Understanding A Wholesale Real Estate Contract
If you are considering becoming a real estate wholesaler, you’ll need to familiarize yourself with a wholesale real estate contract.
When someone acts as a middleman between an end buyer and a property seller, an investment strategy referred to as real estate wholesaling is in effect. A contract plays a big part in this process. The contract between the home seller and the investor allows the buyer to purchase rights to the property. More times than not, the end buyer purchases the property at a higher price than was asked for by the seller, netting profits for the wholesaler. The wholesaler’s profit is the difference between the end buyer’s purchase price and the seller’s asking price.
Best case scenario, wholesalers don’t use any of their own money. Some, on the other hand, do put forth a certain amount as investment funding for the process to move forward.
A Wholesaling Contract – What’s Included
A legally binding document, the sales or wholesale contract gives the rights to an investor to purchase a seller’s property. Do not mistake this for a direct property purchase. The real estate purchase agreement in a wholesale deal plays the role of granting an opportunity to an investor. The wholesaler will attempt to find a buyer who is willing to pay a higher price for the property. Before the property is even obtained by some wholesalers, they will try to find buyers using this agreement.
The conditions and terms of the property exchange are detailed in a real estate contract referred to as a purchase and sale agreement. Within it, parties will find the basic premise of a contract for wholesaling.
Permission Given
A wholesaler is given permission by the seller to transfer buying rights to their property to a different buyer for a higher cost in a wholesaling contract. What should be included in the document can be easily accessed on the Internet. The document should, however, at a very minimum contain the following:
- Signatures from both parties
- A property description
- The earnest money or good faith deposit amount
- The purchase price
- The seller’s and buyer’s legal names
Wholesale Contracts – Who Uses Them?
The main use for a wholesaling contract is for a business deal to take place. It is used between an end buyer and a wholesaler, and between the wholesaler and a seller.
From a wholesaler, the right to buy a property is purchased by the end buyer. Ultimately, this is the individual who closes the property’s sale with its original seller. The new owner – the end buyer – will then decide what they want to do with the property. Frequently, they make any repairs, updates, etc., and then sell it for a profit. In some cases, after repairs and updates, they may turn it into a rental property.
For the end seller, the point of the deal is that they purchased something at what they felt was a good price, sunk some money into it, and will now be able to make money overall, or in the long run.
The point of the process for the wholesaler is that they “acquired” a property from someone who was eager to sell, sold the rights to the property to an end buyer at a higher price, and kept the difference as their fee.
The Pros at Real Equity Acquisitions Can Explain Wholesale Real Estate Contracts
If you would like more information regarding wholesale real estate deals, or are looking for properties to invest in, contact the professionals at Real Equity Acquisitions. You can email us at info@realequity.com or talk to a representative by calling us at 866-210-8835.