SELLING VS. WHOLESALING
AN EXPLANATION OF "WE BUY HOUSES" MARKETING
WHAT'S A REAL ESTATE WHOLESALER?
Wholesaling is an easy way for someone with no real estate experience to get into the business and begin learning the industry.
The business model of a real estate wholesaler is to act as a middleman. Wholesalers find properties like yours and put them under contract to purchase. They will then take your contract and then sell the it to investors.
The investor will be the one who actually purchases the home. The wholesaler makes money based on how much they sell the home to the investor for over your contract price.
For example, let's say a wholesaler offers you $100,000 for your home. You sign a contract to sell the home for that amount. The wholesaler will reach out to their network of investors to sell that contract for, say $130,000.
The investor buys the house. The wholesaler walks away with $30,000. They don't make any repairs or take any risks. The wholesaler is simply getting paid for being the middleman.
How do you know if they are a wholesaler?
"We buy houses" signs
You will see these signs, like yard signs, at busy intersections and entrances to neighborhoods. Sometimes they are handwritten. Others are printed professionally.
Calls or text messages
Chances are you have received several unsolicited calls or texts asking if you would like to sell your home. The caller will proceed to make an offer to buy your home.
Direct mail and postcards
If you own your home, your mailbox is probably filled with them right now. These cards or letters will say something like, "we buy houses" or "cash for your home today".
Not always the case
These are simply indicators of a wholesaler and not always the case. Sometimes investors use these same strategies to purchase your home directly.
You should always ask
If you come across any of these indicators, just ask. In fact, you should always ask. You need to know exactly what kind of contract you are signing.
You can ask if they are a middleman or wholesaler. You can ask if they plan to assign the contract you are signing to another party. You can even ask what kind of spread they are making off this transaction.
Pros and cons of selling to a wholesaler
- A responsible wholesaler will be transparent and let you know exactly what they are doing
- Experienced wholesalers will have a large network of investors and buyers and will likely be able to get your home sold quickly
- You will not make as much on the sale of your home as you would if you were selling to the actual buyer.
- If the wholesaler cannot find a buyer, the contract will be canceled and you will have to start the process of selling all over again.
In the Shoals Realty is not a wholesaler
In the Shoals Realty is a real estate brokerage, not a wholesaler. I am a real estate broker, licensed by the state of Alabama, operating by a set of by-laws and a code of ethics.
My goal when serving my clients is to get YOU the very best deal possible. That means if I help you sell your home, we are going to sell it for as much as we can.
My business does operate on commissions. So, you do pay for my services. But, that commission is significantly less than what you would be losing when selling to a wholesaler. You are paying me to market your home and find you a buyer.
- Chase Gallimore
Broker, In the Shoals Realty