What is Real Estate Wholesaling?

Real Estate

Real estate wholesaling is when someone serves as a middleman between a home seller and a home buyer. In essence, the real estate wholesaler makes a contract with the home seller, makes contact with the potential home buyers who are known to them, and then seek to pass the contract on to one of those potential home buyers. So long as the real estate wholesaler can succeed in this regard before the period of time specified by the contract can run out, they can pocket the difference between what is the home seller is willing to accept and what the home buyer is willing to pay, thus making for a profit for themselves.

Why Should People Become Interested in Real Estate Wholesaling?

Generally speaking, people should be interested in real estate wholesaling because it enables them to make a profit without exposing themselves to the same level of risk that can be found in real estate investing. After all, so long as there is a clause in the contract that they can back out of it if they fail to find a home buyer in time, real estate wholesalers aren’t obligated to purchase the home on their own. As a result, while they won’t be making as much money as a real estate investor who specializes in fixing and flipping, they won’t face as much exposure either.

Of course, real estate wholesaling still has some serious challenges that are inherent to the process, meaning that it isn’t something that interested individuals should be getting into unless they have a very good idea of what they can expect. For example, real estate wholesalers need to be capable of choosing real estate properties with fixing and flipping potential. This is because they need to convince a home buyer to pay more than what is the home seller is willing to accept, meaning that they have the most to gain when the real estate properties that they are interested in have plenty of upward potential that can be unlocked by people with the right expertise and experience. The issue is that finding such real estate properties can be much easier said than done, not least because there is so much interest in them from such a wide range of parties. Likewise, it should be mentioned that real estate wholesalers are operating on a time limit. As such, if they aren’t able to find a suitable home buyer within the specified time period, they are going to lose out on a potential profit as well as a fair amount of their own time and effort. In other words, if someone can’t match a home seller to a home buyer under a time limit, they might want to look elsewhere.

Still, when everything has been considered, real estate wholesaling has a lot going for it. In particular, it is worth noting that some people have seen it as a stepping stone to real estate investing on their own because they don’t need to spend anywhere near as much of their own money. With that said, it should be remembered that less risk is very different from no risk whatsoever, meaning that interested individuals shouldn’t jump in unless they actually know what they are doing.

How Can People Get Started in Real Estate Wholesaling?

For starters, people might want to consult a real estate lawyer about the legalities of real estate wholesaling in the relevant jurisdictions. This is because the practice is something of a gray area in certain states, meaning that interested individuals should be erring on the side of caution. However, if they want to minimize the risk of running afoul of the relevant rules and regulation, they should look into getting the appropriate licenses as well as actually buying the home before selling it using a double close.

Moving on, successful real estate wholesalers need a host of skills. For example, they need marketing skills to convince home sellers to come to them rather than someone else. Likewise, they need real estate skills to be able to pick out real estate properties with fixing and flipping potential. On top of this, real estate wholesalers should also be building up a network of potential home buyers before they get started because they aren’t going to be able to succeed without being able to beat the clock. In the end, real estate wholesaling can be a real path to financial success for interested individuals, provided that they are willing to put in the necessary groundwork.

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