We have all seen the letters in our mail “Will Buy Your House For Cash”. Sometimes these look as if they are hand written, other times they look a little more professional, but they all say the same thing. We want to buy your home as is for cash. This is typically Real Estate Wholesaling. Let’s look at how it works.
Please note that we said typically Real Estate Wholesaling as there are a few alternatives that are not as common. First it may be an investor looking to find a house to flip in a desired up and coming neighborhood. It may also be an investor looking to find their next investment property in a particular area. In this article though, we are going to look at the more common Real Estate Wholesaling.
Wholesalers find properties that are in distress, the worse off the better to a certain extent. They will then explain to the owner that they will buy the house for a certain sum of money. The amount of the offer will sound like a large sum, but it will always be below market value. The wholesaler while explain that the owner will not have to go through the trouble of cleaning, fixing, and putting the property on the market. Just sign the dotted line and take the cheque.
Pros of Real Estate Wholesaling
The biggest pro is the convenience. In some cases, the current owner can take what they want and leave the rest behind for the wholesaler to deal with. No fixing, cleaning, nothing. The current owners will not have to deal with the whole selling process which could take months to complete. They also will not have to deal with showings, open houses and strangers in general coming through their home. They accept the offer and walk away.
Perhaps one overlooked pro is the lack of surprises. Because the house is being sold as is, the wholesaler takes on the risk of any surprises that may be found. This could include faulty foundations or other major repairs that bring large price tags to fix.
Another pro can be a quick turnaround. As mentioned, the selling process can take months on top of months before it actually closes. A wholesaler may get it done much sooner.
Cons of Real Estate Wholesaling
The number one con is selling well below market value. If the current owner were to clean, repair, and bring the property to selling condition, they would likely get significantly more for it. Even if they were to sell it as is, they would likely get more than what the wholesaler is offering.
Another con – and this is not with every wholesaler – but some wholesalers are taking advantage of the current home owner’s lack of knowledge and offering a price that is nothing more than a low ball. So this con we can describe as taking advantage. This is not always the case but can and does happen.
Now that a wholesaler has bought a house, they turn to their network of investors and sell it to one of them at a profit. This is what makes wholesalers different from other investors. They have no interest in doing the renovations themselves. They do not flip the houses, or fix and rent out to tenants. Real Estate Wholesaling is simply the act of finding a house in distress, buying it from the current owner below market value, and selling it at a profit. You can almost think of it as a finder’s fee.
If you get one of these letters in the mail offering to buy your house, or are approached by a wholesaler, the best thing that you can do IF you are considering selling, is to listen to their offer and then give me a call. I would be happy to inform you of what your property would likely go for if sold on the market. Then you can make an educated decision on how YOU would like to proceed.
Real Estate Wholesaling does have its advantages such as convenience and its stress free approach. Keep in mind that you will be paying for these advantages by selling you house for less. Most times significantly less.
If you still have questions or concerns, please contact Ryan Ligeza.
