What to Know About Wholesale Real Estate Companies

Real estate wholesaling is a short-term investment strategy. The wholesale investor buys properties at a discount, intending to assign or sell the property to another real estate investor or buyer for a profit.

Real estate wholesaling offers a quick entrance into the real estate market as a means to generate an income without jumping into investments that require more capital or risk. Real estate wholesaling is a clever way to learn the real estate business, but note that it is not without a learning curve.

Fortunately, real estate wholesale companies offer new and experienced investors essential support and guidance through each stage of the wholesale transaction.

Working with a wholesale real estate company can be a temporary decision – to learn the business from experts who offer protection, support, and guidance until your confidence is strong enough to go at it alone. Although, some wholesalers may find that sharing the profit with the company is a worthy partnership due to the professional support and assistance provided.

Still unsure about wholesale real estate companies? The following narrative details the pros and cons of the wholesale market and wholesale companies.

• What Type Of Business Is Wholesale Real Estate?
• How Does Wholesale Real Estate Work?
• What To Look For In A Wholesale Real Estate Company?
• List Of Wholesale Real Estate Companies
• How Much Do Wholesale Real Estate Companies Charge?
• What Are The Pros And Cons Of Wholesale Real Estate Companies?
• How Do Real Estate Wholesalers Get Paid?
• How To Buy From Real Estate Wholesalers?
• How To Find Real Estate Wholesalers?
• Is It Worth Working With A Wholesale Real Estate Company?
• Final Thoughts On Wholesale Real Estate Companies

What Type Of Business Is Wholesale Real Estate?

Real estate wholesaling is a legitimate short-term investment strategy. Wholesaling real estate creates potential investment options for all investors, even those with limited capital. Its ability to level the investment playing field has made wholesaling real estate quite a popular investment tactic for rental properties, as well as fix and flip investments.

Wholesaling works in all phases of the real estate cycle but is particularly profitable when implemented during Phase 2 – known as expansion. This second of the cycle’s four quadrants – expansion, is characterized by strong demand, declining vacancy, limited supply - pushing prices skyward. Sound familiar?

Source

In the current real estate market’s expansion (which began several years ago), the level of appreciation in Phase 2 has exceeded a typical Phase 2 cycle. This is likely because the current market expansion was galvanized by interest rates that fell to historic lows.

Contrary to what many believe, wholesaling real estate bears no resemblance to retail wholesaling –which involves a transaction of large quantities of goods at reduced prices. When used in this real estate context, the term wholesaling has more to do with the fact that a real estate wholesaler acts as a middleman – connecting potential buyers with sellers of properties.

Wholesaling real estate offers a quick path to a potentially profitable career because there are, for the most part, no formal requirements. There are no required courses or licensing exams to pass. And a wholesaler does not need to become a realtor or hold a license to wholesale real estate in most jurisdictions.

Do you need an LLC to wholesale real estate? No, forming an LLC is not a requirement to be a successful wholesaler.

Wholesaling does require an investor to possess good people skills and the ability to assess the quality of a transaction as a potential investment to be a successful real estate wholesaler.

How Does Wholesale Real Estate Work?

A real estate wholesaler’s objective is to search for a property with potential, usually priced below market. The factors that determine an investment’s potential are often detailed in the original wholesale real estate business plan and objectives.

Once the property is located, a wholesaler enters a legally binding contract (also known as a Purchase Agreement) with the seller to buy the property at an agreed-upon price.

As a show of good faith, a wholesaler will likely provide an earnest money deposit in an amount equivalent to a small percentage of the purchase price. With a signed contract, a wholesaler’s objective shifts to finding a ready and willing buyer to purchase the property at a price that exceeds the wholesaler’s original contracted price.

There are two primary ways to complete a wholesale real estate transaction –

• The Assignment Exit Strategy – in this strategy, the wholesaler enters into a purchase and sale agreement but, before closing, chooses to assign their Equitable Interest/Title (awarded when the contract was fully executed) to another buyer at a higher price.

