It is my understanding that this is currently an exceptionally common arrangement.

It probably is in other locals as well...Edit: I am no expert, but this very scenario has been discussed at our local REIA meetings as something "not to try" as a wholesaler.

like @Dawn Anastasi said: evaluate the worst case scenario.

Through that experience, I learned that the deal has to have enough profit even in worst-case scenario to warrant tying it up and putting it under contract, as I don't believe in moving forward with an offer on a property to keep it from other buyers while I run around trying to make it work.

Pretty common here.

The most likely scenario here is that he bought it subject to an existing large first Deed of Trust, or some other lien, that he expects will eventually foreclose on the property.

So far all my properties have been financed and I never realized so many other option existed, although they seem a bit scary to me.I think my biggest concern, and I have seen its a common one, is whether or not to form a LLC. and other asset protection.

Just to add what Ty put, it's pretty common to have this with rental property that is rented as they don't want to disturb the tenants with every potential person who is interested in the property...

Like anything else, you should interview multiple attorneys to get an idea of their fees, what areas they specialize in, if they seem to have experience with contract assignments, etc and just who you get the best feeling from.We were interviewing attorneys and found one we really liked but he didn't seem to understand how subject-to deals work along with other common wholesaling strategies.

Common sense and due diligence are called for.