WHOLESALING – the basics...

WHOLESALING – the basics...

Wholesaling is finding the deal, getting it under contract to purchase, and selling it fast to another investor for a higher price then contracted for, and you make the difference between the purchase price and the sale price to the end buyer. You should never contract to purchase any property that you do not have the ability and intention to close on. The ability doesn’t necessarily have to be your own capital, it can be bank funding, private money, hard money, joint venture, etc. But in many states, there are laws about entering into a contract to purchase real estate without the ability to perform.

There are two ways to do a wholesale deal:

1. Assignment Contract – You have a Purchase & Sales Contract with the seller, then simply assign your rights and interest in the deal to another investor for a fee.

Example: Seller A agrees in P&S contract to sell you B a property for $80K and you find another Investor C willing to pay $90K for the property. So, you assign your rights to Investor C for $10K assignment fee. Some end buyers will pay you up front, but most will want it contingent on the deal actually closing. The P&S Contract and Assignment Contract are all sent to Title Co, or Escrow Agent, or Attorney and at time of closing Investor C is paying $90K, the Escrow Agent pays You $10K and pays the Seller $80K. Closing fees, taxes, etc are handled based on the terms of the original P&S Contract.

Assignment is the easiest way as long as you know the Seller and End Buyer will not care about how much you are making on the deal. If you’re worried about them knowing, then do a Double Close.

2. Double Close – With a double close, you actually close on the deal and the end buyer investor buys from you. So, there’s two transactions and two P&S contracts A to B and B to C. Some states you will be required to have the funds to close or use a transactional funding company, and some states even require 24 hours between transactions. In other states, “simultaneous closing” is permitted where funds from Investor C can fund the B to C and A to B transaction, and You (B) keep the difference.

Same Example from above: Seller A agrees in P&S contract to sell you B a property for $80K and you find another Investor C willing to pay $90K for the property. So, you do a second P&S Contract from you B to Investor C for $90K. Both P&S Contracts are all sent to Title Co, or Escrow Agent, or Attorney and at time of closing Investor C is paying $90K to you and your paying $80K to Seller A. Again, in some states you would be required to have the funding for the transaction up front, and then get it right back when you sold to the end buyer.

Blind HUD or One Sided HUD - some closing agents allow a Blind HUD or One Sided HUD closing if you ask. With this all parties only see their numbers, so this is another way to not disclose your profit, if you’re making a large cut and worried about it.

🚨WHOLESALING DISCLAIMER🚨

I teach the correct, most ethical & legal way to Wholesale.

Wholesaling is an EXIT strategy only, not an acquisitions method. You should get access to funding to be able to perform on your contractural obligation to purchase the property, in the event you do not find an end buyer. It does not have to be your own cash, it can be bank loan, private money, hard money pre-approval, Joint Venture partner, credit cards advance, retirement account loan, life insurance loan, etc. But it’s unethical and illegal in most states to contract to purchase real estate with no intent on purchasing the property and sole intent being to “market” the property to an end buyer or just walk away if you can’t find one, unless you have a license and then you wouldn’t contract to “purchase”, you’d contract to “market” with a listing agreement. Using “weasel clauses” as escape plan for not finding a buyer is very unethical and not what they’re for.p