assignment contract for wholesaling real estate

Wholesale Real Estate Contract - Free Template Downloads

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The wholesale real estate contract is more simple that the standard purchase and sale agreement. Since wholesale deals are primarily built around the buyer paying all cash, the need for contingencies aren't necessary.

Real estate wholesaling is a two-part transaction. First the contract is executed with the seller. Second, the assignment agreement is executed with the buyer. Both of these contracts are required.

How to Write a Real Estate Wholesale Contract

When you're learning how to write a real estate wholesale contract, it can be intimidating. Executing an agreement when purchasing the property solidifies the deal. The key is to remember that there are only 5 elements that make a contract enforceable. Be sure that your contracts contain all of the essential components.

• Names of buyer and seller must be on the contract
• Purchase Price
• Consideration / Earnest Money Deposit
• Description of Property
• Signed by both parties

Since a real estate wholesale transaction is relatively cut and dry deal, learning how to write a contract will be easy.

You can use any Standard Purchase and Sale Agreement for Real Estate if you choose, or you can simplify things for your seller and use an "All Cash, As Is" Contract.

It's convenient to have contract template on hand. Just fill in the blanks and ask for signatures. Additioanlly, it's helpful to be familiar with every sentence that's in your contract.

As you build your real estate wholesaling business, you can add or remove clauses in your contracts. If they don't fit your business model get rid of them. Furthermore, always consult with an attorney for the best legal advice when it comes to contracts.

As a courtesy, you can download this free Wholesale Real Estate Contract Template and use it in your business. Full Disclosure: Property M.O.B. is not an attorney and isn't offering legal advice. Any contracts on this site are offered as a courtesy only and should be reviewed by an attorney in your state.

Wholesale Real Estate Assignment Contract

There are a few ways to sell the property to a new buyer. The easiest way is to complete a simple Assignment Contract. This simply states that your interest as the buyer in a contract is being assigned to a new person, for a higher price.

Once you find a buyer for your contract , it's easy to assign the contract to another buyer. Don't be intimidated by the use of contracts. The templates written here are written in simple terms and can be downloaded for free.

The assignment fee is collected at the time of contract, or you can get paid at closing.

Download this free Wholesale Real Estate Assignment Contract and use it in your business. Full Disclosure: Property M.O.B. is not an attorney and isn't offering legal advice.

Wholesale Real Estate Contract PDF

The easiest way to be prepared to sign a deal with a seller is to have a wholesale real estate contract in PDF format. That way you can fill out the form using your tablet or smart phone on the fly. Once you get "fancy" you can have a digital signature subscription on your tablet and request digital signs.

Download the free contracts that we offer here so you have something when you go to your appointment. Take the time to review it so you know exactly what it says.

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Thank you for the info you have given. It will help me out alot as I'm just getting started.

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Wholesale Real Estate Contract: A Guide For Beginners

What is a wholesale real estate contract?

Wholesale real estate assignment contract

Wholesale purchase agreement

Contracts and marketing

Generating wholesale leads

Wholesaling is an excellent entry into the profession of real estate investing. It offers powerful wealth-building benefits and does not require significant capital to get started. However, the conundrum for many investors is the intricacies of the wholesale real estate contract .

This is especially true if you’re new to the investing business and unfamiliar with many of the contracts and legal forms required. Even real estate agents, dipping their toes into investing for the first time, can find the wholesale contract a bit of a challenge.

Because there are numerous misconceptions about selling contracts and wholesaling in general, the following breaks down the in’s and out’s of a wholesale real estate contract.

What Is A Wholesale Real Estate Contract?

A real estate wholesale contract is a legal document between a real estate wholesaler and a seller, essentially giving the investor the right to buy the property. As a wholesaler , you are essentially setting up the game for others to play. Your job as the middleman is to locate a potential deal, secure the rights (much how a real estate agent would), and then assign the contract to a real estate investor. “A wholesale real estate contract is a legal document between a real estate wholesaler and a seller, which gives the investor the right to buy the property. Assignment contract is the transfer of rights from the wholesaler to the buyer”, says Rasti Nikolic, a financial consultant at Loan Advisor. The concept of a wholesale is similar to a purchase agreement, but the mechanics are much different.

It is also worth noting that a wholesale real estate contract may be carried out in reverse order. Otherwise known as reverse wholesaling, this process will have the investor seek a buyer before even having a property lined up. In doing so, the investor will already have a buyer lined up the second they initiate a wholesale contract. Additionally, seeking out the buyer first will give the investor an idea of what type of deal to look for. The primary benefit of conducting a wholesale real estate contract in reverse ultimately has to do with efficiency. If, for nothing else, time is the most valuable commodity of an investor, and having a buyer lined up will save them both time and money.

To better understand how a real estate wholesale contract works, wholesalers will need to first familiarize themselves with the basics of a purchase and sale agreement. The framework of this legal agreement, which provides the right to buy and sell a property, will include—but isn’t limited to—the following:

Wholesale Real Estate Assignment Contract

When you sign a wholesale real estate contract to purchase a property from a seller, you now have an equitable interest in the property. Under what is known as the doctrine of equitable conversion, a buyer can become the equitable owner of the property. At the same time, the seller maintains the bare legal title to the property under the terms of the agreement.

Although you won’t have the title to the property, you’ll be able to control it using a contract. On that note, it’s important to mention that every state and county will have its own laws on wholesaling  and the formalities of the real estate wholesale contract.

The next step will then be to assign your contractual rights to an investor, which will require an Assignment of Real Estate Purchase and Sale Agreement. This contractual document will basically state the new buyer is assuming your responsibilities, including purchasing the property to the agreed-upon terms in the purchase and sale agreement.

It is vitally important the new buyer is informed of the original contract’s stipulations and layout, agreeing to all prices, terms, conditions, and contingencies. That’s why wholesalers should attach a copy of the purchase and sale agreement to the Assignment of Real Estate Purchase and Sale Agreement. This will ensure the new buyer is aware of the original sales agreement and has a copy that discloses all addenda made in the deal.

As part of a real estate wholesale contract, wholesalers will collect a profit for their work. The terms of how they get paid will be included in the Assignment of Real Estate Purchase and Sale Agreement. Generally speaking, wholesalers are typically paid a deposit when the Assignment of Real Estate Purchase and Sale Agreement is signed; the rest of the profit comes after the transaction closes. As a reminder, it’s best to have an attorney review the documents and contracts to ensure they’re correctly written for what you’re trying to accomplish.

Pros Of Wholesale Real Estate Assignment Contracts

Several benefits come with assignment contracts for wholesaling real estate. From turning quick profits to learning about the real estate market quickly, here are a few of the advantages of wholesale real estate contracts to keep in mind:

Easily turn quick profits: Wholesale real estate contracts are able to make you profits within 30 days or less. Commonly, savvy wholesalers close around 5 – 10 deals per month. Once you have the experience of finding motivated sellers and building a buyers list, you will be able to repeat the process and turn these kinds of profits yourself.

No credit check requirement: Even with bad credit, you will still be able to wholesale real estate. Since wholesalers are assigning the contract to another buyer, they do not have to go through a credit check. Only the buyer will have to go through credit checks to fund the property.

Learn about real estate investing quickly: While wholesaling may sound intimidating for beginner investors, it is the perfect opportunity to learn quickly learn the ins and outs of the real estate market. Wholesaling is a combination of real estate transactions and will teach you many skills you will be using later in your investment career. These skills include legal documentation, calculating ARV, negotiating, marketing, and much more.

Cons Of Wholesale Real Estate Assignment Contracts

Now that we’ve covered the several advantages of wholesale real estate contracts, it is equally important to note the disadvantages they may have before you dive in. Some of the cons of a wholesale real estate assignment contract include:

No guaranteed income: While wholesaling is a great way to earn profits quickly, steady income is not guaranteed. Once you find a distressed property, it may take some time to find a buyer. As a wholesaler, you are constantly trying to find the best deal for all parties involved, and the best option may not come to you overnight.

Building a buyers list take time: As one of the key components to wholesaling, building a dependable buyers list may take an ample amount of time. You will want a sizable list of potential buyers before offering anything to the seller. In doing this, you reduce the risk of not making a sale at all. A common practice for wholesalers is working with repeat buyers who have been known to reliably make deals in the past.

It can be hard finding distressed properties: Wholesaling often requires you to find distressed properties outside your local market. Unfortunately, there is no way to automate this process, and the research will have to be done yourself. You may have to find distressed properties through newspapers or by driving around neighborhoods to find unkept homes. Other strategies include direct mail and social media marketing campaigns.

Wholesale Real Estate Contract Template: The Purchase Agreement

In order to make sure that all parties are clear on the specificities of a given contract, the agreement must be as direct and informative as possible. Luckily, this process can be streamlined with the help of a template. While the following is not a downloadable wholesale real estate contract pdf, it can serve as a detailed outline for investors. Use the template below as you get started, and do not be afraid to add more information as you go along. When it comes to real estate wholesaling contracts, the more informative and clear the better. Here is a wholesale contract template to get started:

Parties involved: The names of both buyer(s) and seller(s), including signatures from all parties listed on the title.

Description of real estate: The property’s address, legal description and property type.

Personal property included in the sale price: Anything not attached to the building or the land. In most cases, this will include home fixtures.

Purchase price and financing: The purchase price, deposits and financing terms.

Where deposits are held: Outlines the manner in which deposits are held.

Financing contingency: Outlines the financial terms or if paying by cash.

Conditions of premises: Highlights the physical condition of the property that will be presented to the buyer.

Inspection contingencies: If the property does not meet the standards of a buyer, as listed from the conditions of premises, this will allow for an inspection period to occur (typically 14 days), in which point the buyer can back out.

Statement regarding lead-based paint: Disclosure related to lead-based paint.

Occupancy, possession and closing date: Establishes a deadline for the closing date.

Deed type: Confirms the type of deed to be conveyed.

Marketable title: If the seller is unable to pass title or the buyer is unable to obtain title insurance, this option will reject the purchase and return the deposit.

Adjustments: This will vary by state, but typically includes modifications for taxes, water, sewage and other charges.

Buyer’s default clause: This outlines the rights of the seller if the buyer defaults on the agreed upon terms of the contract.

Seller’s default clause: This outlines the rights of the buyer if the seller defaults on the agreed upon terms of the contract.

Risk of loss and damage: Protects the buyer in case of damage to the property while under contract.

Addenda: Common disclosures and addenda of the contract.

Real Estate Wholesaling Contracts & Marketing

The one thing every wholesaler will need to begin considering is a wholesale buyers list . Success in wholesale only works if you have investors in place to call upon. Therefore, a wholesale buyers list with ample prospects will serve as an invaluable tool.

Everyone you come across is a lead. Whether it’s through casual conversation at a coffee shop or dedicated real estate networking events, the people you interact with have potential to become a customer. In order to go from interacting with people to incorporating them into your business dealings, and eventually into a sale, it takes marketing. A wholesale buyers list acts as your audience; give them what they want. When adding to your bank of prospects, it’s important that you take down information on your lead, which will typically include:

Buyer’s First & Last Name

Phone Number

Email Address

Buying Criteria

Type Of Funding

Personal Information

Source Of Referral

Generating Wholesale Leads

Once you have the basic information on your contacts, it will then be time for the real estate lead generation campaign to begin. The three most common types of lead generation outlets are networking, marketing campaigns, and social media/web presence. For those looking to get started, the following breaks down each marketing strategy for generating wholesale leads:

Networking: One of the cornerstones of real estate investing is networking. This process of meeting contacts with the thought of working together down the road has fueled the industry for years. Although it may appear like a slow process when starting out, real estate networking can significantly improve an investor’s results.

Marketing Campaigns: A real estate marketing campaign aims to get both your message and word on your business out to the public. In most cases, a marketing campaign will consist of tools like email, direct mail, and even business cards to reach your target audience.

Social Media: Online marketing has the power to pull the shades back on you and your business and expose your brand to millions of people. With access to such a vast and diverse audiences, the one outlet almost everyone uses is social media. Whether for business or pleasure, sites like Facebook, Twitter, and LinkedIn are home to billions of active users daily, a goldmine for wholesalers. Done right, social media has the ability to produce endless streams of leads to your wholesale buyers list.

