Definition
Wholesaling
Also called: assignment of contract, wholesale real estate
Wholesaling is when someone puts a property under contract, then sells (assigns) that contract to an end investor for a fee before closing — the wholesaler never owns the house. The seller's price includes the wholesaler's margin, typically $5,000–$30,000.
Wholesaling is legal in most places when done honestly, and some wholesalers provide a real service by finding buyers a seller couldn't. The problems are practical: the person making the offer may have no money and no intention of closing themselves, the contract price has a middleman's fee inside it, and if no end buyer materializes, the deal quietly dies during the 'inspection period.'
Sellers can protect themselves by asking directly whether the buyer is purchasing for themselves or assigning, requesting proof of funds, and requiring a meaningful earnest money deposit held in escrow. Selling directly to the end buyer — or making end buyers compete — keeps the assignment fee in the seller's pocket.
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