What Is Disposition In Real Estate? Definition & Step-by-Step Guide

In this guide, you'll find a comprehensive look at the concept of disposition in real estate:

• What Is Disposition In Real Estate?

• Dispositions In Real Estate Explained

• What Is Wholesaling Real Estate?

• What Is Disposition In Real Estate Wholesaling?

• The Process Of Dispositions In Real Estate Wholesaling

• What Does A Disposition Agent Do?

• What Are The Benefits Of Disposition In Real Estate Wholesaling?

• What Is Disposition In Commercial Real Estate?

• Final Thoughts On Disposition In Real Estate

Navigating the complex world of real estate requires more than just pinpointing lucrative deals; it involves a deep understanding of the end-to-end process, especially when it comes to disposition.

Whether you're interested in real estate wholesaling, where swift turnovers and impactful strategies reign supreme, or venturing into commercial real estate where portfolio optimization plays a crucial role in aligning assets with ever-evolving business objectives, understanding the disposition process is key.

At its core, disposition in real estate signifies the liquidation or divestment of properties, helping businesses and investors streamline their portfolios, maximize value, and bolster liquidity for future ventures.

Read on to unravel the intricacies of the disposition process, drawing parallels across wholesaling, commercial real estate, and the broader real estate industry, providing insights for both novices and seasoned professionals.

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What Is Disposition In Real Estate?

Disposition in real estate represents the action or process of selling or liquidating a property or asset.

Drawing parallels to stock investments, just as one might sell stocks at a high price to acquire real cash, the disposition of real estate involves relinquishing ownership of property, typically to bolster cash flow or fund a new venture.

Contrasting its counterpart term, “real estate acquisitions,” disposition essentially denotes the act of “disposing” of a property. This can manifest through selling real estate or even donating it to charitable entities.

Whether for investment strategies or reshaping portfolios, understanding the intricacies of disposition in real estate remains crucial for stakeholders.

 

Dispositions In Real Estate Explained

In the industry of real estate investing, there invariably exists an individual or a dedicated department tasked with seeking out potential buyers and guiding the disposition of properties. Simplified, the disposition in real estate encompasses:

1. Strategically marketing the property up for sale.

2. Constructing and managing an ever-evolving list of potential buyers.

3. Handling and progressing buyer inquiries and leads.

4. Guiding the property to a smooth closing.

 

1. Strategically Marketing The Property

Marketing a property aims to garner attention from the right set of potential buyers. Different types of real estate investors target distinct buyer groups. For instance, wholesalers typically target other investors, such as rehabbers or buy-and-hold investors.

In contrast, a rehabber aims to draw in individuals looking for their next home. To achieve this, a dispositions team might:

• List the property on popular platforms like Zillow, Realtor.com, and Redfin.

• Employ the local Multiple Listing Service (MLS) via a Realtor.

• Advertise on online directories, including Facebook Marketplace and Craigslist.

• Display a prominent "For Sale" sign on the property.

• Collaborate with fellow investors and wholesalers.

• Maintain a dedicated inventory website.

• Periodically send out emails to an active list of potential buyers.

*You don't necessarily need a real estate license to access the MLS. If you want to get quality information on properties, watch our video on How To Get MLS Access WITHOUT A License!

Read Also: How To Get MLS Access In 6 Ways (Even Without A License)

 

2. Constructing & Managing A Potential Buyers List

At the heart of a successful property disposition strategy lies a robust buyers list. This list comprises potential buyers who are consistently updated about a wholesaler's available properties.

Those handling the disposition of a property often take the lead in sending out periodic emails with updates on property inventory, pricing adjustments, or special discounts.

Moreover, to optimize the process, it's common for disposition professionals to familiarize themselves with the preferences of their buyers, actively reach out to the most engaged individuals, and establish a strong rapport with them.

 

3. Handling & Progressing Buyer Inquiries & Leads

Every successful marketing effort generates a stream of buyer leads, but it's what you do next that truly counts. In real estate dispositions, the responsibility of managing these leads is paramount.

Not only is it essential to establish open lines of communication with these potential buyers, but there's also the task of systematically adding them to the existing buyers list.

Once on the list, leads become privy to periodic property updates and exclusive deals. However, the role of a real estate disposition professional goes beyond just managing a list.

They actively engage with these leads, addressing any questions, concerns, or specific property interests. Additionally, they facilitate property showings, ensuring that potential buyers have all the necessary information and access to make informed decisions.

The overarching goal is clear: to make the property buying journey as seamless, efficient, and pleasant as possible for every potential buyer.

 

4. Guiding The Property To A Smooth Closing

Reaching an agreement between parties in a real estate transaction is only half the battle; what follows is the meticulous closing process. This involves several essential steps and stakeholders to ensure a seamless transition from the property owner to the buyer.

