Why/how do wholesalers not actually own the house?

[Macintyre Gallagher]

How does someone wholesaling not actually ever own the house or have to pay expenses? What is the difference between them buying it and me buying it?

[David Dachtera]

@Macintyre Gallagher,

It's called contract assignment - they're selling YOU the right to take their position in a P&S contract. It's a common business practice, though often done wrong by wholesalers.

They've entered into a P&S contract with a seller. This gives them "equitable interest". They then can exercise an option to assign their position in that contract to someone else, preferably with the seller's knowledge and permission. As long as everyone agrees, there's usually no problem.

The wholesaler assigns their position in the contract to an end buyer. The end buyer closes with the seller and pays the assignment fee out of their (the buyer's) funds at closing.

In some states which are wholesale averse, it's often necessary to do what's called a "back-to-back" closing. The wholesaler completes the purchase from the seller using transactional funding, then sells to you when that closing is complete. The wholesaler takes profit from a small markup agreed to with the end-buyer in course of negotiations.

Hope this helps.