Wholesaling vs. Flipping

Wholesaling and flipping houses are considered beginner-friendly investing strategies; however, flipping houses requires significantly more involvement. Flipping a house means buying a property, renovating it, and ultimately selling it for a higher price. This requires upfront capital to purchase and renovate a home. In contrast, wholesalers are not required to ever purchase property or cover costs associated with ownership.

The ownership element of flipping houses increases the level of risk associated with this strategy. Flippers can run into unexpected costs, for example, if the property is on the market longer than expected before selling. In this case, the increased risk does translate to increased reward as the profit margins of flipping houses are somewhat higher than wholesale deals. New investors have found luck with wholesaling and flipping houses; choosing the right strategy will be entirely up to you.

Real Estate Wholesaling Misconceptions

One of the most common misconceptions about wholesaling real estate is that you must obtain a real estate license to do so. You do not need to get a real estate license to become a wholesaler. Wholesalers make money by selling a property contract for more than they bought it for. Real estate agents sell a property, facilitate the entire sale, and receive a commission as a percentage of the purchase price.

Is Wholesaling Legal?

Yes, wholesaling is legal. That being said, wholesalers are required to disclose certain information when facilitating a deal. For example, wholesalers must mention that they do not own the actual property and instead own the right to purchase the property. If wholesalers do have a real estate license, they must disclose that information as well. Always check your state and local laws before wholesaling properties to ensure you are in line with legal requirements in your area.

Can You Wholesale Commercial Real Estate?

You can wholesale commercial real estate in theory, but in practice this investment strategy is rare. The reason for this is because there are additional regulations surrounding the purchase of commercial properties. This makes commercial wholesaling a somewhat different and more difficult process when compared to residential real estate. Many believe the process to be riskier overall. However, because this strategy is much less common investors who are able to get acquainted with the proper regulations will find less competition overall.

Can The Seller Back Out?

The seller can back out if the language of the contract specifies certain clauses that are not met. In these cases, the seller will have legal justification to back out of the contract and deal. This most commonly happens if the seller is unable to buy a new property to move into on time, or if they decide against selling the property at all. Again, these clauses would have to be included in the original contract so while they can be surprising to hear, they should not blind side you.

A wholesale real estate contract is the central component to an investor’s wholesaling strategy and the factor that plays the most significant role when looking to get paid.

So even if you’re not a complete wholesaling expert—and born with a legal mind—make sure to dot your I’s and cross your T’s to ensure this complicated, though powerful, form of investing doesn’t leave you in the dark.

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Wholesale Real Estate Contracts

Are you new to the world of wholesale real estate? Look no further than our comprehensive collection of contracts, agreements, and documents designed to help you succeed in the industry.

Our free PDF and Word templates are available for download and use, and we even offer instructional videos to guide you through the process of filling out each contract in detail.

With a thorough understanding of each contract, you'll be able to confidently explain them to property sellers, cash buyers, and JV partners and even fill them out on the spot to boost your wholesale real estate business.

In the example videos below, I'll go over how to fill out the most basic real estate wholesaling contracts (listed below) so you'll have a solid understanding of each.

• Purchase agreements outline the terms of the sale, including the purchase price and closing date.
• Assignment agreement s allow you to assign your rights and obligations under a purchase agreement to another party.
• JV agreements establish a partnership between two or more parties for a specific real estate project.
• Option agreements give you the right to purchase a property at a specific price within a certain timeframe.
• Notice of cancellation forms allows you to cancel a contract within a specified period without penalty.

Wholesale Real Estate Purchase Agreement (Example)

The Purchase Agreement, also known as a "PA" or "Buy and Sell Agreement," outlines the terms and conditions of the purchase.

A wholesale real estate contract is a legal agreement between a wholesaler and a buyer outlining the terms of the sale of a property.

The wholesaler finds a distressed property, negotiates a deal with the seller, and then assigns the contract to a buyer for a fee.

The buyer then takes over the contract and completes the purchase of the property.

Who gets a copy of the purchase agreement? The seller, wholesaler, and title closing agent. (the buyer will also get a copy after they agree to the terms and sign your assignment agreement)

If you'd like me to email you editable copies of all the contracts and agreements, submit your name and email address below.

Wholesale Real Estate Assignment Agreement (Example)

The Wholesale Real Estate Assignment Agreement is a contract between a wholesaler and a buyer, where the wholesaler assigns their rights to purchase a property to the buyer for a fee.

The buyer then takes over the contract and closes on the property, while the wholesaler receives their fee without ever actually owning the property themselves.

It is a common strategy used in real estate wholesaling and investing.

Who gets a copy of the assignment agreement? The wholesaler, buyer, and title closing agent.

Wholesale Real Estate JV Agreement (Example)

The Wholesale Real Estate JV Agreement is a legal contract between two or more parties who agree to work together to purchase and sell real estate properties for profit.

The agreement outlines the property, terms, and conditions of the joint venture, including the responsibilities and obligations of each party, the distribution of profits, and the duration of the partnership.

This type of agreement is commonly used in the real estate industry by investors and wholesalers who want to pool their resources and expertise to maximize their profits.

Who gets a copy of the JV agreement? The wholesalers in the joint venture and the title closing agent. (neither the seller nor the buyer gets a copy of jv agreement)

Wholesale Real Estate Option Agreement (Example)

The Wholesale Real Estate Option Agreement is a contract between a real estate wholesaler and a property owner that gives the wholesaler the right to buy the property at a discounted price within a certain timeframe.

The wholesaler enters into an agreement with the property owner and can then work to locate a potential buyer for a higher price.

Once a buyer is found, the wholesaler can return to the buyer and exercise the option by entering into an actual purchase agreement.

Who gets a copy of the option agreement? Only the seller and wholesaler.

Wholesale Real Estate Notice of Cancellation (Example)

The Wholesale Real Estate Notice of Cancellation is a document used to cancel a contract for the sale of real estate between a wholesaler and a buyer.

It is typically used when the wholesaler is unable to find a buyer for the property within a specified timeframe.

The notice of cancellation must be provided to the buyer in writing and should include the reason for the cancellation and any applicable fees or penalties.

Who gets a copy of the notice of cancellation? The seller, wholesaler, and title closing agent.

Conclusion: In wholesale real estate, a thorough understanding of contracts and agreements is crucial for success. Our comprehensive collection of free PDF and Word templates and instructional videos provides valuable resources to guide you through the process.

However, it's important to note that real estate laws and regulations can vary by location, and it's essential to check your local laws and regulations and consult a real estate attorney before using any real estate contract.

This ensures compliance and protects your interests.

By familiarizing yourself with the various contract types, such as purchase agreements, assignment agreements, JV agreements, option agreements, and notice of cancellation forms, you'll be equipped to navigate the wholesale real estate business confidently.

These contracts outline the terms and conditions of the transactions and help facilitate successful deals.

Remember, while our resources provide a solid foundation, it's crucial to adapt them to your specific circumstances and seek professional advice when necessary.

Safeguard your business by staying informed and compliant with local guidelines.

Download our editable contracts and agreements to streamline your wholesale real estate endeavors. Just provide your name and email address, and we'll send them to your inbox.

Empower yourself with knowledge, consult experts, and utilize the proper contracts to build a thriving wholesale real estate business.

By downloading any of the forms, contracts and/or paperwork, You understand that such forms, contracts and/or paperwork are provided for your convenience, and you understand that real-estate law is governed state by state, and laws and regulations change from time to time.

You also understand that you may and should seek legal and professional advice before using said forms, contracts, and/or paperwork, and You agree to hereby hold us harmless from any liability by using said forms, contracts, and/or paperwork.

Written by:

David Frizzell

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estate wholesaling

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What is an Assignment Contract in Wholesale Real Estate?

The most successful real estate investors are ones who market to and work directly with homeowners to buy property. When investors talk directly to sellers, they have several options for closing lucrative real estate deals. For real estate investors who don’t have a lot of time or money to invest in any single property, wholesaling is an attractive option.

Wholesaling real estate is a great way to get into real estate investing, and it’s a strategy that allows you to invest without putting down any upfront capital of your own. 

But how? 

In real estate wholesaling, a wholesaler contracts an off-market home with a seller, then finds an interested third-party buyer to purchase the contract at a higher price. The wholesaler then keeps the difference as profit. This process of selling a contract before the wholesaler purchases the property themselves is called an assignment of contract . 

What is an assignment of contract? 

An assignment of contract is a transfer of contractual obligations from one party to another. In real estate, an investor makes a deal with a property owner, and then sells the contract to a third party before the home closes. The investor collects an assignment fee for finding the deal. 

You may have dealt with situations that are similar to an assignment of contract. For example, if the mortgage on your home has ever transferred from one company to another, you’ve been privy to an assignment of mortgage, where your original mortgage company has transferred their contractual obligations to a new company. 

Do I need to put down any of my own money using an assignment of contract? 

No! The benefit to wholesaling with an assignment of contract in real estate is that you don’t need to use any of your own money in order to profit from a real estate transaction. Minimal costs to wholesalers include building a quality list of leads (often distressed properties) through driving for dollars, and sending mail to those leads. 

What is the difference between assignment of contract and double closing? 

Unlike an assignment of contract in real estate, double-closing involves two separate transactions with the seller and buyer. In double closing, a wholesaler purchases a home in their name, and then sells the property within 30 days without making any updates to the home. The benefit of double closing is that a wholesaler can keep their own profit undisclosed to both the seller and the buyer. The downside is that the investor has to put up their own money in order to close the first part of this real estate deal.

How do I find someone to buy my contract?

Finding buyers to purchase your real estate contracts may seem daunting, but there are lots of investors and entrepreneurs who are looking for their next deal. A great way to start building a buyers list is to go to local REI meet-ups and exchange business cards with investors who are actively making deals. You can also post on social media to get the word out about your business. As you’re out driving for dollars, keep an eye out for signs that say “For Rent.” You may be able to connect with those owners to see if they’re interested in growing their rental portfolio.  

Is an assignment of contract in real estate legal? 

Yes - but it’s important to research and keep an eye on the wholesaling regulations in your state. In Illinois, for example, non-licensed investors are allowed to wholesale one real estate deal every 12 months. Investors in Illinois who want to do more wholesaling deals than one per year need to obtain a license. In Oklahoma, real estate investors are required to obtain a license in order to sell an assignment of contract and must abide by all state real estate laws. Be sure to review the laws in your state and keep up to date on local real estate investing news in your area. 

Can I make money wholesaling?

Yes! Just take a look at a few DealMachine customer success stories. Real estate investor Ramin Qudus made $50,000 on a wholesaling deal during his 7-day trial with DealMachine. Rita Grimes talked with our Director of Community Experience, Elise Knaack, about how she was able to make $178,000 in the first half of 2021 through wholesaling and driving for dollars. Just one week after Ashley and Anthony Warren started marking to their D4D leads, they had their first deal under contract for $62,000. 

About David Lecko

David Lecko is the CEO of DealMachine. DealMachine helps real estate investors get more deals for less money with software for lead generation, lead filtering and targeting, marketing and outreach, and acquisitions and dispositions.

Table of Contents

Wholesaling made simple a comprehensive guide to assigning contracts.

Land Investing , Creative Financing, Making Offers, Mindset Training, Video Tutorials

REtipster does not provide legal advice. The information in this article can be impacted by many unique variables. Always consult with a qualified legal professional before taking action.

For several years, my real estate investing business followed a simple model that worked extremely well about 80% of the time.

I would find boatloads of motivated sellers , make deeply discounted offers to them, and when I found a seller willing to accept, I could buy their property outright and pay cash for it.

Once I owned a property, I could list it for sale (usually within 24 hours) and flip it for a MUCH higher price than I paid.

In a lot of cases,  the process worked perfectly . Going through these motions, I could squeeze a lot of free equity out of each property. In the best-case scenario, I could move through the entire process in just a few weeks.

The Problem With a Cash Business

Even though this business model was pretty effective, I found it had some limitations.

It was surprisingly easy for me to find cheap properties and buy them free and clear with the cash I had, but the real challenge was getting these properties sold quickly .

After my first dozen deals, I learned that some properties were MUCH harder to sell than others,   and I didn't always have the foresight to know which properties would take significantly longer to sell .

