How To Wholesale Real Estate In Delaware: Step By Step (2023)Jan 17, 2023
Wholesaling is an excellent way for anyone to earn significant fees by helping another investor locate a real estate deal.
With a population of just over 1 million, according to 2021 estimates, and 457,954 units of housing, there is ample opportunity to wholesale real estate in Delaware. It’s a lucrative technique that anyone can master if they put in the time and effort. But you must understand the business well if you want to be successful.
Here is a step-by-step guide to help you get started in how to wholesale real estate in Delaware.
- What Is Wholesaling Real Estate?
- How To Wholesale Real Estate In Delaware (9 Steps)
- Is Wholesaling In Delaware Legal?
- How Much Do Wholesalers Make In Delaware?
- Do You Need A License To Wholesale Real Estate In Delaware?
- Is Wholesaling In Delaware Easy?
- Final Thoughts On Wholesaling In Delaware
What Is Wholesaling Real Estate?
Wholesaling real estate is an investing strategy that involves connecting a motivated seller with a house flipper or other investor and earning a fee for arranging the transaction.
The wholesaler will go out and look for distressed properties or homes that are in foreclosure. You will then offer to purchase the property from the owner at a discount in exchange for a fast closing that will help them avoid any severe financial consequences.
When you find a seller willing to accept your terms, you will sign a purchase contract agreeing to a price. You will flip that contract to a real estate investor who renovates the property and sells it at market value for a profit. The key is to convince the buyer to purchase the contract at a markup, so you can collect the difference as an assignment fee.
Wholesaling allows you to earn significant fees without risking your own money or credit by taking on the responsibilities for maintaining a property. But you can still earn sizeable fees and learn about the ins and outs of the real estate business.
There is ample opportunity to wholesale real estate all over Delaware, whether you live in Dover, New Castle, or outside of New York. However, it’s easier said than done, and if you want to be successful, you must be patient and willing to learn the ropes.
How To Wholesale Real Estate In Delaware (9 Steps)
In the following nine steps, we’ll show you how to wholesale properties in Delaware. Be sure to check out our in-depth video showing you how to wholesale real estate step by step here:
Here's our simple step by step process for wholesaling real estate in Delaware:
- Partner With A Wholesale Mentor
- Learn Delaware Real Estate Wholesaling Laws & Contracts
- Understand The Delaware Real Estate Market & Lingo
- Build A Cash Buyers List
- Find Motivated Sellers & Distressed Properties
- Put Distressed Properties Under Contract
- Assign The Contract To Cash Buyer
- Close Deal And Collect Assignment Fee
- Double Close When Necessary
Step 1: Partner With A Wholesale Mentor
Before looking for deals, you’ll want to study the basics and have a proper system for managing leads and signing contracts. You can learn this process independently if you feel confident in your abilities, but it may require a bit of trial and error.
One way to expedite this process is to find a wholesale mentor to coach you and show you the ropes. This could be another experienced wholesaler or a real estate investor willing to teach you what they know about the business.
A wholesale mentor is not only a great source of information, but they can also introduce you to people in their network who can help your business. Many experienced professionals will be happy to be a mentor if you make it worth their while.
While not required, a wholesale mentor can make it easier to start closing deals sooner and prevent you from making common mistakes.
Step 2: Learn Delaware Wholesaling Laws And Contracts
Next, you’ll want to study local Delaware real estate and wholesaling laws to avoid getting into trouble. You’ll also want to learn the real estate contracts you’ll use to facilitate your wholesale deal so you’re prepared to find a motivated seller who wants to move fast.
Wholesaling is perfectly legal in Delaware, but you must abide by the local real estate law. It’s essential to be aware of what activities require a real estate license, so you avoid these activities if you are not a broker.
To learn what activities require licensure in the state of Delaware, study Delaware Code, Title 24 Professions and Occupations Chapter 29 - Real Estate Services, Brokers, Associate Brokers, and Salespersons. This is the official text published by the Delaware Real Estate Commission, which lists all the activities that require licensure and the punishments for violating license law.
Studying the contracts you may use in your wholesaling business is also critical. There are two common forms you will likely come across:
- Delaware Purchase Agreement: The standard document you will use to validate any home purchase.
- Assignment of Contract: The document allows you to transfer ownership interest to an end buyer.
You should also study the local laws and customs in your particular city or county because individual municipalities often have their own unique rules. Consult a real estate attorney if you need legal advice on local legislation or contracts.
Step 3: Understand The Delaware Market And Lingo
Before you start working in the field, you must study the Delaware real estate market and understand the vocabulary used by local real estate professionals. Every real estate market offers unique challenges and opportunities. So it’s important to understand the different facets of the market you plan to work in so you know how to set offer prices and negotiate confidently.
The price points in Dover may be very different than in Rehoboth Beach. So it’s important to study the local market trends to make more informed decisions about prospective deals.
