Are Realtors Missing Out On Real Estate Wholesaling Opportunities?

Published November 05, 2023
Tonny J. | Growth Consultant

When I do a search online during this time period, I noticed that there aren’t a lot of searches for real estate wholesaling in Canada. It isn’t a common practice here in Canada compared to the United States. I’ve even spoken to numerous Edmontonian realtors mentioning ‘wholesaling properties’ to be met with perplexed reactions.

Although wholesale housing in America is widespread compared to Canada, there is a large spectrum of people who engage in it to outright being repulsed by it.

I’ve even met a realtor in California who struggled to make commissions as a realtor. So when I mentioned wholesaling to her, she reacted with disgust and disdain.

Yet, I know other investors who are not even realtors making a killing in the States wholesaling properties.

As the real estate landscape is becoming more competitive, it may be a good time to start wholesaling as a realtor. With unlicensed middle-men entering the arena, it may not be long before your competition starts performing to outrank you.

Here I’ll break down some of my insights with my experience doing real estate wholesaling in the States online.

Disclaimer: I’m not a realtor nor a lawyer. Be sure to get professional consultation before engaging in real estate wholesaling. This is for educational purposes only. Use at your own risk.

Currently (as of Nov 2023) there are roughly 400 searches a month when people type ‘real estate wholesaling’.

This skews in comparison where in the States where people are searching this term 5,200 times a month.

What is Real Estate Wholesaling?

Real Estate Wholesaling (aka Assignment Contracts) is when a middle-man finds a buyer or seller of a property, and earns a commission fee as a result of doing so. This is similar to being like a realtor as the middleman, but with a few more technical aspects involved.

With Real Estate Wholesaling, you don’t have to be a realtor to make a profit from the real estate market. It is possible for anyone not licensed as a realtor to earn commissions by flipping houses in the Canadian market.

But if you are a realtor, you could be missing out on financial and networking opportunities if you’re not currently doing wholesaling right now.

Requirements of a Successful Wholesale Deal:

The 3 main factors you need to be successful with real estate wholesaling:

Find a house that is in need of significant renovations
Access to a private lender to offer full cash payments
Finding an investor or fix-and-flipper to purchase the property

How Does Real Estate Wholesaling Work?

The idea is fairly simple, but the process can have a lot of moving parts.

For example, you see a property on the MLS you want to purchase that is in need of some TLC. You call the homeowner and offer to buy the property lower than the price it’s listing for.

The reason you can offer to pay lower for the property is because you’re offering to pay cash in full by the closing date. What homeowner out there doesn’t want a quick exit lump sum of money?

If the homeowner agrees, you typically now have 30-45 days to find a buyer. Usually you’ll make an earnest deposit so you can become the title owner of the home for those 30-45 days.

Now with the new contract in hand you must go out and find a motivated buyer, typically a fix-and-flipper. Building your own network of investors and private lenders can assist you with the cash you need. You show them the Purchase Agreement that’s in your hands to verify you hold the contract. Now, no one can cut you out of the wholesale deal with this legal document.

Once you’ve found a fix-and-flipper ready to buy, you can offer him assistance with cash he needs to buy the property in full. You would introduce him to one of your private lenders if needed.

Your private lender now knows you hold the contract, the fix-and-flipper knows you have the cash. (In some cases, you’ll find a fix-and-flipper who is also a private lender!)

You’re now ready to close the wholesale deal within the 30-45 day timeframe, and you get to walk away with a commission fee typically ranging from $5,000-$80,000. But it isn’t unheard of people earning $7,000,000 from a wholesale deal.

It’s a win-win for everybody.

What Are the Risks to Real Estate Wholesaling?

Although real estate wholesaling can become very lucrative, it does come with its fair share of problems.

Firstly, if you as the wholesaler cannot find a private lender willing to give you cash to buy out any property by the closing date, you’ll likely have to forfeit your earnest deposit. Even if you had a fix-and-flipper agree to take the property off your hands, you cannot guarantee the fix-and-flipper will have the all the cash available to take over the Purchase Agreement.

Of course there could be legal ramifications if you do not have certain clauses in place in your Purchase Agreement as well.

One way to mitigate risks is by placing a ‘10 day inspection clause’. If you cannot find a buyer in time, you could send over an inspector to view the property in question. If it does not meet the criteria to justify buying at the price you initially offered, you can always sit down to renegotiate the price.

Perhaps there are unforeseen repairs that will greatly affect your bottom line. You could ask to drop the price of the home even lower to cover the costs of any unforeseen repairs.

If the homeowner refuses to the new terms, you can terminate the contract without any liability.

What Now?

Real estate wholesaling if done correctly can benefit all parties involved. You as the wholesaler can reap massive rewards for flipping a property to another investor in time. Even newer realtors who are building up their own credentials can use this method when buyers are in short supply.

As the real estate market becomes more competitive than it already is, it may be a good time to start leveraging your network and connections to profit successfully from real estate wholesaling.

You don’t want to be beat out of the market as a realtor to those who are not even licensed, now would you?