An assignment of contract is the legal instrument that provides the means to pass one’s equitable rights (if the original contract does not prohibit or condition its use). The difference between the purchase prices is the wholesaler’s gross profit, typically received as an assignment fee.

• The Double Closing Exit Strategy – The wholesaler enters into a purchase and sale agreement but chooses to close the first transaction before selling the property to a new buyer. Note, the double close may require two sets of closing costs, including the costs of recording by title companies that work with wholesalers, among others.

Real Estate Wholesaling In Four Steps

1. Understand Relevant Real Estate Laws

Perhaps the most essential thing to learn when wholesaling real estate in a new location is to understand those laws that govern real estate and real estate sales licensing. Each state varies in its legislation; however, most states require a real estate sales license to sell real estate.

Real estate wholesaling is not a sales job, so the goal is not to sell the property but market one’s ‘right to purchase' the property. It may seem like this nuance is a distinction without a difference; IT IS NOT.

To sell real property – one would need a license to act as the seller’s agent. Several jurisdictions have enacted laws defining those who work as wholesale real estate agents, including Illinois, Philadelphia, and the latest – Oklahoma, which became effective November 1, 2021.

However, there are no existing laws or guidelines for those wholesaling real estate in California and many other jurisdictions. When working with sellers, though, it is imperative to work from a position of integrity and transparency.

2. Create A Buyers List

As its name implies, a buyers list is a collection of potential cash buyers (i.e., contact information and each phone number) that may be interested in buying a discounted property from a wholesaler.

In a perfect world, a real estate wholesaler would have a buyer interested in the property before entering into a purchase agreement with a seller. This is why it is vitally important to create a network of real estate professionals (like property management companies, brokerage colleagues, or hard money lenders), referrals, and a list of buyers or potential investors updated regularly.

3. Locate A Property Worth Wholesaling

Online real estate and foreclosure websites can offer a great starting point; however, there is growing competition due to the popularity of wholesaling. Wholesale real estate properties can be found from a variety of sources – from online real estate, the MLS, and foreclosure websites to training programs and wholesale companies that offer insight into the machinations of a wholesale real estate deal.

4. Connect The Seller With The End Buyer

As a middleman, a real estate wholesale agent connects to interested parties – the seller and a buyer. When in place, a wholesaler can opt for the most viable closing strategy – the Assignment or Double Close.

What To Look For In A Wholesale Real Estate Company?

A wholesale real estate business specializes in managing wholesale real estate transactions – from sourcing leads to closing the transaction - and everything in between. A real estate wholesale company’s objectives resemble that of any individual wholesaler. The fundamental difference between the company and an individual wholesaler is that the wholesale company is staffed with industry specialists who follow dedicated, proven processes to minimize the cost and time required to finish a wholesale transaction.

A wholesale real estate company also works with sellers who want to offer their wholesale properties for sale quickly (usually distressed or difficult to sell) at a discount. A wholesale real estate company makes a bona fide purchase offer that the seller may or may not accept.

A real estate company working in the wholesale sector can also be helpful to new wholesalers who would benefit from formal guidance to learn – What does wholesale mean in real estate? – from a successful wholesaler. For a slice of the profit pie, an inexperienced wholesaler can learn the ins and outs of real estate wholesaling, networking with colleagues and ancillary players, like a wholesale-friendly title company.

Before you search the internet for wholesale real estate companies near me, take enough time for appropriate due diligence. Consider the following when deciding if and which wholesale real estate company would be a suitable fit –

In-depth Knowledge Of The Subject Real Estate Market

Real estate wholesaling companies are typically experts and well-versed in the markets they serve. This includes relevant laws and guidelines as well processes that are customary for these markets. Market knowledge is critical to understanding the quality of any potential investment.

Proven & Verifiable References

Whether you are a seasoned real estate wholesaler or just a seller interested in working with a wholesale real estate company, it is important to verify the company’s reputation and credibility. First, check out the company’s reviews on social media, where available. Ask to speak with previous clients or wholesalers who have worked for the company. Legitimate wholesaling companies will be happy to provide the requested information.

Similarly, the wholesale company should be well-connected with an established network of industry players as this is vital for long-term success.

