What is Wholesaling Real Estate?

Many people confuse wholesaling real estate and “house flipping.” But the two couldn’t be any different. Wholesaling real estate is a process whereby an investor finds a home or property that is selling below current market rates, acquires a contract or “assignment” to sell it on behalf of the owner, and then sells it to a buyer for a profit; without ever having to actually own or purchase the property themselves (unlike “house flipping”). Therefore the initial investment costs aren’t as large as many people believe. Most sellers will only require some type of earnest money from the wholesaler and a contract which outlines the proposed timeline of sale and any number of other stipulations.

In short, by wholesaling, you are taking temporary ownership of the contract to sell a property to a buyer without having the actual deed to the property yourself, but rather by having the rights to conduct a sales transaction on behalf of the property’s true and current owner.

What Types of Properties Can You Wholesale?

In theory, it’s possible to wholesale any type of real estate. However, when it comes to acting as an intermediary between a seller and a buyer, properties that are distressed, have highly motivated sellers, have tax liens, or need up-dates or repairs are the best options. Especially when it comes to attempting to turn a profit quickly and capitalize on current market conditions. These “distressed properties” will have a much lower asking price and are likely owned by a seller who is willing to listen to someone who has a streamlined process in place for conducting a transaction quickly. They are likely even more willing to listen to someone with some cash-on-hand and a proven network of buyers and investors.

How Do You Find Properties to Wholesale?

There are a few different ways to find properties that are viable for wholesale. “On-market” and “off-market.” On-market properties consist of any listing that is contained within the MLS (multiple listing service.) Each geographic region’s MLS is funneled through sources like Zillow, Redfin, and a long list of other resources. In essence, it contains a collection of all properties in which a seller has determined the market value and wishes to sell; regardless of representation status.

One of the best ways to begin is to search the MLS for properties which include keywords like “distressed,” “needs updates,” or “motivated seller.” All these terms will yield results with homes and different properties that are listed below current market prices. Off-market properties would be those that would not be listed within the MLS and are mostly found through word-of-mouth and traditional marketing tactics. Off-market properties become more common for those wholesalers who already have an established network; albeit not impossible for those that do not. These “off-market” opportunities can also be found by doing what wholesalers affectionately call “driving for dollars;” or the wholesaler’s version of “cold-calling.”

At this point, it becomes essential to determine the potential profitability of the property you’ve found and understand who to contact and when. This is where many people get lost.

What Is My Job As A Wholesaler? Who Do I Contact?

In so many words, your job is to make the owner of a property that has minor issues or stipulations attached to it life easy. Whatever their motivation for selling or their reason for needing to move quickly might be, you fill the role of the person that makes the transaction as smooth as possible. When people look to someone in wholesale real estate, they are expecting to work with someone who has a network of buyers and is prepared to act in accordance with all the stipulations of the agreed upon contract.

Many times when people begin wholesaling real estate, they get some off-beat responses over the phone. And most of the time it’s because they’ve contacted a real estate agent looking to represent a buyer for the property in question. But, a wholesaler isn’t looking to be represented as the buyer of a property by a real estate agent, they are only looking to obtain the contract to sell a property on someone’s behalf.