Often, a closing agent, which can be a title company or an attorney, is brought in to steer this phase. They work diligently to address the nitty-gritty of the deal, such as inspecting the title history for any anomalies or potential hiccups.

For some real estate professionals (particularly investors and wholesalers) the task of overseeing this process is delegated to a transaction coordinator.

Others may assign this responsibility to their dedicated dispositions manager or the larger dispositions team. Irrespective of the individual in charge, it's crucial to prioritize due diligence.

This ensures that the preliminary title report is thorough, and subsequently, a title insurance policy is issued. This policy acts as a safety net, offering coverage against unforeseen liabilities or oversights in the title's history.

While the concept of disposition in real estate primarily revolves around the selling or liquidation of a property asset, in the world of real estate wholesaling, this term takes on a more nuanced role. In wholesaling, disposition doesn't merely denote the act of selling; it is intricately woven into the very fabric of the wholesaling process.

If you want to get started in a career in real estate, wholesaling is the perfect avenue for beginners! Learn everything you need to know with The Pro Wholesaler VIP Program by Real Estate Skills or dip your toes into the industry with our FREE training course on wholesaling and house flipping!

Now, let's dive deeper into understanding what disposition entails specifically within real estate wholesaling.

 

What Is Wholesaling Real Estate?

Wholesaling real estate refers to the process of getting a property under contract at a discount and then flipping that contract to another investor. Wholesalers scout distressed properties or those owned by motivated sellers who are looking to move quickly and make an offer.

They then get the property under contract for a certain price and market it to real estate investors who will renovate it for sale or rent it out to tenants.

Once the sale is closed, the wholesaler can pocket the difference between their offer price and the price paid by the investor - which is known as an assignment fee or wholesale fee. Real estate wholesaling is a great strategy for those who are new to the real estate business because it doesn’t require significant capital or good credit to get started.

But it does require patience and the ability to network with sellers and real estate investors.

Read Also: Wholesaling Real Estate: Step-by-Step PDFs [FREE DOWNLOAD]

 

What Is Disposition In Real Estate Wholesaling?

Disposition in real estate wholesaling refers to the process of selling the equitable interest in the property you got under contract.

There are two basic phases to wholesaling: acquisition, and disposition.

The acquisition stage refers to the process of scouting a property and getting it under contract. The disposition process refers to the act of finding interested buyers and closing on the sale.

While the acquisition process tends to get more coverage on real estate blogs and podcasts, the disposition process can be just as difficult, if not more so. Building a list of potential buyers can take months, if not years because you want a solid pool of potential candidates before you approach any motivated sellers.

Unless you develop a strong relationship with a particular investor or group and you know exactly what they will and won’t buy, there’s no guarantee that someone will purchase your wholesale property once you get it under contract.

So, the best strategy is to develop a strong list of potential buyers who are on the lookout for investment properties and take note of what they are looking to buy.

That way, when you do get a property under contract, you can call everyone on your cash buyers list until you find someone who’s interested.

If you want to build a successful wholesaling business, you need to network with real estate investors and develop strong relationships, so that you can easily find a buyer for any deal that you come across. 

 

The Process Of Dispositions In Real Estate Wholesaling

The process of disposition is pivotal in wholesaling. This procedure not only holds the key to maximizing returns but also streamlines the journey from property acquisition to its ultimate sale or transfer.

Here are the 6 steps of the disposition process in real estate wholesaling:

1. Find & Vet Cash Buyers

2. Ensure You Have An Executed Contract

3. Market That Contract To Your Buyer’s List

4. Secure End Buyer Commitment

5. Assign The Contract

6. Close & Collect The Assignment Fee

 

1. Find & Vet Cash Buyers

The first step is to locate and vet cash buyers. That means obtaining their email and phone number, noting their buying preferences, and checking their credentials to ensure they have the funds available to purchase the property.

Wholesale deals tend to move quickly. So it’s best to work primarily with buyers who are paying cash. Some investors use hard money loans and financial products offered by alternative lenders to purchase properties.

While there’s nothing wrong with keeping your options open and connecting with as many different real estate investors as you can, it’s better to find buyers who have the cash on hand because the sale will close faster.

It could threaten the deal if the buyer has to wait for the loan to be approved. So it’s better to look for those who already have the funds and know what they’re looking to buy.

You can use a variety of different methods to find cash buyers.

You can attend local REI events and conventions, post bandit signs or call investors who post them, post ads on Craigslist or the Facebook Marketplace, contact investors through social media or simply ask your friends and family if they know any investors or cash buyers.

Begin planting seeds early and build a solid cash buyers list before you begin scouting properties. You won't have time to start once you get the property under contract because it will eventually expire. So the first step is to build a solid real estate network you can leverage when the time comes.

*Check out this quick video that talks about How To Find Cash Buyers For Wholesale Deals!