This was a big problem for two reasons:

1. I had a limited supply of cash to work with.

Even if I knew how to get every property on earth for 20% of market value, I didn't have enough money to buy them all . At some point, I had to be smart about which properties to pour my limited resources into.

2. It was hard to know when a property would sell.

One of the unpredictable elements of land investing is that some properties will sell quickly, and some will sit on the market for months on end, and the situation usually ISN'T obvious until you list the property for sale and see how the market responds.

Of course, a few indications  can give off some warning signs, and some markets are known for selling faster than others, but when you're working in an unfamiliar territory (like I was most of the time), this can be a tough nut to crack.

RELATED: How to Find the Perfect Market for Flipping Vacant Land

Once I started pushing up against the limitations of my finite supply of cash AND my inability to predict the future, I started thinking to myself,

“There MUST be a better way to monetize these deals without tying up my cash!”

I kept seeing deal after deal hit my desk – and they were great deals – but they just weren't great enough to justify investing my own money .

Buying a property for 60% of market value is great for the average investor, but if I couldn't get a property for a next-to-nothing price tag, it just wasn't “risk-free” enough to tie up my limited funds!

Wholesaling Through Assignments

Around this time, I started exploring how to assign contracts (i.e. – wholesaling, arbitrage, etc.).

Rather than signing a purchase agreement and buying each property outright, I had heard other real estate investors talking about this ingenious way of signing a purchase agreement and selling that contract to another investor so that THEY could close on the deal – with me just acting as a middleman and collecting an assignment fee in the process.

In short, I would effectively be selling a piece of paper because that paper (i.e. – the purchase agreement) represented a TON of valuable real estate equity that would go to whoever closed on the deal and took ownership of the property.

In some ways, assigning a contract wasn't all that different from acting as a real estate agent because I would be wearing many of the same hats and doing some of the same things an agent would do for their client.

The difference was that I had a signed purchase agreement between myself and the seller, giving me an equitable interest in the property. I wasn't selling a property on behalf of someone else, I was selling a contract that entitled me to close on the deal and could be assigned to any other investor who wanted to jump into my shoes.

This contract was like a paper asset I could sell to a third party and get paid an “assignment fee” without owning the property myself.

Legal Disclaimer: In some states, this process of assigning a contract is considered synonymous with working as a real estate agent. Even though it's technically a different type of agreement, some jurisdictions don't distinguish between the two. If you decide to pursue this strategy, check with the laws in your area to make sure you aren't required to have a real estate license to complete this process. If a license is required, you don't want to attempt this without your real estate license.

This presented a few obvious benefits:

• I didn't need to put up any of my own cash.
• I didn't need to shoulder any liability as a property owner.
• I didn't need to stress out if I couldn't find a buyer immediately (because once the purchase agreement expired, I was free to walk away from the deal).

As I became increasingly strapped for cash (all while the opportunities continued to pour in faster than I could handle), this whole “Assignment” business sounded like the PERFECT solution to my problem.

The Mechanics of Assigning a Contract

Now, the idea of assigning contracts (aka – “wholesaling”) always sounds great on paper – but let me tell you, I struggled for YEARS to understand the mechanics of how this process really worked.

I understood the “20,000-foot-high” concept of assignments, but when it came down to figuring out the real, nitty-gritty details (for example)…

• What kind of Purchase Agreement was I supposed to use?
• What kind of Assignment Agreement needed to be signed?
• How was I supposed to get the deal closed?
• Where could I find the right closing agent to work with me?
• When would I get paid in the process?
• What if the buyer went behind my back and talked to the seller?
• What if I couldn't find a buyer before the original contract expired?

…I had heard so many different opinions from so many different people about how the process was supposed to work. All the advice I saw on the various real estate forums and blogs would constantly contradict each other, making  it even harder for me to nail down the “correct” way to move through this process.

Since I struggled with it for a long time, I will save you a ton of hassle and confusion by laying it all out below.

The 4 Stages of Assigning Contracts

Assigning a contract is (in theory) a pretty simple concept.

When an investor (we'll call this the ‘middleman') finds a great real estate deal and signs a Purchase Agreement with the Seller, they have the option ( if their Purchase Agreement contains the right language ) to “assign” (aka – sell) this piece of paper to an outside investor.

When the wholesaler/middleman assigns the Purchase Agreement to the outside investor, they can do it with a simple, 1-page document called an Assignment Agreement . This document legally transfers the original buyer's rights (as written in the original Purchase Agreement) to the new buyer. It also releases the original buyer (i.e. – the “Assignor”) from any liability or obligation and substitutes the new buyer (“Assignee”) in their place.

Essentially, the outside investor is jumping into the shoes of the wholesaler and can purchase the property directly from the Seller, at the same price, at the same terms, with the same deadlines, exactly as the terms were stated in the original Purchase Agreement. The only difference is that it now applies to the new buyer (Assignee) instead of the original buyer (Assignor).

I always find that visual aids are helpful, so here's my best attempt at showing you another representation of how the process works:

Stage 1: Contract Signed between Wholesaler and Seller

Stage 2: Wholesaler Finds an Outside Investor to Buy Under the Terms of the Original Purchase Agreement

Stage 3: Wholesaler Assigns the Contract to the Outside Investor and Gets Paid a Deposit

Stage 4: Seller, Wholesaler, and Outside Investor Close. The Wholesaler is Paid the Balance of the Assignment Fee at Closing.

As you can see, the Wholesaler (Original Buyer or Assignor) is acting as the “middleman” (or middlewoman, in this case), getting paid in the form of an Assignment Fee from the Outside Investor (Assignee).

In the process I follow (which I'm about to explain further), a portion of this payment is made when the Assignment Agreement is signed by both parties (Stage 3 – above), and the remainder is paid when the deal is closed, and the property officially changes hands (Stage 4 – above).

How the Process Works

Over the years, I have heard numerous explanations (all of which were different) about how the wholesaling process is supposed to work.

Most of these explanations only got me  80% there . They never closed the loop on how to get through the closing process, abide by the law, get paid, AND not be a scumbag .

The process outlined below seems to check all of these boxes and get the job done.

Finding the Motivated Seller

I've already thoroughly explained these techniques in several articles throughout this blog. If you aren't sure where to start, you can reference these posts below:

• How I Find Motivated Sellers  –  Step 1 ,  Step 2 ,  Step 3
• How to Create a Buying Website
• Million Dollar Postcard Templates That Work
• How Much Should You Offer For That Property?
• How To Write Offers That Get Accepted (With 3 Simple Pages)
• Everything You Need To Know About Getting Your County's Delinquent Tax List
• The Ultimate Negotiation Technique That Nobody Talks About
• How to Avoid the Guilt Trip When Sending Low Offers
• Understanding the Motivated Seller
• Getting People To Say Yes

Explain Your Intent & Get the Contract Signed (IMPORTANT)

When you start making offers to motivated sellers, your offer must be accompanied by a thorough explanation of what you intend to do .

Assigning a contract is very different than buying a property outright with a traditional closing. The Seller needs to know what you plan to do (because by itself, your Purchase Agreement doesn't imply your intent to assign the contract, it just says that you CAN assign it… and that's not enough guidance for the seller).

If you don't explain your intentions to the Seller, any rational person will get confused (and probably upset) when they see what happens.

It doesn't need to be this way. All it takes is a clear explanation from you so they understand what to expect.

There are a few key points your Seller needs to be aware of:

• You're not planning to buy their property yourself.
• You plan to sell the contract to someone else, and then THEY will buy the property from the Seller.
• You will communicate with the Seller throughout the process (they won't ever be left in the dark), so they know what's happening.
• If you can't find an outside buyer for the property, the contract will expire, and the transaction won't happen .

Given that a wholesale transaction involves a couple of additional steps, it might be tempting to over-complicate this explanation as you're trying to explain things to the Seller. I had this problem when I started wholesaling with assignments.

Avoid Information Overload

It's important to explain all the basics to the seller, but you don't want to bombard them with the information they don't need to know.

Nobody likes to feel confused. Rather than being made to feel stupid, most confused people will just say “No” to save their pride ( even if this arrangement is in their best interests ).

When I explain the process to a potential Seller, it looks something like this:

“Thanks for contacting us! A fter reviewing the details of your property, we would be interested in marketing your property to our nationwide network of real estate investors. For the next 180 days, we would be willing to invest our time and resources to find a cash buyer at no cost to you. If we are able to find a buyer, we will coordinate with you and the buyer to schedule a closing and ensure you are paid the full amount listed in this purchase agreement. You will not incur any costs in this process . We will be compensated by the buyer (which we will find) and when the transaction is closed, you will receive the full sale price stated in the attached purchase agreement. In order to start the process, we will need a signed copy of the attached purchase agreement. In this contract, our company will be listed as the Buyer and our intent will be to assign this contract to another cash buyer in our network.”

To assign your purchase agreement  (as explained above),  you need to ensure your contract contains an “Assignment” clause, allowing you the right to assign the contract to a third party. Without this clause, you will be the only one allowed to close on the purchase, and the rest of this process won't work.

There are many different ways to state this in your contract, but if you need an example, this is what my Assignment clause looks like:

ASSIGNMENT : Buyer has an unqualified right to assign its rights under this contract to a third party. No notice to the Seller of an assignment is necessary. Such an assignment will create a novation and release the original Buyer from this contract and substitute the assignee in its place.

Reminder: Whatever documentation or language you use, you'll want to make sure you run it by an attorney in your area to ensure it's valid and abides by your local, state, and federal laws.

Due Diligence & Property Prospectus Report

Since you're not the actual end-buyer, you don't need to learn every intricate detail about the property you have under contract.

However, you need to know the basic, relevant details about it because you're going to market this thing to the public, to your buyers list (if you have one), and to anyone else who may be a potential cash buyer.

So how much do you need to know?

As a general rule, I try to uncover any potential disasters that would kill a deal if I were buying it outright ( i.e. – what kinds of things would make ME turn and run the other direction? ). I also try to gather enough information to complete a property prospectus report .

What is a property prospectus report? Mine looks something like this…

It's just a single page that lists all of the basic details about the property:

• Listing Price
• Property Address
• Parcel Number
• Legal Description
• Property Size
• Terrain & Surroundings
• Road & Utility Access
• On-Site Photo(s)
• Breakdown of Costs
• Comparable Listings (to give a basis for my asking price)

…and that's pretty much it. Here's a video overview of how I fill it out:

Also see:   One Weird Trick to Find the Size, Shape, Location & Dimensions of Your Property  and  The Fastest Way to Research Any Property in the United States

The goal of this document isn't to inform my cash buyers of every last detail about the property. The point is to give them just enough information to make it obvious that the deal has great potential and huge value (if it's a good deal, this shouldn't be difficult).

That being said, if I do find any big problems in my due diligence process, I'll either walk away from the deal (if I don't think I'll be able to sell it for a profit) or at the very least, I'll be sure to disclose any “Other Issues” that I'm aware of at the bottom of the report.

(Note: If you want a copy of my Prospectus Report template, you can get it at the bottom of this blog post.)

Find the Buyer, Assign the Contract, Collect the Deposit

When you start getting calls and emails from interested buyers, you'll likely find that there are A LOT of tire-kickers out there. People will get your hopes up, only to go AWOL when it's time to sign on the dotted line.

People are extremely flakey , so if someone wants you to take their offer seriously, they'll have to agree to it in writing AND put their money where their mouth is.

When I find an interested buyer, this is how I would communicate the next steps to them:

“ Thanks for your interest in this property! If you'd like to move forward with this purchase, I'll need two things from you: 1. Please sign the attached Assignment Agreement and fax, email, or text it back by 5:00pm today . 2. Please send us a $______ deposit by 5:00pm today  via wire transfer. Note: This property will not be reserved until both items are received. Once both items are received, the property will be reserved in your name and we will contact <<Title Company Name & Location>> to begin the closing process. They will contact you in the next few days and will send you the closing documents and preliminary title report for your review and approval. Our tentative goal is to close this transaction by <<30 days later>>. This means you will need to submit your funds and all the required paperwork to <<Title Company Name>> by (or before) that time. “

When it comes to the earnest deposit , when the total purchase price is $10K – $30K, I'll usually ask for approximately 10% of the total purchase price, and I round it to the nearest $1,000. If the sale price is less than $10K, then $500 is usually sufficient. The idea is just to collect something to show that the buyer is serious and not blowing smoke.

