GUIDE · UPDATED
What is real estate wholesaling? How it works, step by step
Wholesaling real estate means putting a property under contract with a seller, then selling your rights in that contract to a buyer for a fee. You never own the house. You are paid for finding the deal and bringing the two sides together.
This guide follows one deal from start to finish, explains the two ways a wholesale deal closes, shows what the numbers look like, and lists what to check before you sign your first contract.
THE SHORT VERSION
- A wholesaler signs a contract to buy a property, then assigns that contract to an end buyer, usually a cash investor.
- The wholesaler’s pay is the assignment fee: the gap between the contract price and what the buyer pays.
- The real work is finding motivated sellers, pricing each deal correctly and knowing buyers who can close.
- A growing number of states regulate wholesaling. Check your state’s rules before your first deal.
How a wholesale deal works.
Every wholesale deal moves through the same six steps. The order matters: a deal that is priced wrong at step two cannot be rescued at step four.
Find a motivated seller
A motivated seller values speed and certainty over top price: an inherited house, a tired landlord, a property that needs work the owner cannot fund. Wholesalers reach them through direct mail, driving for dollars, online ads, referrals and public-record lists.
Price the deal
Estimate what the house would sell for once renovated (the after-repair value, or ARV), estimate the repairs, and work back to the most you can offer. That number is your maximum allowable offer, or MAO.
Sign a purchase agreement
You and the seller sign a contract for an agreed price and closing date. The contract must allow you to assign it, and it normally includes an inspection period and an earnest money deposit.
Find a buyer
You present the deal to cash buyers: flippers and landlords who buy at a discount and close quickly. The buyer you choose must be able to close by the date in your contract.
Assign the contract
You and the buyer sign an assignment agreement. The buyer takes your place in the purchase agreement and agrees to pay your assignment fee, usually with a deposit that is held until closing.
Close
A title company or closing attorney handles the closing. The buyer pays the seller the contract price, takes title to the house, and your fee is paid out of the closing.
One deal, with numbers.
A house would sell for $300,000 once renovated, and it needs $40,000 of work. An investor who follows the 70% rule will pay up to $170,000 for it. You want a $15,000 fee, so the most you can offer the seller is $155,000.
| STEP | AMOUNT |
|---|---|
| After-repair value | $300,000 |
| What an investor will pay (70% of that, less $40,000 of repairs) | $170,000 |
| Your contract price with the seller | $155,000 |
| Your assignment fee | $15,000 |
The seller receives the $155,000 they agreed to. The buyer pays $170,000 in total and gets a house with room for a profit after repairs. You are paid $15,000 at closing without ever owning the property.
Two ways a wholesale deal closes.
| Row | ASSIGNMENT OF CONTRACT | DOUBLE CLOSE |
|---|---|---|
| How it works | The buyer steps into your contract and closes with the seller. | You buy from the seller and sell to the buyer in two back-to-back closings. |
| Do you take title? | No. | Yes, briefly. |
| Closing costs | One closing. | Two closings, so two sets of costs. |
| Is your fee visible? | Yes. It appears on the settlement statement. | No. The two sales are separate transactions. |
| Money you need | Your earnest money deposit. | Funds to complete the first purchase, often short-term transactional funding. |
Most beginners start with assignments because they cost less and are simpler. A double close is used when a contract cannot be assigned, or when a wholesaler wants the two prices kept separate.
What it takes to start.
Wholesaling needs far less money than buying property, but it is not free and it is not passive. Expect three kinds of cost, and four skills to learn.
- Earnest money: a deposit on each contract, held by the title company.
- Marketing: mail, ads, lists or fuel, depending on how you find sellers.
- Tools: a way to track leads, price deals, sign contracts and reach buyers.
- Finding sellers consistently, not once.
- Talking with sellers and following up for weeks or months.
- Pricing a deal: comps, repairs and the offer math.
- Building a short list of buyers who close.
The risks, plainly.
- No buyer by the closing date. If you cannot assign the contract or close it yourself, you can lose your deposit and you let down a seller who was counting on the sale.
- A wrong price. Overestimate the after-repair value or underestimate repairs and no buyer will take the deal at your contract price.
- The rules. Some states require a license or written disclosures for wholesaling, and marketing rules apply to calls, texts and mail.
- Your reputation. Sellers and buyers talk. Tell the seller plainly that you may assign the contract to another buyer.
Is wholesaling legal?
Wholesaling is generally legal in the United States, and how it is regulated depends on the state. Some states require a real estate license to market a property you do not own or to wholesale more than a small number of deals. Others require you to tell the seller and the buyer in writing that you are a wholesaler. These rules have been changing quickly.
Before your first deal
Read your state real estate commission’s guidance on wholesaling, and have a local real estate attorney review your purchase and assignment agreements. This guide is general information, not legal advice.
FROM THE PUBLISHER
Where ARIA fits.
ARIA is a CRM built for this workflow. Seller leads land in one pipeline, and on the Pro and Max plans Aria, an AI voice agent, calls the leads who asked to hear from you and books the walkthrough. The Deal Analyzer shows the offer math line by line, contracts are signed inside the pipeline, and a cash buyer finder helps with step four. ARIA does not send direct mail or build seller websites, and it is single-user today.
FAQ
Questions, answered.
How do real estate wholesalers get paid?
Through an assignment fee. The wholesaler contracts to buy a property at one price and assigns that contract to a buyer who pays more. The difference is paid to the wholesaler at closing by the title company or closing attorney.
How much money do you need to start wholesaling?
Less than buying property, but not zero. Plan for an earnest money deposit on each contract, a marketing budget to find sellers, and the tools you use to track leads and price deals. The amounts vary by market and by how you find deals.
Do you need a real estate license to wholesale?
It depends on the state. Some states require a license to market properties you do not own or to wholesale more than a few deals, and others require written disclosures instead. Check your state real estate commission’s guidance before your first deal. This is general information, not legal advice.
What is an assignment fee?
It is what the end buyer pays a wholesaler for the right to take over a purchase contract. In the example on this page the contract price is $155,000, the buyer pays $170,000 in total, and the $15,000 between them is the assignment fee.
What is the difference between wholesaling and flipping?
A flipper buys the house, pays for the renovation and sells the finished home. A wholesaler never buys or renovates; they sell the contract to someone who will. Wholesaling needs less money and carries less renovation risk, and each deal pays less than a successful flip.
How long does a wholesale deal take?
From a signed contract to closing is often a few weeks, set by the closing date in the purchase agreement. Finding and following up with the seller usually takes far longer than closing the deal.
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