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Learn what a wholesaler’s role is in real estate transactions and how to create a wholesale contract.
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How and why to use real estate wholesaling
What does the wholesaler invest in
Who is involved in a wholesale deal
What to include in a wholesale real estate contract
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Frequently asked questions about wholesale real estate contracts
A real estate wholesaler acts as the intermediary between the buyer and seller in a real estate transaction. Unlike a traditional real estate agent, in a wholesale deal, the wholesaler seeks out a potential buyer and connects them with a seller. Once the new buyer is ready to go through with the purchase, the wholesaler assigns a purchase contract (or wholesale contract) to the end buyer and collects an assignment fee for their services.
This purchase agreement does not represent the sale of the property. It simply gives the buyer the exclusive right to purchase the property by assigning the contract to the buyer. This is why wholesaling contracts are also called “real estate purchase and sale agreements” or “real estate assignment contracts” — the wholesaler’s work is connecting their buyers list to their sellers to set up both parties for a smooth and easy transaction. Once this is done, the wholesaler’s role in the transaction is finished.
Wholesaling real estate is a form of short-term real estate investing. Anyone can start wholesaling — you don’t need a real estate license to take part in this investment strategy, although it is advisable to form an LLC under which you can conduct your business. With due diligence and a little real estate know-how, wholesale purchases are a great way to get familiar with the real estate world and make money in a relatively short time frame.
Wholesalers usually seek out properties priced below market value in order to turn the most profit — for example, foreclosures, properties with liens, distressed property, those that need serious repairs, or those that are owned by highly motivated sellers. Once a wholesaler strikes an agreement with the seller, the wholesaler may then work with a title company, contractor, and appraiser to properly vet the property and prepare it for any renovations they — or the seller — want to make.
When the property is ready to be sold, the wholesaler lists it at a higher price — at or above market value. The difference between this purchase price and the wholesale price accounts for the wholesaler’s cut, or the assignment fee, as well as the added value from any repairs or renovations. This can look similar to flipping a house, but wholesaling is generally a shorter, more hands-off process than a complete renovation. Additionally, the buyer is less likely to be a future homeowner and more likely to be a real estate investor.
Wholesale real estate requires unique knowledge to be successful and avoid loss. Familiarity with the real estate industry and legal documentation is helpful. Spotting the opportunities in market properties, however, is key. Success in wholesale real estate means being able to forecast factors like eventual sale price, potential rental property, and real estate market comps.
Wholesaling is considered a relatively fast and easy investment with quick profits, because in most deals, the wholesaler never owns the property but simply matches a buyer with the seller. In some cases, however, the wholesaler will purchase the wholesale property and resell it. This is known as double closing.
The seller, the wholesaler, and the buyer (also called the end buyer of the real estate deal) to whom the wholesaler hands over the assignment agreement are the three parties involved in a wholesale contract. The assignee (buyer) could be anyone from a real estate agent or real estate investor to a first-time homeowner.
Make sure you consult with a real estate attorney to confirm that the terms of the agreement are legally sound for all parties. Here are some common parts of a wholesale contract:
Fortune favors the fast when it comes to wholesaling — make sure you don’t lose out due to time-consuming paperwork or negotiations.
With e-docs you can collaborate, edit, and comment on PDFs with all parties involved so that you can keep sellers and investors in the loop. Quickly send out contracts for digital signatures and receive notifications when the other party signs. Get started with your own wholesale contract template with Acrobat Pro.
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No. You don’t need a real estate license to take part in this investment strategy, but wholesale real estate requires unique knowledge to be successful and avoid loss. Familiarity with the real estate industry and legal documentation is helpful, as is knowledge of the real estate market in your area. Real estate investment clubs can often provide information about getting started in wholesale real estate investing.
No. A wholesale real estate contract gives an investor the right to buy a property from a seller. A wholesale assignment contract transfers the right to purchase a property from the wholesaler to a buyer. Using these two contracts, a wholesaler can act as an intermediary between interested sellers and buyers.
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