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The Case Against Real Estate Wholesalers

If you have owned your property or home in the Richmond real estate market area for more than five years, or have no mortgage on your home, it is likely that you have been contacted by postcard, text or voicemail from someone asking if you would be interested in an offer on your home. BEWARE!  These contacts are from individuals or companies known as Wholesalers. The individual will typically introduce themselves as “a real estate investor”.  Wholesalers are not real estate investors, in that they do not take on any risks, do not invest any of their own money, do they do not make or intend to make any improvements on the home or property. In fact, the real estate wholesaler does not intend to BUY your home!

The wholesaler finds an unsuspecting seller who typically is unrepresented. The wholesaler makes what the seller deems to be a fair offer; however, the offer is usually well below market value. Once the wholesaler has a written contract to purchase the property, he or she is in control, and the seller’s rights are very limited. The contract always has a provision that the buyer can assign their interest to another buyer for a fee.

Once the property is under contract, the wholesaler puts the property on the market using non-traditional methods such as social media. Often, the wholesaler uses large database email campaigns. Typically, these properties are not advertised through traditional channels such as the Multiple Listing Service (MLS)  Zillow.com, Realtor.com or other credible websites.  

The wholesaler is banking on finding a buyer who is not savvy enough to understand what is happening.  The wholesaler has no intention of actually buying your home, but is hoping to re-sell the Contract To Purchase to the highest bidder, walking away with a large fee, typically 50%to 100% MORE than a typical real estate Listing Fee. If the Wholesaler can not find a buyer for the Contract For Purchase, the Wholesaler will usually exercise an “escape” clause in the Contract referring to the inspection or condition of property. 

Wholesalers are not “flippers, and are not investors.  The “flipper” might look for a property that is in need of repairs and may make an offer to purchase the property based on the projected costs of those repairs, and a likely after repair value (ARV). Most legitimate investors will make a cursory inspection of the home or property and then present a WRITTEN offer to purchase.  Most wholesalers will make an offer without ever seeing the property, and then greatly REDUCE their offer upon a visual inspection of the home or property, always negotiating a much lower offer price.

If you find your self in a situation where your home is in need of many repairs, or you fallen behind on your mortgage or property taxes, remember, the Wholesaler IS NOT working to assist you, but most likely is there to take advantage of your difficult circumstances. If you choose to consider an offer from a Wholesaler, you should first consider getting a Comparative Market Analysis(CMA) from a qualified REALTOR knowledgeable about your neighborhood. In Virginia, and especially in the Richmond real estate market, this CMA is FREE to you. Home prices in the Richmond real estate market historically have had a consistent upward trend, with few exceptions over the last 50 years. While your home may be in need of updating or repairs, you may still find a better sales price offered using a qualified Richmond real estate Broker, with the added benefit of knowing the Broeker as a Listing Agent is legally required to advocate and work on your behalf. To find out what your home might sell for in its current condition in today’s real estate market, click here.

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