 

2. Ensure You Have An Executed Contract

The next step is to be sure that your wholesale contract is iron-clad. Before you start contacting investors and telling them all about the great deal you have, make sure you have a legal contract binding you to the deal.

Without a proper contract, the investor could easily go behind your back and deal directly with the seller, which means you wouldn’t get a fee.

Most investors are willing to let wholesalers keep a fee for doing the legwork of finding the property. But if they can find a way to cut you out of the deal and offer the same price to the seller or even a slightly higher price, it means more potential profit for them.

So, even if you know a cash buyer personally and feel like you can trust them, it’s still always wise to get the contract in writing before you divulge any information to investors. That way you avoid giving them any temptation.

If you’re not sure whether the contract you signed is fully legal and enforceable, it may help to work with a real estate attorney. Although it will cost a bit extra, it may be worth it in the long run.

Even if the investor doesn’t try to cut you out of the deal, it will still be pretty embarrassing if you get to the closing and the contract is not valid. So double-check that you dot your I’s and cross your T’s before reaching out to investors.

 

3. Market That Contract To Your Buyer’s List

Once you are certain that you have a legally binding contract, the next step is to market it to your buyer’s list. This is where having a detailed and organized buyers list will come in handy. If all you do is collect business cards, your job will be much harder when it comes time to contact investors.

Most real estate investors have a particular property type, location, and budget that they’re working with and you’ll only waste your own time if you don't do your research and ask the right questions beforehand.

For instance, if one buyer specializes in multifamily properties, it doesn’t make sense for you to contact them if your wholesale property is a single-family home. If you keep a detailed list of what each investor is looking for and what they are willing to pay, it will make this process much easier.

Start with the ones that are an exact match and then move your way down the list until you find an interested buyer (or even a few interested buyers).

If you strike out with the buyers at the top of your list, you can always reach out to others who may have different criteria. Maybe they’ve changed their strategy and they’re now looking for exactly what you have or maybe they know somebody who does.

It never hurts to reach out to as many buyers as possible, especially if it’s been a while since you contacted them. But you will save yourself a lot of time and energy if you vet each candidate carefully and keep a detailed list of what they are willing to buy.

Read Also: How To Find Cash Buyers For Wholesaling Real Estate (2023)

 

4. Secure End Buyer Commitment

If you did a good job of building a solid buyers list, the next step is to secure a commitment. Before you go through the process of drafting contracts and alerting the seller, you want to know that the buyer is serious and willing to agree to your terms. During this stage, you will negotiate the price and discuss your assignment fee. Your fee will be equal to the difference between the seller's asking price and the purchase price of the new buyer.

So you’ll have to get the investor to agree to pay a higher price for the property than what you're offering the seller. This negotiation phase is one of the hardest parts of wholesaling real estate. The best way to be successful is to pull real estate comps and determine the after-repair value (ARV) of the property.

Most investors are willing to pay a price that is 70% of the ARV or lower because that gives them enough of a margin to flip it to homebuyers. So, as long as you secure it for a price that’s less than 70% of the ARV, you shouldn’t have a hard time convincing them to pay the fee because they'll still make plenty of profit on the deal.

If you are concerned that the buyer may back out before the contracts are signed, you may request an earnest money deposit. Most motivated sellers won’t require it because they likely want to close as soon as possible. But if the investor is serious about the purchase and has the cash on hand anyway, they shouldn’t have a problem providing a deposit. If you do so, you may want to work with a realtor who can keep the money in escrow until the sale closes. But an earnest money deposit will give you the assurance that they are serious about moving forward with the deal.

Read Also: MAO Formula In Real Estate: What Is A Maximum Allowable Offer?

 

5. Assign The Contract

Next, you’re going to assign the contract over to the buyer and let them take it from there. To do so, you will have the buyer and seller both sign a wholesale real estate contract that will give you the right to assign the contract to a new buyer without ever having to purchase the property.

You should have already had the seller sign the contract, but you will still need the new buyer to sign any additional paperwork. During this process, it helps to hire a title company to facilitate a smooth transition of ownership.

You want to make sure that the process is as seamless as possible so that the deal doesn't fall apart. A title company can help you make sure that the title is properly transferred and that the investor has full ownership of the property once the deal is closed.

There are a few different ways that you can assign the contract, but the most common is to sign a real estate purchase agreement. This is a purchase and sale agreement signed by the seller and the wholesaler that contains a clause allowing the wholesaler to transfer the ownership to a new buyer and absolve themselves of responsibility.

Other methods include a double closing, a lease option agreement, or a wholesale assignment of contract. You may want to consult an attorney or a real estate agent to determine which contract makes the most sense for the situation.

*To help you in the contract process, Real Estate Skills offer you our FREE Wholesale Real Estate Contract Templates & PDFs. Download yours below!

