WHOLESALING ANSWERS
Real estate wholesaling questions, answered.
Straight answers to what new and growing wholesalers ask most: how deals work, how to run the numbers, what goes in the contract, and how to close. General information, not legal or tax advice.
Basics
What wholesaling is, how a deal works, and where the risks are.
- What is real estate wholesaling?Real estate wholesaling is a strategy where an investor puts a home under contract with a seller at a discount, then sells that contract to a cash buyer for a fee, without buying the property themselves.
- How does wholesaling work, step by step?A wholesaler finds a motivated seller, works out the home’s after-repair value and repair costs, signs a purchase agreement at a price that leaves room for a buyer and a fee, finds a cash buyer, and then assigns the contract or arranges a double close.
- Is wholesaling real estate legal?Wholesaling is generally legal in the United States when you are honest about your role, your contract allows assignment, and you follow your state’s rules.
- How much do real estate wholesalers make?Wholesale fees range from a few thousand dollars to $15,000 or more per deal, depending on the market and the property, and income is uneven because some months have no closings.
- Can you wholesale real estate with no money?You can wholesale without money for the purchase, because the cash buyer funds the closing, but not with zero money.
- Do you need a real estate license to wholesale?In most states you do not need a license to sell your own contract rights, but some states now require one or limit how often you can wholesale without it.
- What is the difference between wholesaling and flipping?A wholesaler sells the contract and never owns the home, while a flipper buys the property, renovates it and sells it to a retail buyer.
- What is an assignment fee?An assignment fee is the money a wholesaler earns for transferring their right to buy a property to another buyer.
- Assignment vs. double close: what is the difference?In an assignment the wholesaler transfers their contract to the end buyer and is paid a fee at one closing.
- What is a novation in real estate wholesaling?In wholesaling, a novation is a strategy where you sign an agreement with the seller, who keeps owning the home, then list it and sell it at a higher price to a retail buyer, keeping the difference as your fee.
Numbers
ARV, comps, repairs and the maximum price you can offer.
- What is ARV in real estate?ARV, or after-repair value, is what a property is expected to sell for once it has been renovated to a typical market standard.
- How do you calculate ARV?Find three to five recent sales of similar renovated homes close to the property, adjust each for meaningful differences such as size, bedrooms and condition, and average the results.
- What is the 70% rule in real estate?The 70% rule says an investor should pay no more than 70% of a property’s after-repair value minus the cost of repairs.
- How do you calculate the maximum allowable offer (MAO)?Multiply the ARV by the percentage your buyers need, usually around 70%, then subtract the repair costs and your wholesale fee.
- How do you choose good comps for a wholesale deal?Good comps are recent, close and similar: sold in the last three to six months, usually within a mile, and matching the property’s size, type, age, bedrooms and bathrooms.
- How do you estimate repair costs on a wholesale deal?Walk the property, or review photos, and list what each area needs: roof, systems, kitchen, bathrooms, flooring, paint, windows and exterior.
Sellers and buyers
Finding motivated sellers and cash buyers, and keeping both warm.
- How do you find motivated sellers?Motivated sellers are people who need to sell quickly or simply, such as owners facing foreclosure, inherited properties, landlords tired of a rental, or owners with a home that needs major repairs.
- How should you follow up with seller leads?Give every lead a next step and a date, contact them again on a steady schedule, and record what the seller told you each time.
- How do you find cash buyers?Find investors who have bought nearby recently using public purchase records, then reach them directly.
- How do you build a cash buyers list?Record every buyer with what they buy, where, at what price and how they close, then keep it current and send only deals that fit.
- What is disposition in wholesaling?Disposition is the work of selling your contract to an end buyer: matching the deal to the right buyers, sending them the numbers and photos, handling their questions and showings, and getting one to commit to closing..
- What is a deal sheet for cash buyers?A deal sheet is a one-page summary of a wholesale deal sent to buyers.
Contracts and disclosures
What goes in the agreement, and the disclosures and signatures around it.
- What should a wholesale purchase agreement include?A wholesale purchase agreement should name the buyer and seller, identify the property, state the price and closing date, allow assignment, set an earnest money amount, give you an inspection period to find a buyer, and include the disclosures your state requires.
- What is earnest money in wholesaling?Earnest money is a deposit the buyer puts down to show good faith when signing a purchase agreement.
- What is an inspection period in a wholesale contract?An inspection period, also called due diligence, is a set number of days after signing when the buyer can inspect the property and cancel the contract and recover their deposit.
- What is a lead-based paint disclosure?A lead-based paint disclosure is a federal requirement for homes built before 1978.
- What is a seller’s property disclosure?A seller’s property disclosure is a questionnaire where the seller states what they know about the home’s condition, such as roof, plumbing, flooding or past repairs.
- Are electronic signatures legal for real estate contracts?Yes.
- What is an addendum in a real estate contract?An addendum is a document added to an existing contract that changes or adds a term, such as a new closing date, price, or contingency.
Closing and tools
Title companies, closing day and the software that holds it together.
- How do you choose a title company for a wholesale deal?Choose a title company or closing attorney that has handled assignments or double closes before, will explain their process in advance, and holds your deposit safely.
- What happens at closing on a wholesale deal?The title company or closing attorney confirms the title is clear, collects the end buyer’s funds, pays the seller the agreed price and any liens, and pays the wholesaler’s fee.
- What is equity and why does it matter to wholesalers?Equity is the property’s value minus what is owed on it.
- What should you look for in a wholesaling CRM?A wholesaling CRM should hold leads with notes and follow-up dates, show property and equity data, run comps and deal math, create contracts, handle signing, and manage your buyer list.
- How do you start wholesaling real estate?Learn your state’s rules, pick one market, set up a way to track leads, find your first sellers, build a short list of cash buyers, and have a local attorney or title company review your contract.