In the merchandising world, wholesale means buying a product with original seller, and then sell it to a third party at a profit.
This is basically the same concept behind property wholesale and assignment. A real estate investor signs a purchasing contract to buy a property from property owner, and then signing a sales contract to sell this property to a third party buyer, usually at a higher price for a profit.
The process of signing an original purchasing contract and then sell it to a third party is called ‘Assignment’, as the original contract was somehow assigned to the third party, the final purchaser of the property.
The premise for property Wholesale and Assignment is that savvy investor can buy the property at a price substantially lower than market value from distressed property owners. Distressed home owners can be those people in financial trouble, house facing foreclosure, behind in payment and property taxes, in divorce, or distressed landlord. The wholesaler investor can come to help the original home owner in this situation for a quick sale, therefore saving their credit or bankruptcy, or whatever the case may be.
The beauty of ‘Wholesale and Assignment’ strategy is that real estate investor do not actually need to purchase the property, therefore avoiding any costly fee in closing costs such as taxes and lawyer fee. Thus this method is often been named as “No Money Down” approach by many real estate seminars.
On the flip side, this strategy needs extensive search on the ideal home to buy, and willing buyer to assign the deal. There are also lots of legal issues to be resolved along the way. Consult your realtor and lawyer carefully before you proceed.