What is a Wholesale Deal in Real Estate?
A wholesale deal is a real estate transaction where the buyer (wholesaler) puts a property under contract with a motivated seller, then sells or assigns that contract to an end buyer for a profit before closing. The wholesaler never takes ownership of the property. Their profit comes from the assignment fee, which is the difference between the contract price with the seller and the price the end buyer pays.
What makes a deal "wholesale"
A deal is wholesale when three conditions are met: (1) the property is acquired at a below-market price from a motivated seller, (2) the contract is transferred to an end buyer rather than the wholesaler closing on the purchase themselves, and (3) the wholesaler's profit comes from the spread between the two prices, not from renovation or rental income.
Contrast this with a flip (where the investor buys, renovates, and sells) or a buy-and-hold (where the investor buys and rents). In wholesaling, the investor never owns the property and never assumes renovation or ownership risk.
Anatomy of a wholesale deal
Seller: Motivated homeowner who needs to sell a $250,000 ARV property fast.
Contract price: $140,000 (signed with wholesaler).
Repairs needed: $45,000.
Assignment price: $152,000 (to end buyer).
Wholesaler's fee: $12,000.
End buyer's all-in: $152,000 + $45,000 = $197,000 on a $250,000 ARV (78.8%).
End buyer's projected flip profit: $250,000 - $197,000 - $20,000 (selling + holding costs) = $33,000.
Everyone benefits: the seller gets a fast cash close, the wholesaler earns $12,000 without buying the property, and the end buyer gets a deal with clear profit potential.
What makes a good wholesale deal
- Sufficient spread: The difference between contract price and ARV (minus repairs) must be large enough for both the wholesaler's fee and the buyer's profit. The 70% rule is the standard filter.
- Motivated seller: The seller must be willing to accept below-market pricing. Motivation comes from financial distress, time pressure, property condition, or life circumstances.
- Buyable by end investors: The deal must appeal to local cash buyers. This means the property type, location, price range, and condition align with what active investors in your market are buying.
- Clean title: No liens, encumbrances, or ownership disputes that would prevent or delay closing.