If you're closing with a title company or attorney, this money should be sent to your closing agent, who will disperse it appropriately when the deal closes (or if it falls apart). Your end buyer can either send the funds directly to your closing agent, or they can send the funds to you, and YOU can give it to your closing agent.

Unfortunately, all kinds of obstacles can get in the way of closing ( clouds on title , funding issues, inspection issues, you name it), so you don't want to get too excited about this money until the deal is closed.

Note Regarding the Assignment Agreement

You might find that some people (buyers, sellers, closing agents, etc.) tend to overthink this document simply because they don't have experience with assignments and aren't familiar with how they work.

As I explained above, this is a relatively simple document that takes your rights as the original “Buyer” of the property and transfers them to a third-party (i.e., the new person or entity that has the cash and desire to jump into your shoes and become the actual end buyer of the property).

This video offers a straightforward explanation if you ever encounter an individual who just doesn't get it.

Deliver Documentation to Title Company, Close, Get Paid

Once you have both the Assignment Agreement and the funds required for your deposit, you'll need to deliver the following documentation to your Closing Agent (i.e., Title Company or Closing Attorney):

• A copy of the fully executed Purchase Agreement.
• A copy of the fully executed Assignment Agreement.
• The funds from the end buyer's earnest deposit.

This should be everything they need to prepare the necessary paperwork for all parties to sign and move forward with closing the transaction.

Given that this is a cash deal (with no mortgages or outside financing involved), this shouldn't be a complicated transaction for your closing agent to pull off. That said, I should warn you that not all closing agents are created equal .

When I started trying to assign contracts, I found that some title companies had no idea what they were doing. They acted like I was asking them to move heaven and earth or do something illegal. I found that MANY title companies were particularly incompetent with assigning contracts, which threw a huge wrench in my progress for a long time.

If you run into this dilemma, keep calling around to various title companies or closing attorneys in your area until you find someone who understands what you're talking about. Don't let their ignorance act as an obstacle to your business.

Advantages to Assigning Contracts

When I look back on all the properties I've listed and sold on my behalf, most sold in 6 months or less (assuming they were desirable, usable , priced right , and I was marketing them consistently ).

Whenever a property took longer than six months to sell, it was usually because of one or two issues:

• My assumption about the property's market value was WAY off (and I didn't have the profit margin I thought I would).
• Something was fundamentally wrong with the property (e.g., it didn't perc , it wasn't buildable, the location was terrible, etc.).

As you can imagine – neither of these issues is fun to realize, but whatever the case may have been, I found that when a property sat on the market for more than six months and the sale still hadn't occurred , something big needed to change .

This is one of the huge benefits of assigning a contract. By the time I realized I had made a pricing or due diligence mistake with one of my properties, it was clear that if I could do it all over again, I wouldn't have bought this property at the price I paid for it .

It would have been far better for me to get it under contract and then assign the purchase agreement (if I even could) rather than buy it outright.

As you can imagine, if there's ever something wrong with a property, this problem should stay in the seller's lap instead of mine.

Here are some issues that make me consider wholesaling through an assignment rather than buying a property outright:

• When I'm not very confident about the property's true market value.
• When there are potential problems with the property that I can't get resolved.
• If I don't have the money to invest and buy the property outright.
• The seller isn't willing to lower their asking price to my liking (but it's still a good deal, with enough profit margin to be a good deal for someone else).
• The property isn't local, and I don't want to take on the liability of ownership.

It's important to remember that even when you have money to buy a property, it doesn't necessarily mean you should.

All kinds of menacing issues can come up with any property – and in some cases, these issues can become MAJOR obstacles to selling it.

For many investors, this uncertainty is more than enough reason to stick to wholesaling them with an assignment exclusively.

Drawbacks to Assigning Contracts

While there are a lot of benefits that can come with assigning contracts, there are a few drawbacks you should be aware of as well.

When you intend to assign a contract, you'll have to deal with a few limitations (which may or may not be a problem – depending on what you're trying to do). For example:

• You won't be able to improve the property (because you don't own it, and it's not yours to improve).
• You won't be able to offer seller financing (because you're not the owner, and it's not yours to finance).
• You'll have a shorter window of time to finish the deal (because your contract won't last forever).
• The closing process will require more attention to detail than the simplicity of a cash closing.
• Your buyer MUST be able to pay all cash (because most mortgage lenders aren't willing to deal with the complexities of an assigned contract).

It's also worth noting that some states (like Ohio , for instance) have laws and statutes that essentially   make it illegal to market a property you don't own in your name. It's considered the “brokering of real estate,” if you don't have a real estate license in that state, you could get fined and/or charged with a misdemeanor for working outside of this box.

Even in states where the legality of assigning contracts isn't an issue, it's still a good practice to make it abundantly clear in your listing that you are selling a CONTRACT to purchase the property, not the property itself .

For example, you could include a short paragraph in your listing that reads something like this…

“ This property is available via our Assignment Program. We have entered into a purchase contract with the current owner to buy the property for $________ (this price includes payment to the owner and all associated fees and estimated closing costs) and for an assignment fee of $_______, we will sell our rights in this contract to a third party. A reputable title company and/or attorney will be enlisted to handle the closing and transfer of title.”

With this kind of statement included in your listing, it should be clear to interested parties that  you are not the current owner . You are simply selling a piece of paper that gives you (and, ultimately, your end buyer) the right to purchase the property for a certain price.

When you decide to buy a property outright and flip it (i.e., the old-fashioned way), there are a lot of freedoms you'll have that simply aren't available when you choose to assign the contract.

So, before you swear off buying properties outright, remember that every deal has different considerations you need to think about. Depending on your end goals, these issues may or may not make the property an ideal fit for wholesaling with an assignment.

It's An Ongoing Education

I'll be completely honest; I still don't consider myself an “expert” in wholesaling via assigning contracts  because it isn't been my primary strategy.

On the same coin, I can say that I've been through enough wholesale assignment transactions to know that this process works .

Wholesaling is a great way to make money in real estate, but assigning contracts isn't my primary technique for handling most deals.

That being said, wholesaling is an extremely helpful sidearm at my disposal when I come across deals that don't fit perfectly inside the “cookie-cutter mold” that I like to see (and as you can probably imagine, this happens pretty frequently).

I think it's great for any real estate investor to be familiar and comfortable with this strategy because there are PLENTY of scenarios where assigning the contract is a much better fit than buying a property outright.

Want Access to My Wholesaling Toolbox?

As I mentioned earlier, I spent YEARS of my life trying to nail down the right process and documentation for wholesaling real estate. The ability to pull some huge profits out of properties I didn't even own was a major revelation, and it could be a big deal for you too.

If you want to try your hand at assigning contracts… I've got something I think will help:

• A copy of my Assignment Agreement template
• A copy of my Purchase Agreement (which is fully assignable)
• A copy of my Property Prospectus Report template
• A copy of my Wholesaling Checklist (to walk you through each step of the process)
• Detailed Video Tutorials explaining how to use each document

Again, there's no “magic” to the documents I use. You can easily call up your local attorney, and I'm sure they'd be happy to charge you $600/hour to give you a similar set of documents and instructions.

Go ahead and call them… I'll wait.

It took me a long time and a lot of tedious conversations with various legal pros to fine-tune this product. These docs were designed to be both simple and user-friendly, all while including all of the pertinent details I needed to see in my wholesale deals.

My goal was to AVOID confusing Buyers, Sellers, and Closing Agents about how this process works and to give myself the freedom I needed to feel comfortable doing these types of transactions. Over time, I've found that these attributes went a long way in getting these deals done. If you’re serious about adding wholesaling to your growing repertoire of real estate investing strategies – the opportunity is sitting right in front of you.

When you consider how many more deals you'll be able to do, the risk you'll be able to avoid, and the amount of money you'll be able to make here (all while investing none of your cash), this information is easily worth 50x than the price tag I'm putting on it – I'm not exaggerating .

Note: When you sign up as an REtipster Email Subscriber , I’ll send you an instant $20 off “Discount Code” for this item, and if you enroll in the Land Investing Masterclass , you'll get access to this item for FREE. There's no pressure – I just want to make sure you're aware.

About the author

Seth Williams

Seth Williams is the Founder of REtipster.com - an online community that offers real-world guidance for real estate investors.

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Wholesaling Real Estate Assignment Contracts: A Comprehensive Guide for Beginners

Introduction:.

Wholesaling real estate assignment contracts is a popular strategy in real estate investment. As an investor, it allows you to act as a middleman between sellers and buyers, earning profits without ever owning the property. This article will discuss the essentials of wholesaling property contracts, including how to get a wholesale assignment contract done, wholesaling land contracts, the role of the real estate middleman, and much more.

Wholesaling Real Estate Assignment Contracts:

Wholesaling real estate assignment contracts involve finding a property seller, negotiating a purchase price, and assigning the contract to a buyer for a higher price. The difference between the purchase price and the assigned price is your profit. This approach is an excellent way for new investors to enter the real estate market, as it requires minimal capital and can be done with little experience as a real estate investor.

Wholesale Property Contract:

A wholesale property contract is a legally binding document that outlines the terms and conditions of a full real estate business transaction between the wholesaler and the seller. The wholesaler negotiates a purchase price with the seller, and in return, they have the right to assign the contract to a buyer. Critical components of a wholesale property contract include property information, purchase price, earnest money deposit, inspection contingencies, and assignment clause.

How to Get a Wholesale Contract:

To get a wholesale contract, follow these steps:.

• Find a distressed property or motivated seller.
• Negotiate a purchase price that is below market value.
• Draft a wholesale property contract with the seller, including an assignment clause.

Wholesaling Land Contract:

Wholesaling land contracts follow a similar process to real estate wholesaling contracts and real estate assignment contracts but involve vacant land instead of residential or commercial properties. Investors find undervalued land, negotiate a purchase price with the seller, and then assign the land contract to a buyer for a higher price. Wholesaling land contracts can be lucrative, as land often has lower holding costs and fewer complications than developed properties.

How to Get Wholesale Contracts:

Getting wholesale contracts involves networking, marketing, and diligent research. investors can find potential deals by:.

• I attend local real estate events and connect with other investors, wholesalers, and professionals.
• You use online and social media platforms to market your services and find motivated sellers.
• I am researching public records, foreclosure lists, and other sources for distressed properties or owners.
• We are developing a reputation for reliability, professionalism, and integrity within the real estate community.

What is a Wholesale Real Estate Contract?

A wholesale real estate contract is a legally binding sale agreement between wholesalers and property sellers. It allows the wholesaler to assign the contract to a buyer for a higher price, earning a profit without purchasing the property. Wholesale real estate contracts typically include an assignment clause, which gives the wholesaler the right to assign the contract to a third party.

Real Estate Middleman Contract:

A real estate middleman or real estate wholesale contract is an agreement between a wholesaler and a property seller. The wholesaler acts as a middleman, connecting motivated sellers with buyers and assigning the contract for a profit. This type of contract is attractive to investors with limited capital, as it allows them to earn money without owning the property or financing the purchase.

Wholesale Contract for Real Estate:

A wholesale contract for real estate is an agreement between a wholesaler or real estate agent and a seller, allowing the wholesaler to assign the purchase contract to a buyer for a higher price. This contract outlines the terms and conditions of the transaction, including property information, purchase price, contingencies, and assignment clause.

Wholesaling Contracts:

Wholesaling contracts are legal agreements that allow real estate investors to act as intermediaries in real estate transactions, connecting motivated sellers with buyers and earning a profit from the difference in the negotiated purchase price and the assigned price. Wholesaling contracts typically include clauses that protect the wholesaler’s interests, such as inspection contingencies and the right to assign the contract to a third party.