Exceptional Communication Abilities

As a service business, wholesaling real estate requires tremendous communication skills – from both the wholesale company and the individual wholesaler or seller.

Strives to Meet the Needs of Clients

Customer service is not always at the forefront of every business owner. However, it's utterly important when it comes to transaction real estate. Remember, wholesaling real estate is a relationship business, not only a transactional business. 

List of Wholesale Real Estate Companies

The number of wholesale real estate companies has been steadily on the rise. While every market will have small local wholesale real estate agents and companies, there are also larger companies with more national wholesale real estate company names -

SkyStone Acquisitions (SA) – Atlanta, GA

Among the leading real estate wholesale companies in and around Atlanta, SkyStone Acquisitions is unique as it works exclusively with investors – from newbies to institutional investors refining/building their portfolio. Since 2018, SkyStone has sold more than $30 million of transactions.

CORE Wholesale Properties – (CWP) Lake Worth, FL

Located on the Atlantic Coastline south of West Palm Beach, CORE Wholesale specializes in deeply discounted off-market properties that are typically off-market. CORE offers its services to homeowners who want to sell distressed properties quickly and with reduced fees.

New Western (NW) – 20 States – Including 2 Locations In Oklahoma And 1 Location In Arizona And Tennessee

Since 2008, New Western has been helping solve the issues faced by distressed and motivated sellers by connecting them with potential investors. NW began with a few savvy investors and has grown to include hundreds of investors from all corners of the nation.

Networth Realty - 21 Cities - including San Diego, Charlotte, Las Vegas, Denver, and Chicago

Networth Realty is a well-known wholesale real estate company that offers discounted properties across multiple major cities. While many real estate investors have come to know them as a company that preys on newbie investors that overpay for distressed properties, they run a respectable wholesale business model at scale.

How Much Do Wholesale Real Estate Companies Charge?

For the inexperienced or novice, generating a profit wholesaling real estate may seem a bit too good to be true. The reality is that nailing down an exact amount or percentage charged by a real estate wholesale company is like trying to nail Jell-O to the wall.

Time is Money – The preferable wholesale transaction is one in which the wholesaler can flip the property without the need for major repairs, construction, or time required to complete the work.

For example, a property with an After-Repair-Value of $400,000 (ARV) is purchased for $250,000 (or 62.5% of an anticipated ARV or $250,000/$400,000) by a wholesaler. This property could be sold to one of many house flippers for $280,000 (or 70% of ARV), who would then, with some repairs, have the opportunity to resell it for $400K, assuming little to no change in the real estate industry.

The total profit on this wholesale transaction would be equal to $30,000 ($280,000 – $250,000) or a 12.5% ($30,000/$250,000) of the original investment. The wholesaler’s ROI would be infinite if the wholesaler borrowed the money from a transactional lender, or if they assigned the contract.

Most wholesale companies have set predetermined schedules of fees and shared profits. Still, for the right reasons and a proven record as a wholesaler, the company may be willing to negotiate typical fees on a deal-to-deal basis. 

What Are The Pros & Cons Of Wholesale Real Estate Companies?

Like any real estate investment strategy, there are pros and cons to wholesaling. The trick is knowing if wholesaling is a suitable fit for you is to determine if the pros and cons align with your own investment goals and objectives.

Pros

New and seasoned wholesalers will find working with a real estate wholesale company offers these benefits:

• A viable quick entry into the real estate investment market.
• There is a team to assist you along the way.
• It offers a valuable experience without taking on the transaction’s entire risk.
• Minimal start-up costs involved.
• Poor credit histories will not preclude one’s ability to become a wholesaler.
• Real estate wholesaling can be done virtually and even from a home office with the digital landscape.
• Provides more control over the direction of your career. 

Cons

Although a great type of short-term investment, when wholesaling real estate, it can be challenging to:

• Generate a consistent income stream.
• Find buyers in certain markets.
• Find deals due to increased competition.
• Costs and fees involved.

In addition, a real estate license may be required to wholesale houses or real estate in certain areas and under specific conditions.

