Investor guide
Wholesale real estate deals, explained
Many off-market deals are sold by wholesalers. Here’s how a wholesale deal works from the buyer’s side, and what to check before you sign.
How a wholesale deal works
A wholesaler finds a motivated seller and signs a purchase contract with them. Instead of closing on the house themselves, they offer it to investors. When an investor agrees to buy, the wholesaler either assigns their contract to the investor or closes on the house and resells it the same day (a double close).
With an assignment, you step into the wholesaler’s contract with the seller. You pay the original contract price to the seller at closing, plus the wholesaler’s assignment fee. Your total price is the number you were quoted.
What you sign and pay
- An assignment agreement (or a purchase contract, on a double close) that states the price, the earnest money and the closing date.
- An earnest money deposit, held by the title company or closing attorney, that shows you’re serious. Read the contract to know when it becomes non-refundable.
- Your usual closing costs. Who pays which costs is spelled out in the contract.
What to check before you buy
- The numbers: confirm the ARV with your own comps and get your own repair estimate.
- Access: walk the property, or get detailed photos and video.
- Title: closing through a reputable title company or attorney protects you. They confirm the seller can sell and that liens are paid off at closing.
- The timeline: wholesale deals often close in one to three weeks, so have your funding ready.
Why buy wholesale deals at all?
Wholesalers spend a lot of money and time finding sellers. Buying from them gives you deal flow without running your own marketing, which is why many experienced investors buy most of their properties this way.
Questions
Is buying a wholesale deal safe?
It can be, when you close through a title company or real estate attorney, check the numbers yourself, and read the contract. Be careful with anyone who pushes you to skip a walkthrough or wire money outside of the title company.
What is an assignment fee?
The wholesaler’s fee for finding the deal and assigning you the contract. It’s included in the price you’re quoted and paid at closing.
Can I use a loan to buy a wholesale deal?
Yes. Hard-money and private lenders finance wholesale deals all the time. Check with your lender early, since closings move fast.
General information, not legal, tax or financial advice. Check the numbers on every deal yourself.