Assigning a Real Estate Contract for Wholesale:

Assigning a used real estate purchase contract for wholesale involves transferring the rights and obligations of the purchase agreement from the wholesaler to the end buyer. This process is generally straightforward and involves the following steps:

• Finding a suitable end buyer: Market the property to potential buyers and find someone interested in purchasing the property at a price higher than the negotiated purchase price.
• Drafting an assignment agreement: Create a legally binding assignment agreement that outlines the terms and conditions of the contract assignment, including the assignment fee (the profit earned by the wholesaler).
• Signing the assignment agreement: The wholesaler and the end buyer must sign the assignment agreement to legally bind it.
• Closing the transaction: The end buyer and the original seller will proceed with the closing process, and the wholesaler will receive their assignment fee upon the successful completion of the transaction.

In conclusion, wholesaling real estate assignment contracts is an attractive investment strategy for individuals looking to enter the market with minimal capital and experience. By acting as a middleman and connecting motivated sellers with buyers, wholesalers can earn profits without ever owning or financing the property. Understanding the intricacies of wholesale real estate deals, property contracts, land contracts, and the assignment process is crucial for success in this fast-paced and competitive market. By networking, marketing, and conducting thorough research, aspiring wholesalers can find lucrative deals and build a successful real estate investment business.

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• Dec 13, 2023

Understanding Assignment of Contract in Real Estate Wholesaling

Real estate wholesaling is a popular strategy for new investors who want to get their feet wet. The term "wholesaling" refers to the process of buying homes and reselling them quickly without making any significant repairs. One crucial aspect of this strategy is the assignment of contract, which allows the wholesaler to profit from the transaction without ever owning the property.

What is Assignment of Contract?

In simple terms, an assignment of contract in real estate is a legal agreement that allows the investor (or 'assignor') to transfer their rights and obligations of the property purchase contract to another party (or 'assignee'). This means that the assignee steps into the shoes of the assignor and completes the transaction with the original seller.

The assignor's primary role is to find a motivated seller, negotiate a purchase price, and then find a buyer willing to pay a higher price for the property. The difference between the contract price with the seller and the amount paid by the end buyer is the wholesaler's profit.

How Does it Work?

Here are the basic steps involved in an assignment of contract:

1. Find a Motivated Seller: The first step is to find a homeowner who wants to sell their property quickly. This could be due to various reasons such as financial distress, job relocation, divorce, or a need to liquidate assets.

2. Negotiate a Purchase Price: Once a motivated seller is identified, the wholesaler negotiates a purchase price and signs a purchase agreement with the seller. This agreement includes an "assignment clause" which gives the wholesaler the right to assign the contract to another buyer.

3. Find an End Buyer: The wholesaler then finds an end buyer who is willing to buy the property at a higher price. This could be a rehabber looking for a fix-and-flip opportunity, or a landlord seeking rental properties.

4. Assign the Contract: The wholesaler then executes an assignment agreement with the end buyer, transferring all rights and obligations of the original contract to them. The assignee pays an assignment fee to the wholesaler, which is typically the difference between the original purchase price and the price the end buyer agrees to pay.

5. Close the Deal: Finally, the deal is closed with the help of a title company or attorney. The original seller receives the agreed-upon price from the original contract, the end buyer gets the property, and the wholesaler walks away with the assignment fee.

How to Fill Out an Assignment of Contract

Download the Assignment of Contract for Free

REIPro is a comprehensive tool for real estate investors that not only provides essential contracts like the Assignment of Contract but also includes detailed training videos. With REIPro's Contract Writer, users can easily fill in the blanks to customize their documents and then download, print, or email them as needed. This platform makes it simpler for investors to understand and implement complex strategies such as contract assignments in real estate wholesaling. Click here to access the Assignment of Contract.

Legalities and Ethics

While the assignment of contract is a legitimate real estate strategy, it's not without controversy. Some people view wholesalers as middlemen who profit without adding value. However, ethical wholesalers can provide a valuable service by connecting motivated sellers with investors.

It's also important to note that the legality of contract assignment can vary by state. In some jurisdictions, you may need a real estate license to wholesale properties. Therefore, it's crucial to understand your local laws and regulations before getting started.

In conclusion, assignment of contract is a powerful tool in real estate wholesaling. It allows investors to profit from real estate transactions without needing to buy, own, or repair properties. As with any investment strategy, education and due diligence are vital to success.

Remember, the goal is to create win-win situations for all parties involved: a quick sale for the distressed seller, a good deal for the end buyer, and a fair profit for the wholesaler. 

• Wholesaling

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Real Estate Wholesaling and Assignment Contracts: Unpacking the Legal Dimensions

Author: Real Estate Holding Company

Wholesaling and assignment contracts have grown increasingly popular as real estate investing strategies. While they offer intriguing profit margins and comparatively lower risks, their legal complexities can be daunting. In this context, the layperson investor often walks a fine line between a profitable deal and a binding contractual mess.

Wholesaling as a Versatile Investment Strategy

Wholesaling has earned its reputation as a versatile real estate investment strategy for several reasons. It allows you to operate with a lower upfront capital requirement than many other forms of real estate investment. Since the wholesaler typically never takes possession of the property, holding costs like taxes, utilities, and maintenance are generally not a concern.

It's also a quicker way to turn a profit. Traditional real estate investments can take months or even years to yield a return. In wholesaling, however, the timeline from acquisition to sale is generally much shorter. But it's precisely this expedited timeline that makes understanding assignment contracts so crucial. A poorly structured assignment contract could not only jeopardize a deal but also potentially subject you to legal repercussions.

The Indispensable Role of Assignment Contracts

Assignment contracts are the linchpin that holds the wholesaling strategy together. These are the legal documents that allow the wholesaler to transfer their purchase rights to a third-party buyer. In effect, they serve as a roadmap that details how the transaction will proceed and under what conditions. Here, every clause matters—from the descriptions of the property to the allocation of costs and the stipulations that would permit either party to back out of the deal.

Given their importance, it's advisable not to use a one-size-fits-all template for assignment contracts. Tailor them to fit the unique circumstances and stipulations of each deal. Consulting with a real estate attorney to draft or at least review your assignment contract could save you from headaches down the line. It's better to invest in a well-drafted contract now than to pay for legal disputes later.

Clauses that Matter: Price, Timeline, and Contingencies

Key clauses in an assignment contract often include the assignment fee, the timeline for the completion of the deal, and any contingencies that must be met for the contract to be fulfilled. The assignment fee is what the third-party buyer pays the wholesaler for the right to purchase the property. This fee is where the wholesaler makes their profit and is usually a topic of keen negotiation.

The timeline is also critical. Given that the wholesaler is not planning to purchase the property, time is of the essence. If the third-party buyer doesn’t complete the purchase within the stipulated time, the wholesaler could risk losing their earnest money deposit or even facing legal claims from the original seller.

Contingencies are another essential feature of assignment contracts. These could range from standard inspection contingencies to more specific conditions like the availability of financing for the third-party buyer. These need to be clearly defined and mutually agreed upon.

The Core Elements of Wholesaling in Real Estate

At its simplest, wholesaling in real estate involves purchasing properties below market value and reselling them at a profit. However, the legal process is more involved. Typically, an investor (the "wholesaler") signs a purchase agreement with the property owner, giving them the right but not the obligation to buy the property. Then, the wholesaler sells or "assigns" this purchase right to a third party.

The assignment of a contract, which transfers the original agreement's responsibilities and benefits to another party, is where things start to get complex. Although a seemingly straightforward process, the practice is governed by a set of detailed laws that can differ from state to state.

Legislation that Sets the Ground Rules

The Uniform Commercial Code (UCC), particularly Article 2, is a principal set of laws that generally govern these transactions in the United States. Yet, real estate contracts often also fall under state-specific legislation that may augment or contradict the UCC. For instance, some states require a wholesaler to be a licensed real estate agent if they sell real property interests. Failure to comply with such rules could lead to severe penalties.

Disclosure Obligations in Assignment Contracts

A key consideration in real estate assignment contracts is the requirement for clear and comprehensive disclosure. Without sufficient disclosure to all involved parties—the initial property seller and the third-party buyer—legal disputes can arise. These might stem from accusations of misrepresentation or even fraud. Therefore, it's advisable to consult an attorney specializing in real estate law to craft a foolproof contract.

When Due Diligence Pays Off

Before diving into a wholesaling deal, engaging in rigorous due diligence may be beneficial. This usually entails an analysis of the property in question, its market conditions, and reviewing all associated legal documentation. A detailed inspection report, comparable market analysis, and a legal review serve as powerful tools to gauge the viability of a deal.

Moreover, as part of due diligence, make sure to check the title for any liens or other encumbrances that may affect the property's value or marketability. This may require professional title services and should not be overlooked.

Financing and Capital: Setting Up for Success

While wholesaling generally requires less capital than other forms of real estate investing, it's not devoid of financial considerations. Even though a wholesaler typically doesn't purchase the property outright, earnest money deposits are common. These deposits are often non-refundable and serve as a gesture of good faith. How much you'll need to put down as earnest money is generally up for negotiation but failing to follow through with the contract could mean losing that money.

Leveraging Wholesaling as a Real Estate Investment Strategy

For those who are considering wholesaling as a primary or secondary strategy in their real estate investing portfolio, caution and educated action are your allies. Although assignment contracts offer a framework for successfully completing a wholesale deal, they are not a shield against legal obligations and compliance with local, state, and federal laws. Ignorance of the law is rarely if ever, considered an acceptable defense. Keep an eye on local and state legislation that may affect your transactions, and stay abreast of federal guidelines. Connect with professionals who can offer valuable insights—be it tax advisors, real estate attorneys, or seasoned investors.

In this business, the margin between success and failure often comes down to understanding the legal aspects. Wholesaling and assignment contracts may appear to be simple routes to profit, yet they are wrapped in layers of legalities that warrant close scrutiny. Proceed with caution, yet proceed—you might find that the investment yields more than monetary rewards.

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Wholesaling Real Estate Contracts [Template Downloads]

If you're a real estate wholesaler, you understand the importance of having the right contracts in your arsenal.

This comprehensive guide is designed to help you navigate the world of wholesaling real estate contracts. From understanding the role of wholesalers to successfully closing deals, this guide will provide you with the insights and knowledge you need to thrive in this exciting aspect of real estate investing.

We’ll also give you some wholesaling real estate contract templates you can download right away!

Understanding Wholesale Real Estate Contracts

Real estate wholesaling is a strategy where you secure exclusive buying rights from a seller without needing a real estate license. You then flip that contract (not the property) to a cash buyer for an assignment fee.

Of course, it’s important to understand the various types of wholesale contracts and the legal aspects involved to facilitate successful transactions.

The Wholesaling Real Estate Contracts Lifecycle

If you’re just getting started, it can be a little confusing when to do what and what to do when… Here's a breakdown from Tyler Austin of the entire contract lifecycle when you’re wholesaling properties. 

Types of Wholesaling Contracts

Wholesalers require two key types of contracts, purchase agreements and assignment contracts, to secure deals and assign them to investors. A purchase agreement, also known as a Real Estate Purchase and Sale Agreement, is a contract that outlines the terms and conditions of the real estate transaction, guaranteeing your right to buy or sell the property to someone else. Being cognizant of any clauses that may prohibit assignment is crucial, as it could impact your capacity to wholesale the property.

An assignment contract, on the other hand, allows you to sell your buying rights to another buyer without actually purchasing the property yourself. This is the basis of a wholesale real estate assignment, where wholesalers connect sellers and buyers, making a profit from the assignment fee without owning the property. After signing the original purchase agreement, the next step involves ensuring your contractual rights are assigned to another investor. You can do this through an Assignment of Real Estate Purchase and Sale Agreement.

Disclaimer: These templates are meant to just be a starting place for your wholesaling real estate contracts. Please consult with a lawyer to customize the templates so that they’re legally binding for your local jurisdiction. 

Legal Aspects

Legally binding contracts are the backbone of any successful wholesale real estate business, and understanding the legal aspects of these contracts is crucial. For instance, awareness of the rules and regulations applicable to the state where the property is located is vital. Contingency clauses are another vital aspect of wholesale real estate contracts, allowing a party to back out of the agreement without negative consequences if certain conditions aren’t met.

Restatement Second of Contracts 317 states that assignments are generally allowable within contracts. Unless the contract itself prohibits it, an assignment is permissible. To ensure a smooth transaction and avoid potential legal issues, make sure to consult a real estate attorney and include all the necessary elements in your wholesale contract, such as the parties involved, property description, purchase price, and financing terms.

