How to wholesale real estate step by step

How wholesaling actually works

You find an owner who needs to sell more than they need top dollar. You agree on a price below market and sign a purchase contract you are allowed to assign. Before that contract closes, you sell your position in it to a cash buyer for a fee. The buyer closes with the seller. You get paid out of escrow and never take title, so you need little capital and carry little property risk. The whole business is 2 skills: finding sellers others have not found, and knowing within an hour whether the numbers work.

The money is the spread. Contract at $110,000, assign at $122,000. Your fee is $12,000, disbursed at closing and shown on the settlement statement. Fees commonly run from a few thousand dollars to the low five figures, driven by deal size, discount depth, and buyer demand.

Step 1: Build a motivated seller pipeline

A motivated seller is not just someone who wants to sell. It is an owner with two things at once: enough equity that a discounted cash price still leaves them whole, and a reason that makes speed worth more than the last 15% of price. Inherited property 3 states away. A tired landlord. Deferred maintenance. A relocation, a divorce, a tax delinquency.

Direct mail is the workhorse: slow to start, compounding over months, reaching owners who are not searching for you. Cold calling gives faster feedback but is increasingly constrained by TCPA rules and state do-not-call lists. Driving for dollars is free and high signal at low volume. For a wider survey, see how to find motivated sellers.

The common mistake is buying a giant list and mailing it thin. 20,000 names mailed once produces less than 800 well-chosen names mailed 6 times. Response on cold owner mail typically lands around 0.5%–2%, and where you fall in that range is list selection, touch count, and how credible your offer sounds.

That is the problem Farmrix solves: it scores every owner in a market on how likely they are to sell in the next 6–12 months, ranks them, and mails the top of that list. On your first two deals, pulling a county list yourself and mailing 200 owners by hand is fine. Ranking matters once you are spending real money on mail every month.

Step 2: Run comps and estimate repairs

Two numbers decide everything downstream: after-repair value and repair cost. Get either wrong and the deal dies on the walkthrough.

After-repair value

ARV is what the house sells for after a standard renovation for that neighborhood, not what it is worth today and not what an AVM says. Pull three to six closed sales, not active listings, and tighten filters until the comps are genuinely comparable:

• Sold in the last 90–180 days. Older than that and you are pricing a different market.
• Within roughly half a mile in a suburb and much tighter in a city, and never across a highway, a school-attendance boundary, or a subdivision line.
• Within about 20% of the subject's square footage, same bed and bath count, same story count, similar age and style.
• Renovated to the standard your buyer will renovate to. A tired rental that sold as-is is not an ARV comp.

Then look at the photos: two houses that both sold at $260,000, one builder-grade and one with quartz and a finished basement, imply very different rehab budgets.

Repairs

Cost per square foot is a sanity check, not an estimate. Light cosmetic work sits at one band in your market; a full gut with new mechanicals sits at 2 to 3 times that band. Get your bands from a local contractor, not HomeAdvisor.

What blows budgets is a short list: roof, HVAC, foundation movement, sewer lateral, electrical panel, windows, and anything needing permits pulled after the fact. Photograph the panel, the water heater date sticker, the attic and any cracks. Price those specifically. Early on, walk it with a contractor or a buyer who flips that zip code.

Step 3: Calculate your maximum offer

The starting formula is the 70% rule:

MAO = (ARV × 0.70) − repairs − your assignment fee

The 70% is not a profit margin. It bundles your buyer's profit, both sets of closing costs, resale commission, holding costs and financing into one multiplier. That is why it breaks in predictable places.

• High-value homes. On a $700,000 ARV, 30% is $210,000 of implied cost and profit. No flipper needs that. Buyers in that band often work at 78%–85% minus repairs, and at 70% your offers never get accepted.
• Low-value homes. On a $90,000 ARV, 30% is $27,000, which barely covers two closings, 6 months of holding, and hard money points. Cheap houses often need to be bought below 65%.
• Heavy rehabs. A 12-month gut carries more interest and taxes than a 6-week cosmetic flip, and needs more cushion.
• Buy-and-hold buyers. A landlord underwrites to rent and cash-on-cash return, not resale, and pays more than a flipper about as often as far less.
• Hot or cold markets. When inventory is scarce buyers stretch. When days-on-market climbs they pull back and your old numbers stop working.

