Wholesaling Steps

This is an article published sometime ago that might help out....

Below is an outline to follow when working wholesale and flips in the real estate investment community. It is assumed that you already have some knowledge about doing these sort of deals and or you are at least familiar with the concept. Because I am not familiar with all the laws governing real estate transactions in each state some of these steps may not work for you directly or the closing process may be different for you. Please consult a Real Estate Attorney when drawing up a contract.

There, I gave my legal disclaimer.

Any comments, questions or concerns
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please contact me directly I always welcome other people’s opinions. If you have a question about a flip and need some guidance then contact me and I will assist you with it the best I can.

1) Introduction

a) What is flipping? The true definition of flipping is finding a property, putting it under contract, and then selling the property to another investor.

b) There are many ways to accomplish the flipping of a contract.

i) Double contracting – This approach is taken when you come across a property that has a large enough spread in it and you would like to protect your interest in it. If the assignment fee is greater than $5,000 then take this approach so the deal is not “stolen” from you and or also Hard Money Lenders do not like to fund flip fees in excess of this amount. Remember don’t get greedy; it still has to fit into our formula if you want to flip the deal

(Arv x 65% - repairs - c/c/cost - af = mao).

ii) Assignment of Contract – Use this approach if all you want to do is flip the property to another investor and you are not profiting in excess of $5,000.

2) Understanding the contract.

a) Reviewing the contract – section by section

i) Special provisions (These are in accordance with Texas state laws and may not apply to where you are at check with a local real estate attorney in your area for more accurate information):

(1) Seller to leave house in broom clean condition, if house is left with contents in it, seller will leave in escrow $500 for clean up fee, with an invoice to be submitted to title company for clean up.

(2) This is a cash offer to the seller, buyer will need access for inspections and appraisal for buyers purpose only.

(3) This offer is subject to buyers partners approval within 10 days of executed contract.

3) Work the formula. Arv x 65% - Repairs - C/C/Cost - AF = MAO

a) Arv = after repaired value

b) Note that if an investor is using a Hard Money Lender for the first time then the Loan to Value(LTV) will be 50% and not 65% as projected in the above formula

c) Repairs – use the evaluation sheet

d) C/C/Cost= carrying and closing cost

e) AF= assignment fee

f) MAO= Max. Allowable offer

g) Even if you decide not to wholesale or flip properties this formula should still be considered when reviewing all your potential deals.

4) Evaluating the comps.

a) Review the comparable sheet.

b) Drive by a couple of your comps to determine accurate value

c) Review the tax record

5) Property Inspection and Bid Form

a) Condition - Assess the condition of the house and take pictures if possible

b) Repair estimates – is a separate 3 page form that I use when making my initial walk through so that I can determine the repair costs. Contact me and I will send it to you if you do not have it already.

c) Exit Strategy – When doing repair estimates keep this in the back of you mind. What you think needs to be fixed/repaired another investor may have another opinion or idea of what needs fixing so try to be conservative here.

6) Carrying and Closing Cost

a) Cost of financing

b) Closing Cost – review of HUD 1

i) Title policy

ii) Escrow fee

(1) Locate an investor friendly title company who is willing to process a flipable contract, not all title companies are willing to work these sort of transaction. Call around or find out this information through your local Real Estate Investment Club.

iii) Other charges


c) As a general rule of thumb I always request the HUD1 statement 24 to 48 hours before closing so that I may look over it myself to make sure the Buyer and Seller fees are correct and my flip fee is indicated correctly

7) Assignment Fee – The investor needs to know:

a) Complete address with zip code

b) Photos of front and back of house as Hard Money Lenders require this when lending generally

c) What does the property need to reach max re-sale?

d) What amenities does the property have?

e) What is the projected cost to get max re-sale?

f) Why is seller selling?

g) What is your position in the deal?

h) Is title work working or complete?

i) Are there disclosures the buyer needs to know?

j) How long has property been on the market?

k) You (anyone) should not expect to make a profit if you don’t provide something we, the Investors need to make an intelligent decision.

l) EARN IT, AND YOU WILL RECEIVE IT!

8) Looking for properties


a) Drive-by

b) Newspapers

c) Referrals

d) Rentals


9) Finding owners


a) Tax record

b) Mail a letter to the home owner

c) Online services – www.KnowX.com and www.Anywho.com are good to start with

d) www.deadleads.com - Could not resist the free plug


10) What to say to the owners.


a) Be up front and honest

b) Determine what it is the buyer is wanting from the sale, learn this skill and you will be very successful as a real estate investor

c) Creative real estate needs creative thinking in order to be successful. Think out side of the box and you will be successful




Note: Larry works for www.Deadleads.com which is a owner and tenant tracing service provider that has partnered with TCI.