Key Components of a Wholesale Contract

A well-crafted wholesale real estate contract should contain several key components to ensure it is legally binding and effective. These essential elements include:

• Clearly defining the parties involved
• Providing a detailed and accurate property description
• Outlining the agreed-upon purchase price
• Specifying the financing terms

Incorporating these components into your contract equips you to navigate the complexities of wholesale real estate transactions and safeguard your interests.

Parties Involved

In a wholesale real estate contract, clear definition of the roles and responsibilities of the buyer, seller, and wholesaler is vital. The roles are as follows:

• The buyer: the party purchasing the property from the wholesaler at a discounted price.
• The seller: the original owner of the property who contracts with the wholesaler to sell the property at a negotiated price.
• The wholesaler: plays a pivotal role in securing the contract from the seller and finding a suitable buyer to purchase the rights to the contract, ultimately making a profit from the difference in price.

In addition to the primary parties, a title company plays a significant role in wholesale real estate contracts. The title company is responsible for ensuring that the property title is legitimate and providing title insurance to protect both the buyer and seller during the transaction. Including all relevant parties in the contract helps to establish roles and responsibilities, minimize misunderstandings, and ensure a successful deal.

Property Description

A detailed property description is vital for a legally binding and efficient wholesale real estate contract. This description should include:

• The property’s legal address
• Property type
• Specific features such as the number of bedrooms, bathrooms, and other relevant details

Providing a thorough property description enables all parties involved to understand the property’s condition and value, helping to prevent disagreements and ensure a smooth transaction.

In addition to the basic property details, it’s important to include any disclosed issues, such as structural problems, termite damage, or lead-based paint, that may affect the property’s value or require repairs. Outlining the property’s condition clearly allows for an accurate assessment of the potential profit margin and negotiation of a fair purchase price with the seller, thus setting the foundation for a successful wholesale deal.

Purchase Price and Financing Terms

Outlining the agreed-upon purchase price and financing terms is another integral component of a wholesale real estate contract. The contract should include:

• The purchase price, which should be based on factors such as market value, necessary repairs, and the potential profit margin for the wholesaler.
• The payment method, specifying how and when the payment will be made.
• Any financing arrangements that both parties have agreed to.

When it comes to payment methods, wholesalers typically receive a deposit upon signing the Assignment of Real Estate Purchase and Sale Agreement, with the remaining profit paid at closing. However, it’s important to note that title companies may have restrictions on the types of payment they accept, such as not accepting credit cards, checks, or cash due to ‘good funds laws’. Clearly stating the purchase price and financing terms in your wholesale contract ensures a smooth transaction and safeguards your interests as a wholesaler.

Crafting a Wholesale Contract: Best Practices

Creating a solid wholesale real estate contract is essential for a successful deal, and there are several best practices to follow when crafting your agreement. These include:

• Conducting due diligence to research properties, laws, and potential buyers.
• Consulting an attorney for legal advice and contract customization.
• Utilizing pre-made contract templates to streamline the process and ensure all necessary components are included.

Implementing these best practices can enhance your chances of closing deals and making profits in the competitive realm of wholesale real estate investing. In the following sections, we’ll delve deeper into each of these practices, providing you with valuable insights and tips to help you craft an effective wholesale contract that meets your needs and protects your interests.

Due Diligence

Conducting thorough research on properties, laws, and potential buyers is critical to ensuring a successful wholesale deal. This process, known as due diligence, involves:

• Inspecting the property
• Performing a records search
• Seeking legal advice
• Preparing any special disclosures

Conducting due diligence enables you to gain a better understanding of the property’s value, condition, and potential issues that may arise during the transaction.

Due diligence also extends to researching the local laws and regulations that govern wholesale real estate contracts in the jurisdiction where the property is located. This knowledge can help you ensure that your contract is legally binding and compliant with all applicable laws, reducing the risk of disputes or legal issues down the line.

Investing time in thorough due diligence can improve your success chances as a real estate investor in the fast-paced domain of wholesale real estate investing, attracting real estate investors with similar goals.

Consulting an Attorney

Seeking legal advice is another crucial best practice when crafting a wholesale real estate contract. A real estate attorney can review and customize your contract template to ensure it complies with all relevant laws and regulations, as well as protect your interests in the transaction. This can be particularly important when dealing with contract assignment restrictions or navigating complex financing arrangements.

In addition to providing legal guidance, an attorney can also help you:

• Negotiate the terms of your contract, ensuring a fair and mutually beneficial agreement for all parties involved
• Avoid costly mistakes
• Safeguard your investment
• Increase your chances of success in wholesaling real estate

Consulting an experienced real estate attorney can provide you with benefits that even a skilled real estate agent might not be able to offer.

Utilizing Templates

Leveraging pre-made contract templates can greatly streamline the contract creation process and ensure all necessary components are included in your wholesale real estate contract. The use of a template can save time and effort, while enabling the crafting of a legally binding and effective agreement that suits your needs and protects your interests.

There are several reliable sources for wholesale real estate contract templates, such as:

• Real Estate Skills
• FortuneBuilders
• Property Mob
• Rocket Mortgage

While templates can provide a solid foundation for your contract, it’s important to remember that customization may be necessary to comply with local laws and regulations, as well as to address the unique aspects of your specific deal. Utilizing templates and seeking legal advice for customization to suit your situation allows the creation of a robust wholesale real estate contract, setting you up for success.

Strategies for Success in Wholesaling Real Estate

To thrive in the competitive world of wholesaling real estate, it’s essential to implement effective strategies that help you source properties, build a strong buyers list, and generate a consistent flow of leads. Focusing on these core aspects of your business positions you well to close deals quickly and maximize your profits as a real estate wholesaler.

In the following sections, we’ll explore some proven methods for sourcing distressed properties , establishing a network of potential investors, and generating leads through various marketing channels. By implementing these strategies, you can propel your wholesaling business to new heights and achieve long-term success in the real estate industry.

Sourcing Distressed Properties

Identifying undervalued properties, such as distressed property, is a critical step in the wholesaling process, as it allows you to secure deals at a lower price and sell them at a higher margin to your end buyers. To source distressed properties, it’s essential to conduct thorough research and utilize various lead generation channels, such as online real estate marketplaces, foreclosure listings, and local real estate agents.

Networking is another key strategy for finding motivated sellers and distressed properties. By attending local real estate events, joining real estate clubs, and leveraging referrals, you can establish connections with property owners who may be interested in selling their properties at a discount. Honing your skills in sourcing distressed properties enhances your chances of securing profitable deals and expanding your wholesale real estate business.

Building a Buyers List

Establishing a network of potential investors and buyers is crucial to quickly assigning contracts and closing deals in the world of wholesaling real estate. To build a strong buyers list , you can start by:

• Networking with local real estate agents
• Attending real estate events
• Joining real estate clubs in your area
• Utilizing online platforms like Craigslist and social media groups to connect with potential cash buyers

When adding leads to your buyers list, make sure to collect essential information such as:

• Their names
• Contact details
• Buying criteria
• Funding sources

Cultivating a robust buyers list equips you better to quickly assign contracts, close deals, and generate consistent revenue from your wholesale real estate business.

Marketing and Lead Generation

Attracting motivated sellers and generating a steady flow of leads is essential for success in wholesaling real estate. Implementing marketing strategies like:

• Direct mail
• Social media
• Display ads

can help you reach your target audience and establish your brand in the industry.

In addition to traditional marketing channels, leveraging content marketing can be a highly effective strategy for lead generation. By creating valuable and informative content, you can:

• Attract motivated sellers
• Establish yourself as an expert in the industry
• Increase brand awareness, visibility, and reach
• Ultimately drive more leads and deals for your wholesaling business.

Overcoming Challenges in Wholesale Real Estate

While wholesaling real estate can be a lucrative venture, it’s not without its challenges. Common obstacles include dealing with contract assignment restrictions and managing contingencies. By understanding these potential challenges and implementing the strategies discussed in this guide, you can navigate the complexities of wholesale real estate contracts and set yourself up for success in this thriving niche of the real estate market.

Contract Assignment Restrictions

One common challenge faced by wholesalers is the presence of contract assignment restrictions, which can limit your ability to assign contracts to other buyers. To overcome this obstacle, you can utilize a Standard Contract Assignment Addendum, which modifies the original contract to allow for assignment, or consider alternative strategies such as double closings.

Awareness of potential limitations on contract assignments and exploration of alternative strategies enable navigation through these challenges and assurance of a successful wholesale deal. Additionally, seeking legal advice from a real estate attorney can help you tailor your contract to comply with local laws and regulations, further reducing the risk of disputes or legal issues down the line.

Managing Contingencies

The inclusion of contingency clauses in your wholesale real estate contracts is vital for the protection of all parties involved and the assurance of a successful transaction. Common contingencies include:

• Financing contingencies
• Inspection contingencies
• Sale contingencies
• Title contingencies

These contingencies allow a party to back out of the agreement without negative consequences if certain conditions aren’t met.

Effective management of contingencies requires ensuring that all parties understand the terms of the contingency clause and establishing a realistic timeline to meet the conditions. Additionally, seeking legal advice from an attorney can help you craft contingency clauses that safeguard your interests and reduce the risk of disputes or legal issues down the road.

Final Thoughts

Mastering the art of wholesaling real estate contracts can unlock a world of opportunities for savvy investors. By understanding the fundamentals of wholesale contracts, crafting solid agreements, and implementing effective strategies for sourcing properties, building a buyers list, and generating leads, you’ll be well on your way to success in this thriving niche of the real estate market. With the knowledge and best practices shared in this comprehensive guide, you’re now equipped to overcome challenges, close deals, and reap the rewards of wholesale real estate investing.

Frequently Asked Questions

What type of contract is used for wholesale real estate.

A wholesale real estate contract is an Assignment of Real Estate Purchase and Sale Agreement which facilitates the transfer of rights from the wholesaler to the end buyer.

How do you assign a wholesaling contract to real estate?

To assign a wholesaling contract to real estate, you may need to include an assignment clause in the purchase agreement and draft an assignment of contract agreement. You also need to disclose to the seller that you have the authority to sell or assign the property, as stated by the clause "and/or assigns" next to your name in the contract. Finally, you must find a buyer and assign the contract assignment.

How does a wholesaler get paid?

The wholesaler gets paid when the buyer assumes legal rights of sales contract, or when the closing of the transaction is complete and funds and title of the property change hands.

How can I find distressed properties for my wholesale real estate business?

Do your research, network with industry professionals, attend local real estate events, and leverage online real estate marketplaces to find distressed properties for your wholesale real estate business.

What are some effective marketing strategies for attracting motivated sellers?

Target motivated sellers with direct mail, social media, display ads, and search ads to generate leads and make the most of your marketing efforts.

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What Is Wholesale Real Estate?

How to wholesale real estate.

• Pros and Cons
• Succeeding at Wholesale Real Estate

Wholesale Real Estate vs. Flipping

• Wholesale Real Estate FAQs

The Bottom Line

• Alternative Investments
• Real Estate Investing

What Is Real Estate Wholesaling? How It Works, Example, and Strategies

Gordon Scott has been an active investor and technical analyst or 20+ years. He is a Chartered Market Technician (CMT).

Pete Rathburn is a copy editor and fact-checker with expertise in economics and personal finance and over twenty years of experience in the classroom.

Investing in real estate is nothing like investing in stocks and bonds . With the latter two, depending on the type of investment, you may be able to dive right in with perhaps as little as $100. You can exit whenever you wish. It's not that easy when you're dealing with real estate. In fact, real estate transactions can be tricky to navigate and they often come with a hefty price tag.

What's more, it takes time to buy and sell homes. First, there's the issue of the down payment. You also need financing for what your down payment doesn't cover. You must fill out all kinds of paperwork. Then, there's the closing, not to mention the time required to deal with tenants and collect rent.

If you really want to invest in real estate , but can't bear the thought of all the money involved and going through the purchase process, you have options. Wholesale real estate is one of them. It's a legal strategy concerning the purchase of real estate that you don't commit to buying yourself or make a down payment on.

So, how does it work? Read on to find out about wholesale real estate and the profits available from it.

