The World of Wholesaling

You may be familiar with the term wholesaling from retail sales. Wholesaling is the act of buying goods in bulk at a discounted price and selling to a retailer for a higher price, for them to repackage and in turn sell the product for an even higher price to the end consumer. Whole real estate wholesaling different from traditional retail wholesale, the primary concept remains the same – buy low, sell high.

How does Real Estate Wholesaling Differ?

Real estate wholesaling, like a traditional wholesale business venture, is similar, in that it refers to a short-term business investment strategy. In the real estate industry, a wholesaler acquires a property for less than retail price and then sell it (the property or their contract) for a profit.

Typically, the wholesaler enters into a purchase contract for a home from a seller, for a small earnest money deposit. The contract usually states in very plain, explicit language that the wholesaler is agreeing to purchase the property because they intend to assign their contract or sell the property shortly thereafter for a profit.

How Does it Work?

After the wholesaler places the property under contract, they generally attempt to find an interested investor. Once found, they normally assign the contract to the investor at an agreed upon higher price. The difference in prices is known as the assignment fee, which goes to the wholesaler.

Usually, wholesalers look for a distressed properties that the owner doesn’t want to spend time or money on. The owner is usually motivated to sell and often doesn’t want to work with a real estate agent because of the cost, property type, etc.

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Do your due diligence. Whether you are looking to buy or sell, real estate wholesaling isn’t for everyone. Some properties are perfect for wholesaling, while others are better-suited for the traditional real estate market. I advise all buyers and sellers to learn and understand the wholesaling sector because it may just be the exit strategy you need.