How Do Real Estate Wholesalers Get Paid?

Real estate wholesalers can generate income in several specific ways; however, one should not expect a guaranteed wholesale real estate salary. In all wholesaling methods, the wholesaler finds a property in which to invest and enters into a legal contract with the seller.

#1 Income Scenario For Real Estate Wholesalers

• Find an investment property
• Enter into a contract
• Find (or have) an Alternate Cash Buyer
• Using the Equitable Interest awarded when the contract is fully executed, a wholesaler can use an Assignment of Contract to assign the right to purchase the subject property to a new buyer – at a sales price that exceeds the original purchase price. The difference between sale prices represents a real estate wholesaler’s gross profit.

#2 Income Scenario For Real Estate Wholesalers

• Find an investment property
• Enter into a contract
• Find (or have) an Alternate Buyer
• For an agreed-upon fee, a wholesaler can use an Assignment of Contract to assign their right to purchase the subject property to a new buyer. The wholesaler’s fee can be a flat fee or a percentage of the sales price.

#3 Income Scenario For Real Estate Wholesalers

• Contract on a distressed property with a seller, similar to above
• Enter into a second contract at a higher price with a cash buyer, with the wholesaler acting as the seller
• Perform a double closing on both contracts, with the difference in price becoming your wholesale profit.

Pro–Tip: Property wholesalers often network with construction experts and appraisers to keep current with essential data - home values and the cost of renovations.   

How To Buy From Real Estate Wholesalers?

It is important to remember that when you are interested in a deal that may be available from a real estate wholesaler, remember that, as a buyer, you are purchasing the real estate wholesaler’s equitable interest/rights – which is a marketable asset in the eyes of the law.

Depending on the organization of the local market, there may be a list of real estate wholesalers, making it easy to learn where to find real estate wholesalers.

However, buying the contract that guarantees the purchase of a property – especially one with an appealing price may leave little time for property inspections if you are to outpace the competition.

If you find a property you wish to purchase from a list of real estate wholesalers, be ready with an offer, an earnest money deposit placed in escrow, a lender’s commitment (if applicable) if you are to be victorious in your purchase.

How To Find Real Estate Wholesalers?

With so many new investors interested in jumping into the real estate wholesale market, it is critical to learn how to discern between real estate wholesalers with experience and professional integrity and those who possess those desired traits but fail to follow through.

The most direct place to find real estate wholesalers is through an internet search but be certain to perform a background check on the person or company to ensure you are working with legitimate businesses. It may also be a good idea to work with established real estate companies as their leads and processes are already in place.

Real estate investor association meetings (REIA meetings) are excellent events to build your professional network of deal-finding associates.

Another option would be to investigate which of the best apps for real estate wholesalers may work to help meet your professional objectives.

Read Also: 8 Best Real Estate Wholesaling Tools (2022 Edition)

Is It Worth Working With A Wholesale Real Estate Company?

The answer to whether it is worth it to work with a real estate company is incredibly personal and highly contingent on who is asking the question. For those new to wholesaling, a wholesale real estate company's guidance, education, and risk reduction would be considered money well spent.

However, some novice wholesalers may find they prefer to test the waters by themselves. Neither is wrong; it is just that choosing training or a wholesale mentor is likely to accelerate you towards your first wholesale deal.

More experienced wholesalers may find the profit-sharing is worthwhile because of the support provided by a real estate wholesale company. Still, others may find that sharing the profit is not acceptable and go it alone.

The Bottom-Line – Deciding if a real estate company is worth working with is a hugely personal decision – and definitely not a one-size-fits-all answer.

Final Thoughts On Wholesale Real Estate Companies

Most real estate investors choose to enter the market as a wholesaler for a variety of reasons. Wholesaling offers an entrance ramp into a market where the market value of the assets reaches over $100,000 on a regular basis.

When executed with skill, real estate wholesaling offers a low-risk strategy that can be completed in several simple steps. Wholesalers are not born but developed by the guidance provided by quality wholesale real estate training programs that offer important insights into how successful wholesalers find and close wholesale deals.