Study things like:
- Property values
- Land prices
- Construction costs
- Demographic data
- Zoning laws
- School districts
- Employment information
Having a decent grasp on this type of info will make it easier to make a successful offer when it comes time to approach sellers. A good resource for information is the National Association of Realtors. Contrary to popular belief, the NAR is open to anyone in the real estate business. They often host events where you can network with real estate agents, flippers, rental property owners, wholesalers, contractors, and more.
Here is a list of some of the most popular NAR chapters in Delaware:
- The Delaware Association of REALTORS
- New Castle County Board of REALTORS
- The Sussex County Association of REALTORS
- Kent County Association of REALTORS
The Delaware Real Estate Investors Association is another good place to network with other real estate professionals and collect business cards. The best way to learn local real estate lingo is to spend time with other investors in the business. But, Section 2902, “Definitions” of Title 24 of the Delaware Code, also features a quick glossary of definitions you can use.
Step 4: Build A Cash Buyer’s List
Once you have a handle on all the necessary information, it’s time to build a cash buyer’s list. As a wholesaler, you’ll want to work with cash buyers because they will be the most likely to be in the market for a distressed property and be able to close quickly. Finding a buyer interested in the property you’re wholesaling may take some time, but you likely won’t have the chance to start from scratch once you get a property under contract.
So the best solution is to begin networking with cash buyers before you start looking for properties and build a detailed list, which you can use to narrow down potential candidates once you have a property under contract.
There are many different places in Delaware where you can find cash buyers. A few common methods include:
- Real estate networking events
- Social media
- Bandit signs
- Craigslist Ads
- Email lists
- Property Auctions
- Real Estate Agents
- Your personal network
It’s also important to get more information than just their name and a business card when you find a cash buyer. Instead, you’ll want to ask them a set list of questions to determine if they’ll be a good lead and then record the information in a spreadsheet or CRM software.
Information you’ll want to get includes:
- Name and contact information
- What type of property they’re looking to buy
- How soon they’re looking to make a purchase
- Any markets or locations they prefer
- What kind of budget do they have?
- How are they financing the purchase?
- Any other considerations
You’ll have to develop a system that works best for your wholesale real estate business, but this is a good place to start. Make sure to keep the information organized and safe so it’s easily accessible when you have a hot deal.
You can also check out this video on how to find cash buyers!
Step 5: Find Motivated Sellers And Distressed Properties
Once you have a solid cash buyers list, you’ll want to begin scouting for motivated sellers and distressed properties. A motivated seller is a homeowner desperate to sell due to life events or financial difficulties and may be willing to accept a lower offer in exchange for a fast closing.
A distressed property means the home is either in foreclosure or on the verge of default and may also have maintenance issues or outstanding tax liens. Although you can target any type of property you like, real estate wholesalers tend to look for distressed properties because the seller is likely highly motivated and willing to compromise to avoid foreclosure.
So, your job will be to go out and find distressed properties. There are several different methods you can use to find wholesale properties:
- Driving for dollars
- Bandit signs
- Post on Craigslist and Facebook marketplace
- Direct mail
- Public Records
- Real estate auctions
If you drive around downtown Dover or Wilmington, you’ll probably notice a few abandoned or dilapidated homes. These properties you’ll want to target will provide the most opportunity. So you’ll want to get comfortable locating homeowners and uncovering other information using public records.
Step 6: Put Distressed Properties Under Contract
When you get in touch with the seller of a distressed property, you’ll want to explain your interest in the home and make them a fair offer. But these will likely be off-market properties, meaning the seller won’t have a real estate broker or a set listing price. Therefore, you’ll have to crunch the numbers to determine a fair offer that works for your bottom line.
Real estate wholesaling involves a decent amount of math. So there are two formulas you should learn to determine a fair offer; ARV and MAO.
After repair value (ARV) is the amount the property could likely get from an average homeowner if renovated to market expectations. Flippers use ARV as a metric to determine a home's profit potential and cash flow, so it’s good to know for yourself.
You should pull comps of recent sales in the area to get a rough estimate of the ARV. You can do this by enlisting the help of a real estate broker or pulling market data from sites like Zillow. Pick 3-5 properties that recently sold and are similar to your potential wholesale property. Divide the sales price of each home by the square footage, then take the average of all the properties.
ARV = Property Square Footage x Average Price Per Square Foot
Simply multiply the average price per square foot in the area by the home's square footage to get a rough estimate of the ARV.
Next, you’ll want to calculate your MAO or Maximum Allowable Offer. This is the highest possible amount you can pay the seller and still make a profit on the deal.
MAO = ARV - Fixed costs + Rehab Costs + Preferred Profit or Equity
To determine you’re MAO, take the ARV determined in the last step and subtract the associated costs and desired profit margin. Fixed costs include utilities, taxes, insurance, and other fees associated with owning the property.
Rehab costs refer to labor and materials required to renovate the property to market standards. You can calculate these costs using online tools like a rehab calculator or enlist the help of a general contractor to get a more accurate figure.
