Copeland]

Let's say you're a motivated seller and I'm a wholesaler.

Your house is worth 100k (after repair value or ARV), but it needs $25k in repairs, making the current value $75k.

I offer to buy the house from you for $50k. You're in a bind and you need to sell fast, so you accept my offer.

I now have your house under contract (you can't sell it to anyone else), so I have an equitable interest in the property.

I now turn around and find Buyer B who wants your house. He's willing to take my place with regards to the contract and buy your house at those exact terms (called an assignment of contract), and agrees to pay me a $2,000 assignment fee.

At closing:

• Buyer B pays $52k
• You get your $50k
• I get my $2k

Thereafter, the seller and wholesaler are done. 

Buyer B will most likely pay for the $25k in repairs, so he's how into the house for the $52k he paid, plus the $25k in repairs, so a total of $77k. He then sells the house for the $100k it's worth, and makes a profit of $23k.

All of the above is an oversimplification for illustrative purposes. It ignores closing costs, commissions, and holding costs, etc., and the numbers are all made up.

Hope that helps!