Could someone explain the wholesale process?

Question

Hey BP,

I want to start out wholesaling but yet when I go and try to research more about it I am always coming across that you have to find a deal, find a buyer, and collect your profit. No one wants to explain what happens behind closed doors. I understand that you need documents and one of them is the sale agreement but is there anything else? I have heard that you need to find a title company, have a real estate attorney present and other things but I want to know what you actually need when you sit down with the seller and buyer. Also no one has explained how you actually make a profit. How do you charge your buyer? Is there a certain percentage of the property's sale price or can you just make up a reasonable offer? All I ever hear is the basic process but never what happens and what is needed behind closed doors. I hope someone can shed some light on this topic for me as I am eager to start.

Thank you!

Jason

Jason Bratter · Answer

Thanks Chris for the information! I greatly appreciate it as it was what I was looking for.

Dale Shin · Answer

Hi @Jason Bratter, I'm also starting out in wholesaling and appreciate your posting this question.  @Chris Piper, thanks for your reply to Jason's post, I've seen on the forums that most people usually use a short, assignable contract for buying the property from the motivated seller.

You mention however that another way to get a contract is to get one from a local RE agent.  Being a broker in CA, the standard contract we use is 13 pages long.  It is a good contract but not sure if there would be a problem assigning it or not, have you used these types of contracts in wholesaling?

Chris Piper · Answer

It's a very simple process Jason. You find a motivated seller, you make an offer of 40%-60% below retail value, they accept and you both sign a contract which you can get from an local RE agent or online, you find a cash buyer, assign the contract to them, and after the buyer closes with the seller, you get paid.

You do need to call around and find an investor friendly title company to handle the closing. Once you get a property under contract, send them the documents and let them handle all of the closing details.

Tell your cash buyer you need a minimum $2k non-refundable deposit made out to you or your company at the time you assign your contract to them. That way if they can't close and you lose the deal, at least you made $2k.

As far as what to charge for your assignment fee, it can be whatever you decide. Also depends on how much of a discount you can get on the property you're putting under contract, and what cash buyers are typically paying for similar properties in a similar area.

Example:

Do an MLS search for sales in the last 6 months that were cash deals. Look at the search results and find the area where the most properties were bought with cash. Find a motivated seller in that area you can buy from at a good price, tack on your assignment fee, flip it to a cash buyer and get paid.

If you see from your MLS search that cash buyers ate paying $50,000 for 3 bed 1 bath homes in a certain area, then you know the price you get a property under contract for plus your assignment fee need to be no more than that amount.

Chris Martin · Answer

Oh, Welcome to BP!

Chris Martin · Answer

Step #1: educate yourself.

google "wholesale process" site:www.biggerpockets.com.

Find all kinds of stuff... 100s of topics. Read all of them. Examples: https://www.biggerpockets.com/forums/12/topics/22202-my-understanding-of-the-wholesale-process-https://www.biggerpockets.com/forums/93/topics/139473-wholesale-processhttps://www.biggerpockets.com/forums/93/topics/164228-wholesale-process-newbie-question

...

Read and understand the material.

Step #2: Applies only if you complete Step #1. Post with questions on BP after spending 40+ hours on step #1.