Also, don’t forget to include the investor's profit margin because no one will buy an investment property just to break even. Each investor is different, but most want an 8-12% profit margin. So don’t forget to factor that into your calculation.
Step 7: Assign The Contract To A Buyer
When you find a seller willing to agree to your price, you’ll want to get the property under contract to lock in the price. This is crucial because if you don’t do this correctly, the buyer can cut you out of the deal.
When you have the property under contract, you’ll begin calling up the names on your buyer’s list until you find someone interested in purchasing the property. When they want to move forward with the real estate transaction, you will simply assign the ownership rights over to them and move on to your next deal.
Step 8: Close Deal And Collect Assignment Fee
Once you have two willing parties ready to move forward with the sale, all that’s left to do is close the contracts and collect your assignment fee. If you did everything correctly, the buyer would be fronting any closing costs because they are assuming ownership of the property and the rights that come with it. All you need to do is show up to the closing table and ensure all the contracts are properly signed and executed.
Delaware is an attorney closing state, meaning an attorney must be present to finalize the real estate transaction. So follow their directions and ensure all the paperwork is properly signed and filed. When everything is finalized, you can simply collect your fee, and the end buyer will take it from there.
9. Double Close When Necessary
In most cases, it’s the simplest to simply assign the contract to the new buyer and avoid taking ownership of the property. But in some scenarios, you may have to do a double close.
As the name suggests, a double close means you close once with the seller, then turn around and close with the buyer immediately afterward. This means that your name will be included on the chain of title, and you will briefly take ownership of the property. But the result will be the same as an assignment.
A double close is often necessary if the buyer’s lender has an issue underwriting an assignment contract. That’s why it’s often best to work with cash buyers who don’t have these restrictions. But be aware that some hard money lenders and other loan providers may have this issue.
Read Also: Wholesaling Real Estate For Beginners
Is Wholesaling In Delaware Legal?
Yes, Wholesaling is perfectly legal in the state of Delaware. However, you must avoid any activities requiring a real estate license. A wholesaler's job is to act as a neutral third party and not represent the interest of any other party for compensation. Doing so could be seen as a violation of license law which carries hefty penalties.
You should review Title 24 of the Delaware Code to understand fully what activities constitute brokerage services so you don’t inadvertently break the law.
Important Sections include:
§ 2901: License Requirements & Exceptions
§ 2902: Key Definitions
§ 2924: Penalties
How Much Do Wholesalers Make In Delaware?
The fees earned by a wholesaler can vary greatly depending on the market and the skills of the wholesaler. The beauty of wholesaling is there is no limit to the amount you can make. However, you must have a keen eye for deals and negotiating skills to get a reasonable price.
The average wholesaler usually makes between $5,000 and $10,000 per sale, while those with more experience earn up to $30,000 to $50,000.
Do You Need A License To Wholesale Real Estate In Delaware?
No, a license is not required to be a wholesaler in Delaware, as long as you understand your role and don’t do anything that would require a license.
According to Section 2901 (e, 1-5) of Title 24 of the Delaware Code, license law does not apply to: “Any person or a subsidiary or division thereof with common ownership or control who, as owner or lessor or buyer or lessee, performs any of the acts enumerated in this section with reference to property owned, purchased or leased by such person.”
So, basically, a license is not required to transact real estate you own, lease, or sell. As a wholesaler, you only facilitate a purchase, which is exempt from licensing requirements. But stay away from representing either party's interest in the transaction for any money or other consideration.
Is Wholesaling In Delaware Easy?
Wholesaling in Delaware isn’t easy, but it isn’t as complex as you might think. It doesn’t require licensure or years of schooling, and you can begin making money as soon as you land your first deal.
But it does take time and patience to master. There is no guarantee you’ll close a sale, so it may take several months or even years to land your first deal. However, it will become easier with more experience and networking skills. So, while it isn’t a get-rich-quick scheme, it is perhaps the simplest way to earn four to five-figure checks in a short period.
Getting a coach, a mentor, and the proper training can make the wholesaling process much easier. At Real Estate Skills, we offer the Pro Wholesaler VIP Program, an elite course that can help set you up for success.
The Pro Wholesaler VIP Program is designed for the modern entrepreneur to learn the basics and the easy potholes to spot and avoid. It is 100% online and is used for local and virtual real estate wholesaling.
Final Thoughts On Wholesaling In Delaware
Wholesaling in Delaware is a smart practice for anyone interested in real estate investing but doesn’t have the funds or experience to take on the risk of owning property. It allows you to get first-hand experience and build a network of investors that can be beneficial in many ways.
But you must be patient and willing to do your research if you want to be successful. So start by studying local laws, market trends, and investor techniques, and eventually, you’ll develop a system that provides consistent results.
Check out our brand new free training on how we help investors all across the country wholesale and flip houses from the MLS using only a laptop and a cell phone.