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Wholesale Real Estate: A Beginner’s Guide

How to sell real estate wholesale: step by step

The first part of getting into wholesale real estate is setting up your business. In the United States, this means that you will likely start out by setting up a Limited Liability Company (LLC) to run your wholesale real estate business.

Once you do, you are ready to hit the real estate market and search for investment properties. Follow these steps to get into the real estate wholesale game.

1. Searching for a distressed property or an excited seller

To make the real estate business work for wholesale, you must find enthusiastic sellers of distressed properties. These sellers want to sell the property quickly and don’t want to use the normal channels of a real estate agent, mortgage lender, serious money, home inspections or appraisals.

Instead, they want to sell to a cash buyer who can quickly close the property before going into foreclosure. Agitated sellers usually sell the property for less than market value because they want to get out of the house quickly.

If you bid at a price well below market value, there is enough room for you to place the home under contract at a higher price with your team of investors. This is important, so you can make a profit or “finder fee” to facilitate the transaction.

To find the owner of distressed properties, you must market yourself via direct mail, social media, and even word of mouth as a cash buyer of distressed properties. The more people know about your services, the more homes you have available to place under a contract.

2. Negotiate with the seller

When you find the right property, it’s time to negotiate a deal with the seller. This is one of the most important steps of the process. If you bid too high, you leave no room for profit when you assign the contract to the final investor. If you don’t bid enough, the seller may reject your bid.

When negotiating a property purchase agreement with the seller, be professional and courteous and give the seller reasons to trust you. Tell the seller your experience and how many other sellers you’ve helped avoid foreclosure or mortgage defaults anymore.

It’s important to be attentive to details, too. Just walking around the house, you should tell the improvements the house needs so you can use them in your negotiations, and tell the seller how much it will cost to fix the house to help you negotiate a lower price.

The less money you agree to pay the seller, the easier it may be to find investors who see an opportunity to profit.

3. Signing the contract

Once you agree on the price with the seller, prepare a wholesale contract. You can hire a real estate attorney or real estate agent to do this, or create one yourself. You’ll save more money if you do it yourself, but you run the risk of something going wrong. If you are not well versed in real estate contracts, it may be a good idea to consult an attorney.

4. Find the final buyer

To find an end buyer, you will need to rely on the network of real estate investors. While you may not know someone who is directly interested, someone may know someone you know. Build your network through social media and local real estate meetups.

As you build your wholesale business in real estate, you will gather a group of real estate investors who will buy the properties you find. This is the final buyer or person who will acquire the property.

5. Negotiate with the buyer

Just as you negotiate the price with the seller, you will then negotiate with the end buyer how much you can make from the sale of the contract. This is where you negotiate your transaction fee. This could be a standard fee that you charge, or it could be something specific that you agree with the buyer.

6. Set contract

To assign the contract that you signed with the seller to the buyer, you must complete the assignment of the contract agreement.

This agreement states that you assign the contract you signed with the seller to your final buyer for the agreed amount. The amount stipulated in the contract is the difference between the amount you agreed to pay the seller and the buyer’s agreement to pay you for the house.

The buyer agrees to buy and take over the home. You (the seller) agree to accept the fee as a waiver of contract, which does not give you any rights in the home.

7. Close the deal

The last step is leveling. This is when all parties sign the documents, and transfer the title deed to the final buyer. The wholesaler (you) does not have to pay any money out of pocket. The final buyer pays all closing costs and the cost of the house. You pass the money to the seller keeping only your profit or the difference between the sale price and the price you agreed with the final buyer.

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