What If I Can’t Find A Buyer? - Wholesaling Real Estate 101

What happens if I can’t find a buyer? This is the most common question I see from people who are thinking about getting into wholesaling real estate. Here is what you do to protect yourself.

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How protected you are will depend on your real estate contract. I can’t speak for every contract so I’m going to assume you’re using mine. You can download it free at: FutureFlipper.com

There are two things in the contract that you need to understand. The first is the earnest money deposit. This is the amount that you put down to show good faith that you are purchasing the property. You would deposit this when you open escrow at the title company. This amount is completely negotiable and it's what you’re at risk for if you don’t perform on buying the house. I’ve seen it as low as $10 and above $100,000. Typically a fair number would be 1% of the purchase price if you’re buying on the MLS. If you’re direct to the seller then you can usually get away with $500-$1000 in many places.

The second thing to be aware of is the due diligence period. During this period you have the ability to inspect the home and find the end buyer. This period is also completely negotiable. I’ve done it where I’ve completely waived it in order to get a deal. I’ve also done as long as 180 days. A typical due diligence period is 7-14 days when you’re dealing with something on the MLS. Once again when you’re direct to the seller, most won’t care about this. So I would advise getting at least 30 days.

During the due diligence period you are going to find out whether you have the house for a good price or not. You would offer the deal out to buyers and see what they want to offer on the home. If it is more than you have it under contract for then you’re looking good to continue. If it is less then, you need to find out what is the max price they’re willing to pay. Once you have that, you would then go to the seller and ask for a price reduction. If the seller is willing to give it then everything is good! If they are not, then you need to cancel the contract and get your earnest money deposit back.

In conclusion as long as you understand your deadlines you will be fine!