Key Takeaways

• In real estate wholesaling, a wholesaler puts a seller's home under contract and then finds an interested investor to buy it.
• The wholesaler assigns their rights in the contract to the buyer at a higher price than the price contracted with the seller and keeps the difference.
• Real estate wholesalers generally deal in distressed properties.
• They take on the role of middleman to match investors/buyers with sellers.
• Unlike flipping real estate, a real estate wholesaler doesn't make any renovations and carries no costs.

Wholesale real estate refers to a short-term business strategy that investors can use to make quick and steady income in the real estate market.

In wholesale real estate transactions, the wholesaler enters into a purchase contract for a home from a seller for a small earnest money deposit. The contract spells out the amount the wholesaler will sell the property for and the required time period for the sale.

After the wholesale real estate contract is in place, the wholesaler attempts to find an interested investor. Once found, they reassign the contract to the investor at an agreed-upon higher price. The difference in prices is known as the wholesale fee and can be 5% to 10% of the property price. This goes to the wholesaler.

Usually, wholesalers look for a distressed property 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.

Wholesale real estate may be well suited for people interested in real estate transactions but who don't have the financial wherewithal to actually buy and sell properties.

You often don't need a real estate license to become a wholesaler but check your local laws to be sure. If you have great people skills and are industrious, wholesale real estate may be right for you.

Instead of purchasing a home and selling it, a wholesaler contracts with a seller for the property, finds a party interested in buying it, and sells them their rights to the contract.

While wholesaling real estate doesn't require a large amount of money, it does require that a wholesaler do the necessary property research, the networking to find the right investors, and the work to craft a financial deal that the investor will accept.

Here are the steps involved in real estate wholesaling.

1. Conduct Research

Learn about the wholesaling laws in your jurisdiction. In addition, look into the locales and neighborhoods where you want to buy property.

2. Locate a Distressed Property

Look for properties that may be listed below market value and owners who are motivated to sell. Owners of homes that are being foreclosed or have liens may be open to selling for less than what the house is worth. These resources may help you find such properties:

• Multiple Listing Service (MLS)
• Networking organizations, online real estate auction sites
• Social media platforms
• Foreclosure sites

3. Do the Math and Due Diligence

Once you find a property that fits your criteria, make sure your wholesale real estate transaction will make financial sense. First, find out the property's fair market value. Looking at comparable properties sold in the area, occupancy rates, and cash-on-cash returns can help. Then determine what any required repairs will cost.

This information will allow you to calculate the after-repair value (the fair market value after repairs are done). With that, you can calculate a maximum allowable offer (the highest price you can offer for the distressed property and still make a profit).  

4. Contact the Seller

Explain your role as a real estate wholesaler and how working together may be an ideal way to sell their property. Clearly describe how the wholesale real estate transaction would work. Wholesale real estate transactions are legitimate (as long as state laws are followed) and there's nothing to hide.

5. Obtain a Property Contract

Present your offer to the seller and get the property under contract. Be sure your contract includes the right to assign the contract to another party. Also, include in your contract a contingency that allows you, as the wholesaler, to withdraw from the deal if unable to find a buyer before the contract expires. This limits your risk.

6. Find a Cash Buyer

Once you’ve found the right property and have a wholesale real estate contract with the seller in place, you need to market your contract to potential cash buyers.

Use your networking skills, both online and off, to connect with potential investors. You might also contact local realtors and ask about cash purchases made over the recent past.

7. Reassign the Contract to the Buyer

Now's the time to close the deal with the investor who fits your wholesale real estate transaction best. Both of you have to agree to terms and conditions. Of course, as the real estate wholesaler, you want to be paid for the work you did to find the distressed property and to put the deal together.

Pros and Cons of Wholesale Real Estate

• Real estate wholesaling can school you in the real estate market and help you build high-value negotiating skills.
• It's a low-risk money-making strategy because it requires little money upfront.
• Money is made quickly. Profits, when they come, are made in a relatively shorter timeframe than other kinds of real estate investments. The fee is partially paid at the assignment of the purchase contract and the remainder at the closing of the property sale.
• No credit score (good or bad) is required.
• No property renovation experience or effort is necessary.
• If you have a good network of investors, you can sell the house fast.
• You may make a large profit in a relatively short time, depending on how many deals you put into play.
• To make reliable income quickly, you must develop (or already have) optimal networking skills and a solid pipeline of leads that can deliver investors.
• You won't make any money until you find properties and investors so a lot of sweat equity can be required as you master the process and build your book.
• Some states require a real estate license to wholesale real estate.
• Wholesale real estate transactions involve a profit margin that's lower than other real estate investments.
• They can be unpredictable due to the dependency on suitable/available properties.
• Wholesalers who fail to find investors may lose their earnest money deposits.
• Property owners may not understand or be comfortable with the wholesale real estate strategy.

How to Succeed at Wholesale Real Estate

Real estate wholesaling isn't for everyone. It requires a lot of work, time, commitment, and patience. You also need to have great communication and marketing skills.

You must build a network of investors who may be interested in buying the properties that you find.

Of course, finding the right kind of property is one of the keys to successful wholesaling. Homeowners who own distressed properties and are eager to sell make great prospects.

These are the kinds of properties that can attract potential investors. Before you make the seller an offer, you'll want to review the types of repairs or additions the home will need.

Here are some personal attributes that can help someone become a successful real estate wholesaler:

• A personality that focuses on goals and commits to achieving them
• An ability to organize and tackle tasks efficiently
• An ability to delegate tasks when useful
• A recognition that partnering with those with access to possible leads, e.g., the Multiple Listing Service, can be necessary
• An affinity for technology (such as customer relationship management software and mobile apps) that can make the entire wholesale real estate workflow easier and more effective
• An understanding of the power and value of a well-constructed website to market your services and dispense important information to potential sellers and investors
• A desire to learn more with each wholesaling experience and to make sure both seller and buyer are happy with the wholesale real estate transaction

Example of a Wholesale Real Estate Transaction

Real estate wholesaling may sound complicated but it's actually very simple.

Let's say a homeowner has a property they don't believe could sell because it's fairly distressed. The owner doesn't have the resources to fix it up and just continues to live in it, thinking they'll never get a fair price for it.

Enter the wholesaler, who approaches the homeowner with an offer. Together, they agree to put the house under contract for a purchase price of $90,000. Using a network of investors, the wholesaler finds an eager buyer at $100,000.

The wholesaler assigns the contract to this investor , who then has a profitable fixer-upper project. The wholesaler makes a $10,000 profit without having to buy the home.

Essentially, the wholesaler contracted with the homeowner to find an interested party to buy the house. Under the contract, the buyer paid $10,000 to the wholesaler and then closed on the purchase with a payment of $90,000.

Real estate wholesaling is similar to flipping . Both use property as a means to invest and make a profit. Both require a contract and the sale of a home.

However, the time frame with wholesaling is much shorter than it may be with flipping. Also, the wholesaler does not make any repairs or modifications to the home.

Since the wholesaler never actually purchases a home, real estate wholesaling is much less risky than flipping. Flipping also often involves renovation and carrying costs such as a mortgage, property taxes , and insurance.

Real estate wholesaling requires much less capital than flipping. Earnest money payments on a few properties generally suffice. Success depends on the wholesaler's knowledge of the market and connection to investors for quick sales.

What's Involved in Running a Wholesale Real Estate Business?

Running a real estate wholesaling business requires that you be good at finding properties that can be sold for less than market value. You have to be comfortable and proficient at negotiating deals with both home sellers and cash buyers. In addition, you must work hard to build and manage a solid, reliable lead list of buyers. Usually, you'll also have to invest a small amount of funds in the form of earnest money deposits.

Do You Need a License to Wholesale Real Estate?

You may need a real estate license in some states. An important aspect of wholesale real estate is that you must look into your state laws relating to it (or the laws of state(s) in which you'll engage in it). Be sure to learn all you can and abide by any rules and regulations. A real estate attorney can help explain the landscape for you.

What Is a Wholesale Real Estate Contract?

A wholesale real estate assignment contract is what the wholesaler and the homeowner sign to start the process of wholesale real estate. It doesn't provide the wholesaler with title to the property but it gives them some control over it while they try to find an investor to buy the seller's house.

Once the wholesaler locates that investor, the wholesaler assigns their contractual rights to them. This involves a different contract—an Assignment of Real Estate Purchase and Sale Agreement. This second document states that the investor/buyer assumes the wholesaler's responsibilities, including buying the property according to the terms in the first contract (made with the seller).

Real estate wholesalers are middlemen who bring together homeowners of distressed houses and investors who want a below-market real estate deal that they can make a profit on.

Wholesale real estate offers beginners the opportunity to start investing in real estate. It usually involves little or zero capital investment. With experience, wholesalers can get several deals working at the same time and make a sizable profit quickly.

Real estate wholesaling involves a certain amount of risk, especially if a wholesaler has to make earnest money deposits. However, the potential to make solid profits is there for those who commit to the time and effort required to build a wholesale real estate business.

RealEstateInvesting.org. " How to Wholesale Real Estate ."

Oregon Association of Realtors. " Purchasing Distressed Property ."

HG.org. " Flipping a Home: The Legal Aspect ."

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Wholesale Contract for Real Estate: Mastering the Essentials for Investors

Understanding the variations and legal complexities, such as Purchase & Sale Agreements, Lease Options, and Assignment Contracts, is critical.

Struggling to understand the nuances of wholesale contracts for real estate?

You're not alone; let's clarify the complexities together.

• The definition and importance of a wholesale real estate contract.
• Exploring the different types of wholesale contracts available to investors.
• The delicate interplay between legality and profitability.
• Effective strategies for maximizing your returns through wholesaling.

Continue reading to navigate the intricacies of wholesale contracts and to make well-informed decisions in your real estate investments.

The Essentials of Wholesale Real Estate Contracts

At the heart of any successful wholesale real estate transaction lies the contract itself.

But what exactly is it?

A wholesale contract legally binds a property seller to the wholesaler, setting the stage for a profitable flip.

It's the strategic blueprint that outlines the terms of your potential profit.

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These contracts facilitate a swift transfer of the property's purchase rights to an end investor, often in under a month.

Without this key document, the wholesale deal simply cannot proceed.

Types of Wholesale Contracts in Real Estate Investing

Real estate investing is an art that requires the right tools, and in wholesaling, contracts are the brush and canvas.

One has the luxury of choosing from three common types: the Real Estate Purchase & Sale Agreement, Lease Option Agreement, and Wholesale Real Estate Assignment Contract. Each of these offers different advantages depending on the situation and desired outcome.

Action Tip: To navigate the world of real estate wholesaling effectively, one must assess the investment scenario. If you're aiming for a quick turnaround, perhaps the assignment contract is your alley. If control over the property with minimal upfront cost is your goal, consider the lease option. And for those who crave a more traditional route, the purchase and sale agreement might be the best fit.

Common Mistake: New investors often stumble by misapplying these contracts, which can lead to financial and legal repercussions. For instance, utilizing a lease option when a straightforward purchase and sale would suffice might complicate the transaction unnecessarily.

Clarity in the purpose and execution of each contract type ensures a smoother investment journey.

Navigating the Legality of Wholesaling Contracts

Wholesale real estate contracts entail intricate legalities that warrant professional oversight. Diving into these waters unassisted is akin to navigating a labyrinth without a map. Particularly, the assignment and contingency clauses of these contracts are areas where legal counsel is indispensable for clarity and precision.

Before sealing any deal, a seasoned lawyer's input is your safeguard against potential legal pitfalls. This does not merely protect your interests; it also upholds the wholesaling industry's integrity as we move beyond 2023. As such, professional legal consultation isn't a luxury—it's a necessity.

Maximizing Profits with Wholesale Contracts

Profits are the name of the game in wholesaling real estate, and the engine driving those profits are the wholesale contracts. With a well-negotiated wholesale fee, you can see yields without the typical hurdles of credit checks or sinking personal funds into the deal.

This fee is the lifeblood of your wholesale endeavor, serving as both the reward for your efforts and the incentive to refine your skills in contract negotiation and market analysis. Indeed, as we move through 2024, savvy investors will continue to harness the power of wholesale contracts to turn quick profits smoothly and efficiently.

In summary, understanding the nuances and selecting the appropriate wholesale contract is crucial in real estate wholesaling. These contracts form the backbone of profitable transactions in an industry ripe with opportunity.

