Wholesaling real estate is when a real estate wholesaler (also called middle-man) puts a distressed home under contract with the intent to assign that contract to another buyer. Distressed properties are those in disrepair or those with owners who are motivated to sell quickly. The wholesaler’s entire gig is getting a property under contract without any out-of-pocket money of their own and then selling that contract to another investor or flipper. The wholesaler doesn’t plan on fixing up or selling the property. Instead, they market the home to potential buyers and investors for a higher price than what they have the property under contract for. For example, if a distressed owner wants $30,000 for their property to walk away, the wholesaler and owner will sign a contract allowing the wholesaler to work on its behalf for a fee, the wholesaler will then advertise the property for sale to potential buyers, and if they are able to find an individual or investor to purchase will walk away with the profit.
Seems great right, but wait, the downfalls include confusion on the legality of whether one is actually engaging in the practice of real estate without proper licensing, fraudulent acquisition circumstances, title tracing issues and complicated contracts. Working with wholesalers requires a knowledgeable investor-friendly agent. Distressed property owners need solutions and wholesaling to an investor is sometimes the fastest, and easiest exit option.