Stop guessing the multiplier. Ask your buyers what they pay right now in each zip code and price band. The 70% rule is for someone with no buyers yet.

Step 4: Get it under contract

The contract is what you are actually selling, so it has to be assignable and give you a clean way out. Use your state's standard purchase agreement where one exists, and have a local real estate attorney review your version once, which costs a few hundred dollars and is the highest-return expense in this business.

• Buyer named as “Your Name and/or assigns,” plus an explicit assignment clause stating you may assign without further consent. Do not rely on that wording alone.
• An inspection or due-diligence period, typically 7 to 14 days, with a unilateral right to terminate and recover your earnest money, plus access rights to bring contractors, inspectors and buyers through. This is your real exit, and the window in which you find your buyer.
• Earnest money. On off-market deals with unrepresented sellers, $10 to $1,000 is common. On agent-represented deals expect 1% or more, sometimes non-refundable after inspection. Deposit it with the title company or attorney, not your own account; Oklahoma now requires it to sit in an in-state FDIC-insured bank.
• Closing date. 21 to 30 days is normal; under 14 is aggressive unless you already know your buyer.
• A named title company or closing attorney that has closed assignments before, plus seller disclosures and occupancy status, including any tenant or junk left behind.
• A written statement of your role: that you are acquiring an equitable interest, intend to assign it for a fee, and are not acting as the seller's agent.

The assignment itself is one page. It identifies the original contract by date and address, names you as assignor and your buyer as assignee, states the fee and that it is payable at closing through escrow, handles the earnest money, and confirms the assignee assumes every obligation. It does not release you from that contract unless the seller signs off.

Step 5: Build a real cash buyer list

A list of 500 email addresses is not a buyer list. 12 buyers who have closed on properties like yours is. Build it before you need it. The worst time to meet a buyer is day 9 of a 14-day inspection period.

• County records. Deeds recorded in the last 12–24 months with no mortgage lien are cash purchases. Repeat names are your targets.
• Hard money lien holders. Pull mortgages recorded to non-bank lenders, the ones with LLC in the name. The borrower is an active flipper, and the lender knows 12 more.
• Other wholesalers. Co-wholesale one deal with someone established and you meet their buyers.

Qualifying beats collecting. For every buyer, record zip codes, price ceiling, bed and bath minimums, rehab appetite, funding source, last closing and decision speed. Ask for proof of funds once, dated within 30 days. Then rank them by closings with you, and call the top first.

Assignment vs double close vs novation

Assignment is the default because it is cheapest and fastest, but it is not always available. Some title companies will not handle one as a matter of policy. Bank-owned, HUD and many institutional sellers write anti-assignment clauses in, and listed properties often carry brokerage restrictions. On a $30,000 spread, the settlement statement shows your fee to the seller, which occasionally kills a signed deal at the table. Ask the title company in week one whether they close assignments and will show a fee your size.

A double close is two real closings: you buy from the seller, then sell to your buyer, sometimes minutes apart. You need funds for the first leg, usually transactional funding priced as a percentage of the purchase price plus flat fees. Confirm your title company allows same-day funding.

A novation replaces the original contract with a new agreement between seller and end buyer, with your compensation defined separately. It suits nearly retail-ready houses, where the spread comes from listing properly, not a deep discount. More parties, more paperwork, and in many states a licensed agent. Not a beginner move.

A worked example

A 1,400 square foot three-bed ranch, inherited two years ago by an out-of-state owner. Renovated comps in the subdivision, sold in the last 4 months, cluster at $240,000. That is your ARV. The house needs a roof, HVAC, kitchen, both baths, flooring throughout and paint. A contractor says $45,000; you carry $50,000 because first estimates are optimistic.

Your buyers in that zip code are working at 70% right now. So $240,000 × 0.70 = $168,000, less $50,000 in repairs = $118,000, less a $10,000 fee = a $108,000 maximum offer. You offer $102,000. Settle at $110,000 after the seller counters. Sign with a 14-day inspection period, $500 earnest money and a 28-day close.

You send it to your top 6 buyers. Two walk it, one offers $118,000, the other $122,000. You assign at $122,000 and collect $12,000 at closing.