Regardless of the market's fluctuations, those who master the art of the wholesale contract will find success. Whether through Purchase & Sale, Lease Option, or Assignment Contracts—knowing your tools is tantamount to crafting your triumph in real estate wholesaling.

Frequently Asked Questions (FAQ)

Do you have more questions about wholesale contracts for real estate? Here you'll find answers to some of the common inquiries that can help demystify this essential aspect of real estate investing.

Entering the domain of real estate wholesaling necessitates a sharp understanding of legalities. Each contract comes with its nuances and complexities.

Action Tip: Before drafting or signing a wholesale contract, it's prudent to consult with a real estate attorney. They can provide guidance tailored to your situation.

Wholesaling contracts abound with legal jargon. A standout term is the ‘assignment clause'. This provision is crucial as it lays out the conditions under which contract rights may be transferred.

Another key clause is the ‘contingency clause', offering an exit strategy if certain conditions aren't met. These terms aren't merely formalities; they protect your interests and define the deal’s boundaries.

Common Mistake: Overlooking the fine print in wholesaling contracts can be tempting. However, this oversight can lead to disputes or financial loss. Always ensure every clause is clear and accounted for to safeguard your investment efforts.

Remember the legality of wholesale contracts can be as intricate as the deals themselves. Statistically, those who invest time in understanding these details may better navigate potential legal pitfalls, safeguarding their profits in the process.

Your quest for success in real estate wholesaling is intertwined with the mastery of legal aspects. The time and resources spent ensuring contractual compliance are invaluable. Secure your position in this dynamic field by prioritizing legal proficiency.

A key luring factor to real estate wholesaling is the prospect of considerable gains with minimal financial input. Statistical data suggests that the speed of acquiring profits from wholesale fees is one of the primary attractions for new investors. This is where wholesale contracts shine.

As a middleman, you can earn a wholesale fee without undergoing a credit check or locking in personal funds.

Action Tip: Establising a network of potential buyers can streamline the process of contract assignment, thereby expediting your profit generation.

Common Mistake: Novice wholesalers may undervalue their potential earnings by setting wholesale fees too low. Research your market thoroughly to set competitive and profitable fees.

Remember, your profit reflects the value you add by finding and negotiating these potential deals.

Wholesale contracts serve not just as a conduit for deal-making but also as a strategic tool for profit maximization. By leveraging these contracts wisely, your wholesale business can operate with impressive efficiency and financial leverage.

As we sum up the key insights on wholesale contracts for real estate, let's reinforce the knowledge that can guide you toward success in this domain.

• Wholesaling in real estate is gaining traction, especially for those new to the industry, with its quick-turnaround benefits and minimal entry barriers.
• A legal framework in the form of wholesale contracts is essential to navigate deals and secure profits without the need for a credit check or personal capital investment.
• Understanding the types of wholesale contracts—Purchase & Sale, Lease Option, and Assignment—is crucial to selecting the right one for each transaction.
• Professional legal guidance is paramount to ensuring that these agreements are not only legally sound but also beneficial for all parties involved.
• The proficiency in utilizing wholesale contracts can significantly impact your profit margins and overall success in real estate wholesaling.

Remember, each real estate deal is unique, and the appropriate utilization of wholesale contracts can make the difference between a good and a great investor.

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How to create a wholesale real estate contract.

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How and why to use real estate wholesaling

What does the wholesaler invest in

Who is involved in a wholesale deal

What to include in a wholesale real estate contract

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Frequently asked questions about wholesale real estate contracts

What is a wholesale contract?

A real estate wholesaler acts as the intermediary between the buyer and seller in a real estate transaction. Unlike a traditional real estate agent, in a wholesale deal, the wholesaler seeks out a potential buyer and connects them with a seller. Once the new buyer is ready to go through with the purchase, the wholesaler assigns a purchase contract (or wholesale contract) to the end buyer and collects an assignment fee for their services.

This purchase agreement does not represent the sale of the property. It simply gives the buyer the exclusive right to purchase the property by assigning the contract to the buyer. This is why wholesaling contracts are also called “real estate purchase and sale agreements” or “real estate assignment contracts” — the wholesaler’s work is connecting their buyers list to their sellers to set up both parties for a smooth and easy transaction. Once this is done, the wholesaler’s role in the transaction is finished.

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How and why to use real estate wholesaling.

Wholesaling real estate is a form of short-term real estate investing. Anyone can start wholesaling — you don’t need a real estate license to take part in this investment strategy, although it is advisable to form an LLC under which you can conduct your business. With due diligence and a little real estate know-how, wholesale purchases are a great way to get familiar with the real estate world and make money in a relatively short time frame.

Wholesalers usually seek out properties priced below market value in order to turn the most profit — for example, foreclosures, properties with liens, distressed property, those that need serious repairs, or those that are owned by highly motivated sellers. Once a wholesaler strikes an agreement with the seller, the wholesaler may then work with a title company, contractor, and appraiser to properly vet the property and prepare it for any renovations they — or the seller — want to make.

When the property is ready to be sold, the wholesaler lists it at a higher price — at or above market value. The difference between this purchase price and the wholesale price accounts for the wholesaler’s cut, or the assignment fee, as well as the added value from any repairs or renovations. This can look similar to flipping a house, but wholesaling is generally a shorter, more hands-off process than a complete renovation. Additionally, the buyer is less likely to be a future homeowner and more likely to be a real estate investor.

Wholesale real estate requires unique knowledge to be successful and avoid loss. Familiarity with the real estate industry and legal documentation is helpful. Spotting the opportunities in market properties, however, is key. Success in wholesale real estate means being able to forecast factors like eventual sale price, potential rental property, and real estate market comps.

What does the wholesaler invest in?

Wholesaling is considered a relatively fast and easy investment with quick profits, because in most deals, the wholesaler never owns the property but simply matches a buyer with the seller. In some cases, however, the wholesaler will purchase the wholesale property and resell it. This is known as double closing.

Who is involved in a wholesale deal?

The seller, the wholesaler, and the buyer (also called the end buyer of the real estate deal) to whom the wholesaler hands over the assignment agreement are the three parties involved in a wholesale contract . The assignee (buyer) could be anyone from a real estate agent or real estate investor to a first-time homeowner.

What to include in a wholesale real estate contract.

Make sure you consult with a real estate attorney to confirm that the terms of the agreement are legally sound for all parties. Here are some common parts of a wholesale contract:

• Name and contact information of the buyer and current property owner (seller)
• Legal description of the property
• Condition of premises
• Purchase price and financing
• Closing costs, who pays them, and when
• Assignment clause to transfer property rights
• Buyer and seller default clauses
• Signature by both parties

Create, sign, and manage wholesale contracts with Adobe.

Fortune favors the fast when it comes to wholesaling — make sure you don’t lose out due to time-consuming paperwork or negotiations.

With e-docs you can collaborate, edit, and comment on PDFs with all parties involved so that you can keep sellers and investors in the loop. Quickly send out contracts for digital signatures and receive notifications when the other party signs. Get started with your own wholesale contract template with Acrobat Pro.

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Frequently asked questions about wholesale real estate contracts.

Do you need a real estate license to wholesale.

No. You don’t need a real estate license to take part in this investment strategy, but wholesale real estate requires unique knowledge to be successful and avoid loss. Familiarity with the real estate industry and legal documentation is helpful, as is knowledge of the real estate market in your area. Real estate investment clubs can often provide information about getting started in wholesale real estate investing.

Is a wholesale assignment contract the same as a wholesale real estate contract?

No. A wholesale real estate contract gives an investor the right to buy a property from a seller. A wholesale assignment contract transfers the right to purchase a property from the wholesaler to a buyer. Using these two contracts, a wholesaler can act as an intermediary between interested sellers and buyers.

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Assigning Deals Safely With a Wholesale Assignment Contract

• Blog , Wholesaling Real Estate
• Published on December 6, 2022

Home » Blog » Assigning Deals Safely With a Wholesale Assignment Contract

Once you sign a real estate contract with a motivated seller, it’s time to enjoy your big payday. But there’s one more thing you need to take care of before you can cash that assignment fee check you’ve been looking forward to: you need a wholesale assignment contract. 

How does it differ from a wholesale real estate contract and what should it include? Here are all the details you need to know about legally transferring your deals to cash buyers.

What is a wholesale assignment contract?

There are two different kinds of contracts you need to understand in wholesale real estate: purchase and sale agreements and wholesale assignment contracts.

A purchase and sale contract gives a wholesaler equitable interest in a property, meaning that the house is in the process of being sold and the wholesaler has a financial tie to the transaction. A wholesale assignment contract transfers that equitable interest to a cash buyer, giving them a right to close on the property in place of the wholesaler.

The difference between the two documents is that the assignment contract details the wholesaler’s terms and removes the wholesaler from the deal completely. After signing, it’s the cash buyer’s job to finish the transaction.

What should a wholesale assignment contract include?

An agreement between a wholesaler and a cash buyer is a relatively simple document, but you should include a few key elements to protect yourself and keep everyone involved in the transaction informed.

One key thing to include is a copy of the original wholesale real estate contract. This document will include all the sale agreements including the closing date, sale price, state of the property, and its legal description or address. 

You should also detail your terms and conditions. These include the deposit you expect on the assignment fee, the fee amount, how it should be paid, and if it will be held in escrow. The document should also include a clause that states that you are absolving yourself of any responsibility or equitable interest in the property. This can protect you if something happens to the deal between the seller and the cash buyer.

One final piece your wholesale assignment contracts should include is a clause that prohibits the buyer from assigning the contract to someone else. Contract law states that nearly all contracts are assignable by nature unless they specifically state otherwise. By including a clause that prohibits your buyer from reassigning the contract, you can prevent them from wholesaling your deal and assigning it to someone else for more profit, ensuring that you collect your assignment fee.

Building a list of buyers you can trust

Because real estate investing involves large monetary transactions, it’s important to have buyers you can trust before you assign a contract to them. While contracts are designed to protect you, the truth is they can’t stop buyers from breaching the agreement. They can only give you recourse after the fact. 

However, that will still require you to hire a lawyer and possibly even go to court to reclaim damages. Even if you can reclaim the money, you’ll be spending a large amount of it on legal fees. You’ll also be losing a lot of time you could use to find other deals.

To protect yourself from this hassle, we recommend building relationships with cash buyers as opposed to sending deals to investors you don’t know. This way you know who you’re working with before you sign a contract with them.

Finding cash buyers

There are several ways to meet and network with cash buyers . One great option is to get involved in local real estate groups and meet-ups. Not only will this give you the chance to meet buyers in person, but you’ll also open up opportunities for joint ventures and partnerships with other wholesalers.

You can also attend local property auctions. When homes are condemned or enter foreclosure, the county may auction them off on the courthouse steps, giving buyers a great opportunity to snag deals at low prices. 

These auctions will give you a great opportunity to see which investors are actively buying. With the real estate market cooling down, not every investor can still afford to buy. You should limit your working relationships to those who can so you don’t get stuck with deals you can’t assign.

Finally, you can also use real estate lead generation software to generate a lot of potential buyer leads at once. All you have to do is search for people who have made cash real estate purchases in the last two years. Then you can call through the lists to find real estate investors who are interested in buying a property like the one you have available.

All of these are great ways to find cash buyers, but we recommend being careful and doing your due diligence before sending a contract to anyone, especially if it’s your first time working with them. Ask other investors in your market if they know them and learn as much as you can about their reputation. A contract can protect you, but it may involve a lot of headaches that can be avoided by learning about who you’re working with before sending them a contract.

Understanding how to assign a contract to a cash buyer is an essential part of wholesaling real estate. The process is fairly simple, but it does involve a few key parts that you don’t want to overlook. 

The good news is that the internet is full of reliable wholesale assignment contract templates that you can use for free. We just recommend consulting a real estate attorney before you sign or assign one. Real estate laws vary by state, and you don’t want to find out that you’re working with a bad contract after you’ve already signed it. 

With all that in mind, the most important thing to understand about real estate contracts is that they can’t stop someone from breaking an agreement. Your first responsibility is to find trustworthy people to do business with so that your contracts can act as a formality instead of helping you reclaim damages in court.

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