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You may be familiar with different types of ways to get involved in real estate. For example, you could buy a home and hold onto it; you could make it a rental property or fix and flip, known as “flipping.”
The purpose of real estate flipping is to make quick profits. If you’re looking to invest in property, buying a below-market-value property and putting in the work and money to increase its value can be a smart strategy. However, it’s crucial to have the right legal guidance and support throughout the buying and selling process from a conveyancer.
And the idea of flipping in real estate goes beyond taking hold of a property, but also flipping the purchase agreement and reselling it to a third party.
This process is known as wholesaling real estate, and if interested, you may question is wholesaling real estate legal in California.
The short answer is yes, wholesaling is legal in California and most states, but you need to understand the process first.
Wholesaling is relatively new in real estate and refers to the quick re-selling of the purchase of homes.
The idea behind wholesaling is to act as a broker between a motivated seller to a third-party buyer, and the difference between the initial purchase agreement and the amount that it is resold for is the profit for the wholesaler.
Because the real estate is never conveyed to the wholesaler, there is much less overhead and risk for the wholesaler than traditional flippers.
To begin with wholesaling, there are a few critical steps that need to be taken first, including;
- Finding motivated sellers and distressed properties
- Agreeing to contract assignments
- Signing buy and sell agreements
- Possible double-closing deals
Finding Motivated Sellers And Distressed Properties
The most crucial step for a wholesaler is to find highly motivated, desperate sellers who need fast cash.
Foreclosures, real property auctions, and deaths are all listed in public notices and are excellent resources.
The benefit a wholesaler plays for these owners is that it protects them from facing a government auction for failing to pay property taxes or an IRS tax lien.
Also, many real estate auctions are conducted by lenders who would instead get the entire loan paid off. So a wholesaler can come in and provide relief to both the seller and the lender.
Another source of finding motivated sellers is the local obituaries because the heirs may not want to live in the deceased’s home or be in a position to take on the financial obligations required to maintain ownership. Probate lawyers also make good resources for discovering seller opportunities.
Finally, bankruptcies are an excellent resource for wholesalers as well. As a form of federal public record, simply contact bankruptcy lawyers or the homeowner’s lawyers to conduct a quick sale.
Agreeing To Contract Assignments
Once you’ve found a motivated seller that will agree to sell their property rights to you, understanding that you’ll turn those rights over to a third party, the next step is to agree and sign contract assignments.
In wholesaling, the wholesaling contract would list that you are acting as a sale broker and not the actual buyer. The specific type of contract is known as a wholesale real estate contract that states the terms and the selling price and gives permission to the wholesaler to broker the deal to a motivated buyer.
Signing The Seller And Buyer Agreements
Once the wholesale real estate contract is agreed to and signed, the next step is to have the original seller and the new buyer sign respective purchase agreements that list the terms and requirements of the sale.
As a wholesaler, you act as an intermediary between the two parties for a small profit. With traditional purchase agreements, there are requests for repairs and other counters. In wholesaling, most of the terms are predetermined, and recommendations for repairs are waived to help facilitate a fast, easy sale.
Building Your Buyer List
To succeed as a wholesaler, you need to have a stable of cash buyers chomping at the bit to get a home at a reasonable price. Also, sellers need buyers to make their deals succeed.
To be successful at wholesaling, you’ll need to create a stable of buyers and do it quickly. You should consider the following;
- Attend real estate auctions
- Local real estate investor’s networking events
- Create a website to find cash buyers
- Join LinkedIn real estate groups
- Network with local agents
- Research public records
Wholesaling is the process of finding a motivated seller and brokering the deal between them and a buyer. It’s a process with low overhead and an opportunity for quick profits, but only if you have a strategy.