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. The wholesaler earns the difference between the two prices, called the assignment fee.
The wholesaler does not renovate, rent or hold the property. The work is finding the deal, agreeing a price with the seller, and finding an end buyer, usually a flipper or landlord, who will close on it.
Because the wholesaler is selling a contract rather than the home itself, the purchase agreement has to allow the sale or assignment, and the buyer should know exactly what role the wholesaler plays.
Common mistakes
- Marketing a property you only have under contract as if you own it. Market your contract interest, and follow your state’s advertising rules.
- Signing a contract that does not allow assignment, or that the title company will not close as written.
- Promising the seller a closing date before you know a buyer will pay your price.
- Treating wholesaling as risk-free: earnest money, marketing and time are all at stake if a deal falls through.
More questions
Who buys from wholesalers?
Mostly investors: flippers who renovate and resell, and landlords who rent the home out. They buy from wholesalers to find discounted deals without doing the marketing themselves.
Does the seller get less money in a wholesale deal?
The seller receives the price in their contract, which is usually below retail because they get a fast, as-is sale with no repairs or showings. Whether that trade is worth it is the seller’s choice, so explain it clearly.
How long does a wholesale deal take?
Many close in a few weeks, depending on how fast you find a buyer and how quickly title can be cleared. Deals with liens, probate or missing owners take longer.