Wholesaling Real Estate

Real Estate Wholesaling Definition

Real estate wholesaling means putting a property under a purchase contract with the seller and then assigning the contract to an end-buyer who closes with the seller and pays the wholesaler an assignment fee.

Explanation

Real estate wholesaling is a short-term investment strategy used to make money quickly and without actually buying real estate.

The only substantial investment made by the wholesaler is an earnest money deposit given to the seller. With a properly composed contract, the deposit is refundable if the deal falls through.

Wholesalers find motivated sellers willing to sell their real estate at a discount. They sign a purchase contract with the seller as if the wholesaler was the buyer.

The contract contains a clause allowing the buyer to assign the agreement to a third party.

At closing, the wholesaler assigns the contract to the actual buyer — normally a home flipper or landlord — who pays the wholesaler an assignment fee and buys the property from the seller.