Now the part people leave out: what did the lead cost? Say that seller came from a mailing of 500 ranked owners at $1,195, the Farmrix entry package (see pricing). If the campaign produced 8 conversations, 2 appointments and this one contract, a $12,000 fee cost $1,195 to source. That is an illustration, not a promise; the same campaign can produce 3 contracts or none. You are buying a cost per contract, and you only learn yours by running volume.

The $12,000 is ordinary income, not a capital gain: Schedule C, plus 15.3% self-employment tax on net earnings over $400 (IRS Topic 554). Set part of every fee aside the week it clears.

What actually goes wrong

• The buyer backs out the day before closing. Keep a second and third buyer who have walked it, and never spend a fee before it clears.
• Your numbers were wrong. Repairs come in over estimate, or a comp turns out to be a flip in a nicer pocket. Either way the buyer renegotiates, and it comes out of your fee, not the purchase price.
• Title problems. Unreleased mortgages, liens, unpaid taxes, code fines, an ex-spouse still on the deed, an estate never probated. Open title in the first 48 hours, not the last week, because heirship issues alone can add months.
• The seller walks. A higher offer, an intervening family member, or a change of heart. Stay in contact between contract and closing; silence is where deals die.
• You cannot perform. No buyer, no funds, and a seller who turned down other offers because of you. This one ends careers. It is also what produces the complaints that drive new regulation.
• Daisy chains. A “buyer” who is another wholesaler marketing your deal further down the line. Ask whether they are the end buyer and what they last closed for cash.

The legal picture, honestly

The core principle: you hold an equitable interest through your contract, and you sell that interest, not the property. That is generally not brokerage. Advertising a house you do not own, negotiating for the seller, or taking a commission for introducing parties starts to look like brokerage. Brokerage requires a license.

Texas puts that principle in statute. You may assign a contract to purchase without a license only if you do not use it to engage in brokerage and you disclose the nature of your equitable interest in writing to any seller or potential buyer. Leave it out and the same section says you are brokering (Texas Occupations Code Sec. 1101.0045). Illinois draws its line at repetition, defining a broker to include anyone dealing in assignable contracts on 2 or more occasions in any 12-month period (225 ILCS 454/1-10). There, your second deal of the year is the one that needs a license.

Enforcement is what changed since 2025. Oklahoma SB 1075, effective November 1, 2025, requires written disclosure of your intent to assign, a two-business-day cancellation right, and earnest money at an in-state FDIC-insured bank; a contract missing a required element is unenforceable (Oklahoma Real Estate Commission). Ohio SB 155, effective March 2, 2026, requires a signed disclosure before execution and puts the Consumer Sales Practices Act behind it (Ohio Department of Commerce). Connecticut goes furthest: registration with the Department of Consumer Protection from July 1, 2026, three business days for the seller to cancel, and no closing more than 90 days out (Connecticut DCP). Municipalities add registration on top.

Two habits keep you out of most trouble anywhere: disclose your role to the seller in writing before they sign, and market your contract to buyers rather than the property to the public. Know the limit of the second one. South Carolina's Real Estate Commission has written that advertising a contract position without implying, suggesting or purporting to market the underlying property is “practically impossible.” In that state, no workaround (SC REC guidance).

Your first 90 days

1. Pick one market and one property type. One county, one price band, one house style. Depth beats breadth.
2. Book the attorney. Get your purchase agreement and assignment addendum reviewed, and find out what your state requires.
3. Find your title company. Call 3. Ask whether they close assignments and double closes, and pick the one that says yes without hesitating.
4. Build 12 real buyers before you have anything to sell. Pull cash deeds, call the repeat names, record their criteria.
5. Underwrite 10 deals you do not buy. Comp them, price the repairs, check your ARV against what sells. Being wrong on paper is free.
6. Start mailing, and keep mailing. One send is a test, not a campaign. Plan 6 touches to the same ranked list. Judge after touch 6, not after the first drop.

The last step decides whether the rest matters. People quit wholesaling because they never built a repeatable source of sellers, not because they could not master an assignment addendum. Farmrix handles that side: every owner in your market scored, ranked, and the top few hundred mailed. To pressure-test your market and budget, book a call.