Selling a property is a chance to earn a lot of money quickly. Whether you inherited a house, face foreclosure, or own a distressed property, the important thing is to have a sale strategy in place.
When you put your house on the market, you’ll receive many calls and offers. Soon enough, you’ll meet a real estate wholesaler promising you a quicker sale and secure profits. There are both pros and cons to working with a wholesaler. However, you want to think hard before signing any contracts with a real estate wholesaler.
Advantages of Selling Your Home to a Wholesaler
Wholesalers work best for homeowners who want to sell fast. Often, you can finish the sale in a matter of days. Another benefit of the wholesaler is their network. Usually, they are always on the lookout for new properties and have people actively looking for properties. Thus, you don’t need to invest much, as they find financing and cover some expenses as part of the deal.
Quicker Sale
Wholesaling is all about quick sales. The allure of the wholesaler is in his ability to find a buyer for almost any property. Some even buy properties that require renovation and additional expenses.
The wholesaler’s business model depends on the constant search for new homes to purchase. They earn more money with more clients since they act as middlemen in each contract. Thus, they have to work with different people to make their business model work.
Capitalize on the Wholesaler’s Network
That also may work for you. For example, you may inherit an old property. It requires repairs and renovations. However, you don’t have the resources for the repairs, which lowers the price of the property.
Wholesalers may have a deal with renovation companies. They can reach out and find a buyer while looking for someone to repair your property. Instead of spending time looking for these contacts, you can lean on the wholesaler’s network.
Less Investment
Yet, the primary reason that people to turn to a wholesaler is a lack of financing. In an ideal scenario, your property is ready for sale. In practice, you mostly have to invest some money into your property.
Once you negotiate the price with the wholesaler, it’s their job to close the sale with a potential buyer. Most of the time, they include the costs of the repairs in the contract they make with the final buyer. When people can’t get a bank loan or a hard money loan, wholesalers may be the best way to sell a house.
Less Involvement
Still, for most sellers, less involvement is the best perk of doing business with a wholesaler. A wholesaler helps you to sell your property even if you know nothing about the real estate market. Usually, you need to know a thing or two about your property and the market before selling.
The wholesaler approaches you with an idea to make the whole process simple. They know what sells and how to deliver that. All you need to do is negotiate the price and wait for them to find a buyer.
All that is excellent if you want to sell fast.
Disadvantages of Selling Your Home to a Wholesaler
But that isn’t such an excellent thing if you want to sell smart. Speed of execution is the finest trait of a wholesaler. That puts you in a position to sign a bad deal, face legal issues, and let others profit from you.
While a wholesaler may seem like a reasonable solution, give other options a try. Some companies act as end-buyers of properties and are active on the market. They can find a home for you or buy it from you legally and for a fair price.
Lower Price
And the price is the aspect of the property that the wholesaler cares the most about. Their whole business model involves capitalizing on the margins of the sale. So, the lower the price they buy the house for, the more they profit during the re-sale.
With a lack of transparency, wholesalers often profit from buyers that lack experience in the real estate market. Using a sense of urgency and your lack of knowledge, they can low-ball you and hustle you into a bad deal.
Additionally, there is another problem with wholesaler transparency.
Wholesalers Aren’t Direct Buyers
When dealing with a wholesaler, you have no idea who is buying your home. You don’t know about the credit score or financing of the potential buyer. Also, you don’t have any other information about them.
Anyone can purchase the contract from the wholesaler under any terms they negotiate. While the house isn’t your concern anymore, a wholesaler’s sale is your concern. If the deal falls through on their end, you can also face issues. So, you need legal protection for this kind of business.
Possible Legal Issues
A wholesaler’s whole business strategy is to charm you into believing they have everything ready for the sale. All they need is your property and a contract with you to finish the deal. The problem is that you are unaware of their dealings with buyers and realtors.
Thus, the level of transparency equates to the level of trustworthiness when dealing with a wholesaler. A wholesaler that doesn’t want to share information about who they are selling to isn’t necessarily a person you want to work with. Instead, try to understand where the wholesaler’s job and your need to sell a house align.
Profit Comes First
For wholesalers, it is all about profit. Simply, the more contracts they sign and the more houses they sell, the more money they earn. That makes the wholesalers prone to nefarious sales tactics as long as they make a profit.
Not all wholesalers share this trait, but, unfortunately, it’s not too uncommon. If they see you lack experience in the real estate market, they may use it against you. In the end, it all comes down to how fast you need to sell your house.
Sell Your Home
Even in urgent situations, do your homework first. Working with a wholesaler is a quick fix, but not necessarily a smart solution. Try to find companies in your areas that buy and sell homes as end-buyers. Check out their testimonials and look for social proof. Test their legitimacy and see if you wish to sell your home to them while earning a profit and helping your community.