  

6. Close & Collect The Assignment Fee

Once the contracts are signed and the funds have been exchanged, you’ll be able to collect your assignment fee and walk away from the sale.

The seller will have their money and be able to move on with their lives and the buyer will own a new investment property that they can do with what they wish. The exact length of time that the disposition process takes can vary depending on a variety of factors, but you can often close on the sale in 30 days or less.

Real estate wholesalers make on average about $10,000 - $20,000 per deal, although it can vary depending on the market conditions and the experience level of the wholesaler.

There’s no limit to the amount of money you can make although there is a ceiling to how large markup investors are willing to accept.

But if you work hard and learn the market you’re working in well, you can easily make four and five-figure checks without even working as a wholesaler full-time.

Read Also: Wholesale Real Estate Salary: How Much Can You Make Wholesaling?

 

What Does A Disposition Agent Do?

A wholesale disposition agent is a real estate agent who specifically oversees the disposition process. An agent can be very useful to wholesalers because they can provide the support and guidance that the wholesaler may need.

They can help communicate with leads and respond to any questions or concerns. They can help you pull comps to determine a fair price that buyers will pay or they can get access to properties if the buyer wants to schedule a viewing. They can also help you manage your buyer's list so you have everything you need to close deals as quickly as possible.

A disposition agent can be a valuable addition to your team, so you should consider using one if you want to scale up your wholesaling business quickly.

                         

What Are The Benefits Of Disposition In Real Estate Wholesaling?

Mastering the disposition process can have several benefits for real estate wholesalers. Ultimately, far too many wholesalers focus too much on acquisitions and not enough on disposition. But real money can be made by mastering the sales process.

• A Quicker Close Means Higher Returns: First of all, the quicker you close, the more likely you are to get the highest price possible. If the process drags on, you may be forced to accept a lower offer just to avoid losing the deal. So having a long list of potential candidates ready can ensure that you get the highest fee possible.

• More Demand: The more potential buyers that you get interested in the property, the more demand you create, which can be used in your favor. If you only have one cash buyer who is interested, you’ll be forced to accept whatever offer they make you. But if you have several cash buyers who are willing to buy the property, you may be able to create a bidding war that will drive up the price. So focusing on the disposition can help you get a better offer.

• Building Relationships: Plus, if you want to build a long-term wholesaling business, you want to invest time in building relationships with investors. Once the deal is closed, you’ll likely never see the seller ever again. But if you bring an investor a profitable deal, it can create a business partnership that could last many years. So putting the effort into building a solid buyers list and maintaining relationships with local investors can be very beneficial in the long term.

Read Also: The Pros & Cons Of Wholesaling Real Estate: An Investor's Guide

 

What Is Disposition In Commercial Real Estate?

Commercial real estate disposition refers to selling, subleasing, or conducting a lease buyout of a property.

This process is primarily driven by the need to monetize assets, either to reinvest in the business or clear existing debts. Often, properties are divested when they no longer align with a company's core business objectives.

Here are the steps involved in commercial real estate dispositions:

1. Prioritize Your Goals: Sellers collaborate with seasoned real estate brokers to set objectives, devise an initial disposition strategy, and determine asset pricing based on market conditions. This phase encompasses tasks like collecting property data, identifying potential barriers to sale, and conceptualizing a tactical action plan.

2. Due Diligence & Pricing: With a strategy in place, the focus shifts to a deeper understanding of the property's market standing. Sellers finalize pricing after careful consideration of the property's condition and potential challenges.

3. Marketing To Interest Buyers: Aimed at reaching potential buyers, this phase employs targeted marketing strategies. Activities include market feedback analysis, potential buyer identification, and deploying various advertising mediums.

4. Negotiating With Potential Buyers: Here, sellers engage with interested buyers. Experienced brokers lead this phase, ensuring optimal value realization for the property through careful comparison and negotiation of offers.

5. Final Terms & Closing: The culmination of the disposition process, this phase ensures that the negotiations' essence is captured in the final terms. Activities include document review, compliance checks, and ultimately, the transfer of property title and funds. Once completed, the portfolio is refined, with non-contributing assets effectively removed.

Read Also: Wholesaling Commercial Real Estate: The (ULTIMATE) Guide

 

Final Thoughts On Disposition In Real Estate

Disposition in real estate is a delicate process that takes time to master. Don't get discouraged if you lose your first few deals because you can’t find a buyer.

It’s all a learning process and the more time you invest in building a buyers' list, the easier it will become to land a profitable wholesaling deal. So it pays off, in the long run, to dedicate time and energy to building relationships before you even begin scouting properties.

If you’re looking for a step-by-step process to help you start and grow your wholesaling business without spending a dollar in marketing, check out our brand-new FREE training and start scaling your real estate business today!