The six steps of a typical wholesale transaction, and what can go wrong.
Wholesalers look for owners who value speed or convenience over top price: inherited houses, properties needing major repairs, tired landlords or owners relocating. Outreach must follow marketing laws such as the TCPA and the Do Not Call Registry.
Pull recent sold comparables to estimate after-repair value (ARV), walk the property, and estimate repairs. Many investors start from the formula: maximum offer = ARV × 70% − repairs − wholesale fee.
The contract should clearly allow assignment and usually includes an option or inspection period. Earnest money is deposited with a title company. Tell the seller in writing that you are an investor and may assign the contract.
Share the deal with potential buyers. In Texas you must disclose that you are offering your interest in the contract, not the property itself. Do not advertise properties you do not have under contract.
In an assignment the end buyer signs an assignment agreement and pays your fee at closing. In a double close you buy the property and resell it in a second transaction.
The title company clears title, collects funds and pays the seller, any liens and the wholesaler’s fee according to the settlement statements. If no buyer is found, the wholesaler may have to cancel and can lose earnest money.
If you cannot find a buyer before your option period ends, you may have to cancel or risk your earnest money.
Skipping disclosures or marketing properties you do not control can amount to unlicensed brokerage.
Tying up sellers with contracts you cannot close harms them and can lead to complaints or lawsuits.