NH Home Buyers LLC
How to Wholesale a House
Updated: Sep 3, 2020
We are all familiar with the common transaction of buying or selling a home as we have either bought or sold a home ourselves or witnessed our family and friends make the decision. The familiarity with the concept does not mean that this is the only way to sell a home and this is where the concept of Wholesaling a House becomes of value as it offers a new perspective on the traditional concept of buying and selling homes.
Wholesaling a house is where a home is purchased at a discounted price to an investor who has the primary intention of rehabbing the home for the purpose of selling it for a profit or using the home as a source of income through renting the unit.
Let’s take a brief look at the process of purchasing a wholesale property:
Marketing and Research: It gets the leads that help to secure deals. The marketing and research process allows you to search for ideal deals that will provide the best margins when rehabbing a home.
Gathering potential Leads: Create a criteria of your ideal property. Stick with your criteria as you gather potential leads as not all deals work as a wholesale. It’s crucial to have an eye for the houses that promise the best deal for the right price.
Visit, Inspect, then offer: Make sure to see the house before offering a deal for it. Estimating repair costs can get stressful, but it’s beneficial to determine the maximum offer.
The Contract: Put the house under contract, get the agreement signed, and visit a local title company to get the receipt. A title search also helps in clearing up any underlying issues.
Find the buyer: Investors that pay cash, hard money, and private money are the best. They make the process smoother and quicker.
Closing Method: You can do a double closing, simultaneously close, or assign a contract.
Three Ways to Wholesale Houses
Assigning the Contract
There is an agreement made with the seller of the house. This is the ‘agreement of contract’ which is assigned when a buyer is found. The deal is closed by the end- buyer, which helps in getting rid of the need to own the house, and all the other pains that come with it.
The end-buyer gives a non-refundable deposit. It’s important to assess the seriousness of the deal through the size of this amount.
Two transactions take place under a simultaneous close. One of them is between you and the seller, the other between you and the buyer. The funds from the buyer are used to close the transaction with the seller.
Some title companies allow simultaneous close, but some do not. The process can become difficult to maneuver so make sure you thoroughly perform your research before undertaking this process.
A double close differs from a simultaneous close as the funds from the buyer are not used to close the transaction with the seller. It is required that the transaction is funded through a purchase. ‘Bridge loans’ exist to make this an easier task. The advantage of a double close is that the amount made is not disclosed to the end-buyer. This doesn’t happen in a contract.
In both, simultaneous close and double close, a separate purchase agreement is signed with the buyer, with you as the seller.
Tips to Take Away
While it is valuable to build a buyers list of your own, keeping track of areas where end-buyers demand investment houses are also essential.
Lastly, in case it becomes difficult to find a buyer, it’s advisable to either lower the wholesale fee and renegotiates, or back out of the deal with the help of an ‘escape clause’.
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