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Investing

Real Estate Wholesaling

Also called wholesaling, assignment of contract, wholesale deal

In short

Real estate wholesaling is putting a property under contract at a discount and then assigning that contract, or reselling the property, to another investor for a fee, without renovating it.

Wholesaler earns
Assignment fee or spread
Common sources
Pre-foreclosures, vacant homes
End buyer
Usually a flipper or landlord
Regulation
Varies by state

How wholesaling works

A wholesaler finds a motivated seller, often an owner in pre-foreclosure or with a vacant property, and signs a purchase contract. They then find an investor who takes over the contract through an assignment, paying the wholesaler a fee. Alternatively, in a double close, the wholesaler buys and resells the same day.

Legal and ethical issues

Several states now regulate wholesaling, requiring licenses, disclosures to sellers, or limits on marketing contracts the wholesaler doesn't own. Distressed homeowners can be harmed if they don't understand that the buyer intends to resell. Be clear about your role and check your state's rules before you start.

Buying from a wholesaler

If you're the end buyer, verify the numbers yourself. Wholesalers' ARV and repair estimates can be optimistic. Confirm the contract is assignable, check the title, and use your own escrow or title company.

Example

An assignment deal

A wholesaler contracts with an owner facing foreclosure to buy for $140,000. The ARV is $240,000 and repairs are estimated at $45,000. Using the 70% rule, an investor's maximum offer is $240,000 × 0.70 - $45,000 = $123,000, so the wholesaler's price doesn't work for a typical flipper. A landlord investor with a different strategy agrees to take the contract for $147,000, paying a $7,000 assignment fee.

Real Estate Wholesaling vs. BRRRR Method

Real Estate Wholesaling

Real estate wholesaling is putting a property under contract at a discount and then assigning that contract, or reselling the property, to another investor for a fee, without renovating it.

BRRRR Method

The BRRRR method is a rental investing strategy: buy a distressed property, rehab it, rent it, refinance based on the higher value, and repeat with the cash pulled out.

The differenceA wholesaler sells their contract rights to another buyer without owning or renovating the property; a BRRRR investor buys, renovates and keeps the property as a rental.

Frequently Asked Questions

Related terms

After Repair Value (ARV)InvestingAfter repair value (ARV) is the estimated market value of a property once planned repairs and renovations are complete. Investors use it to decide how much to pay for a fixer-upper.The 70% RuleInvestingThe 70% rule is a fix-and-flip guideline: pay no more than 70% of a property's after repair value (ARV) minus the cost of repairs. It leaves room for profit, holding and selling costs.Pre-ForeclosureForeclosure processPre-foreclosure is the period after a lender files a default notice or foreclosure lawsuit but before the property is sold at auction. The owner still holds title and can sell or catch up.Zombie PropertyForeclosure processA zombie property is a home the owner has vacated during foreclosure, but where the lender has not completed the foreclosure, leaving it empty with the original owner still holding title.Resale (After Foreclosure)InvestingA resale is the last stage of the foreclosure lifecycle: a buyer or investor who bought the property at auction or from the bank repairs it, then lives in it, rents it out or sells it again on the open market.Comparative Market Analysis (CMA)Buying & closingA comparative market analysis (CMA) is a real estate agent's estimate of a home's value based on recent sales, pending sales and active listings of similar nearby properties.Earnest MoneyBuying & closingEarnest money is a deposit a buyer puts down when an offer is accepted to show good faith. It is held in escrow and usually credited toward the down payment or closing costs at closing.Hard Money LoanMortgages & financingA hard money loan is a short-term loan from a private lender, secured mainly by the property's value rather than the borrower's income. Investors use it to buy and renovate properties quickly.

Learn more in the knowledge base

Approaching Distressed Homeowners Ethically in Pre-ForeclosureGuide · 7 min readHomeowners in pre-foreclosure are under real stress, and they have more options than selling to you. Buyers who are honest, respect those options and follow state rules for distressed-property purchases can make fair deals without exploiting anyone. This guide covers how to do that and which patterns to avoid.How to Buy a Pre-Foreclosure Home: A Step-by-Step GuideGuide · 6 min readBuying a pre-foreclosure means negotiating with an owner who is behind on the mortgage, before the lender sells the home at auction. The deal can close as a normal equity sale or as a short sale that needs the lender's approval. This guide walks through each step, from research to a clean closing through escrow.How to Find and Screen Pre-Foreclosure PropertiesGuide · 6 min readPre-foreclosure leads come from public filings, so anyone can find them. The real work is narrowing a long list to the few properties worth your time. This guide covers where the filings are recorded, how to use a listing service, and how to screen each lead for equity, timeline and occupancy before you contact anyone.
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Disclaimer: The information on this page is for general educational purposes only and is not legal, financial, tax or investment advice. Laws, lending rules and market conditions vary by state and change over time, and any figures shown are estimates. Before you buy, sell, finance or bid on a property, consult a qualified attorney, financial advisor, lender or licensed real estate professional about your situation.