Wholesale Purchase Process (from a buyer's perspective)

[Payton Gonzales]

Let me apologize in advance as I'm sure this has been written about somewhere, but I'm only finding forum posts from folks looking to get into wholesaling or others describing what their marketing process looks like for finding wholesale deals.  I'm looking for information on what to expect from the buyer's perspective and what the process looks like.  If you can point me in the right direction of another post, happy to go there, but with that said...

I recently came across a deal listed by a wholesaler.  I reached out, had a brief conversation, and after that asked via email for a copy of the contract to understand what the terms and process look like from their side.  Here's their response:

"The process on our end is very straightforward. Our contracts on all our properties are 100% as is, we don’t allow for any option periods or contingencies once in contract and buyer pays traditional closing fees. We typically can close in a week and require a 5k deposit via cashier check or wired to us due at signing of contract.  I’ll send you over a copy of the contract for you to review once you get me proof of funds."

The high level terms largely seem as expected (e.g. sold as is), but I'm wondering what I need to be aware of / what I don't know... I've bought deals before, never wholesale, but from reading forum posts I've found that less than reputable practices seem to occur a bit more frequently in wholesale transactions, especially around deposits.  In this case, they're asking for a deposit of $5k on a property under $100k... Does this seem normal?  

A lot of this should be cleared up once I provide proof of funds and can see the contract (even that seems weird that they won't allow me to see the contract before providing POF). I plan on executing a title search and performing an inspection, but does anyone with experience in purchasing wholesale properties have anything to add on what to expect, things to watch out for, or steps to take in the process?

Thanks in advance for any input!

[Jon K.]

I have purchased several properties through wholesalers. Yes, absolutely do your own due diligence on the property and its title before signing anything. Of course read the purchase contract and your assignment contract carefully first as well. Ensure you get a title insurance policy at closing.

I wouldn't be put off by their request to see POF before providing the purchase contract for inspection. They likely want to ensure you're a serious buyer and have the capacity to close if you proceed. Nothing wrong with not wanting to waste their time on a tire kicker.

A deposit on your part is required. As for "typical", I paid $1500 and $4000 respectively on the last two that were assigned to me and the purchase price for each was in the low 100s. This deposit should absolutely go to the title company handling the transaction and not the wholesaler. They don't get to touch your money and will not be paid until you successfully close on the property. When they are paid it will be by the title company albeit by the funds you provided. There will also be language in the assignment contract covering when/how the deposit can be returned to you if the transaction is not completed for specific reasons. Things like the seller could not provide a marketable title or the property changed significantly between when it was put under contract and the closing date for example should result in a refund. For other reasons like if you just fail to execute or change your mind and walk away you will forfeit the deposit.