At a barbecue a few weekends ago, I was approached by a neighbor who was trying to start his own real estate investment business. He’d heard about all the money you can make by buying, renovating, and flipping distressed properties, and wanted to get in on the action. Unfortunately, he’d made some financial mistakes in the past that negatively impacted his credit score, so he didn’t think he could qualify for a traditional loan from his bank. He was also wary of riskier financing options such as hard money loans, because he didn’t have any experience in real estate and wasn’t confident in his ability to meet short-term repayment requirements.
So, purchasing a property to fix and flip or rent out for monthly income was probably not the right fit for him. He’d heard about real estate wholesaling, and thought that would be a better way to dip his toe into real estate investing. As a real estate wholesaler, you contract a distressed home with a motivated seller, and shop that home around to other real estate investors and potential buyers. Your goal is to find someone to purchase that home—within the time period specified in the contract—for more than the seller’s asking price. Then, you get to keep the profit left over from the sale.
When you wholesale a property, you only need to make a small deposit to the seller—often as little as $100. That means you don’t need to come up with a hefty down payment or obtain financing to get started, which makes wholesaling ideal for people with limited funds or a shaky financial history. However, the specifics of the deal will depend on your wholesaling contract. Let’s take a look at these contracts in greater detail before discussing where to get wholesaling contracts.
An Introduction to Wholesaling Contracts
Wholesale real estate laws vary by state, but all wholesaling contracts generally tend to outline the same process. The contract gives you as the wholesaler the exclusive right to buy the property for a set cost, which may be the seller’s asking price or a price that you negotiate with them in advance. When you and the seller sign the contract, in some states you enter into something known as “the doctrine of equitable conversion.” It all depends on the terms of the contract and whether or not the contract allows for the assignment of your contract rights to a third-party buyer to purchase the property. However, the seller retains the home’s title until the end buyer completes the real estate transaction.
The wholesaling contract will also stipulate how much time you have to reassign the contract to a new buyer—usually 30 days. If your contract expires and you haven’t found anyone to purchase the home, you’ll likely lose your deposit. Often, that’s the extent of the penalties you’ll face, which is why wholesaling is considered a low-risk real estate investment. However, you need to ensure this is clearly stipulated in your wholesaling contract if you want to protect yourself from further legal action.
Where To Get Wholesaling Contracts
A solid wholesaling contract is critical to your success as a real estate wholesaler. But where do you get wholesaling contracts?
Many new investors start real estate wholesaling by simply Googling “wholesaling contract templates,” and using the top result. This is certainly quick, convenient, and cheap, but that doesn’t mean it’s your best option. First, you should remember that wholesaling laws vary depending on what state you live and work in, so a general template may not cover all your legal bases. Second, unless you thoroughly vet the website you download the template from, you can’t know if it was created by real estate wholesaling experts or just an internet fraud looking to make a quick buck. If you end up using a wholesaling contract template that doesn’t meet your state’s legal standards, you could face consequences like fines, loss of profits, or even a lawsuit.
Social Media Groups
A slightly more reliable option is to ask for advice in a real estate investing social media group. They’re often location-specific, which means you’re more likely to get a wholesaling contract that meets your state’s laws. But again, unless you personally know or thoroughly vet your sources, you can’t know for sure that the contract you get is legally valid.
Real Estate Lawyers
The safest, but also most expensive, option for finding wholesaling contracts is to speak with a real estate lawyer. Lawyers who specialize in real estate investments often have boilerplate wholesaling contracts you can purchase for a fee, which might be less than the cost of having a custom contract drawn up for you. If you have the resources to comfortably hire a lawyer to handle your wholesaling contract, then that’s probably your best option. However, many of us get into wholesaling because we don’t have the funds to purchase an investment property, so we need less expensive wholesaling contracts.
If you’ve established a network of real estate professionals in your area, then they’re a fantastic resource for getting wholesaling contracts. You already know that they’re successful in their field and are probably aware of the state wholesaling laws, so there’s little risk of getting burned. That said, if you’re here, you’re likely a new investor who hasn’t built this sort of professional network yet. Luckily, there’s a better option for where to get wholesaling contracts.
A Better Option for Wholesaling Contracts
One big danger with wholesaling contracts is that you could unintentionally fall afoul of state laws and regulations. Getting sued by a home seller after one of your first transactions could irreparably harm your local reputation as an honest real estate investor. The best way to get wholesaling contracts is by joining an established network of professional real estate investors—like HomeVestors®.
HomeVestors® is a national network of independently owned and operated real estate investment franchises. If you become a franchisee, you’ll gain access to some of the best real estate training and education in the industry, so you can learn the ropes of wholesaling from the experts. Plus, you can get reputable recommendations for where to get wholesaling contracts from local franchisees in your area and the names of real estate attorneys who can review them for compliance and enforcement.
Find out where to get wholesaling contracts by becoming a HomeVestors® franchisee. Contact us today to learn more!
Each franchise office is independently owned and operated.