Selling your home can be a complex process, especially when navigating the different selling options available. If you're considering selling your home quickly and with minimal hassle, you might have come across terms like "wholesale real estate" and "cash home buyers." But what do these terms really mean, and how do they affect your selling experience? In this roundup blog, we'll break down what wholesale real estate is, how it works, and compare wholesale home buyers with cash home buyers to help you make the best choice for your unique situation.
- What Is a Wholesale Real Estate?
- How Does Wholesale Real Estate Work?
- Pros & Cons of Wholesaling Real Estate
- What It's Like to Sell Your Home to a Real Estate Wholesaler
- Real Estate Wholesalers vs Cash Home Buyers
- How to Tell If You're Selling to a Real Estate Wholesaler or Cash Home Buyer
What Is a Wholesale Real Estate?
Wholesale real estate is a strategy where an investor, known as a wholesaler, contracts a property with a seller and then finds an end buyer to purchase the property at a higher price. Typically, the wholesaler does not actually purchase the property or own the property themselves. Instead, they assign the contract to the buyer and earn a profit based on the difference between the contracted price with the seller and the final sale price.
How Does Wholesale Real Estate Work?
Here’s how it works: Imagine a wholesaler finds a home listed for $110,000. After negotiating with the seller, they get the property under contract. Next, the wholesaler uses their connections to find a buyer willing to purchase the property for $140,000. When the deal goes through, the wholesaler assigns the contract to this buyer and earns the difference—$30,000—without ever actually buying the home. This approach allows the wholesaler to make a profit by simply connecting the seller with the buyer.
Pros & Cons of Wholesaling Real Estate
Pros
- Quick sale: Property can be sold quickly, often faster than traditional methods.
- No repairs needed: Sell the property "as-is" without the need to invest in costly repairs.
- Avoid agent fees: No need to pay real estate agent commissions.
- Less hassle: The wholesaler handles most of the process, reducing the seller's involvement and workload.
Cons
- Lower sale price: The property may sell for less than its market value.
- Limited buyer pool: Wholesalers may offer fewer potential buyers than listing on the open market.
- Uncertain deals: The sale depends on the wholesaler finding a buyer, which isn’t always guaranteed.
- Potential legal concerns: If not handled properly, wholesaling can involve legal complexities that might affect the seller.
What It’s Like to Sell Your Home to a Real Estate Wholesaler
Here’s what our cash home buying experts say about what it’s like to sell your home to a real estate wholesaler.
1. Wholesalers Back Out & Cancel Contacts
“The biggest risk you run when selling your home to a wholesaler is them cancelling the contract. I get calls every month from people who were under contract to sell their house to a wholesaler, and then the wholesaler backed out of the contract on the last possible day. It leaves the homeowner in a terrible situation, and they call me wanting to see if I can buy their house in a hurry to bail them out of that situation.”
2. Wholesalers Don’t Pay Fair Market Value
“Wholesalers are essentially middlemen who purchase properties below market value with the intent of selling them to investors or other buyers at a profit. When you sell your home to a wholesaler, you may not receive the fair market value, as their goal is to acquire properties at a lower cost.”
3. Wholesalers Offer Less Transparency
“Selling to a wholesaler often means accepting a lower price than market value. Wholesalers typically offer quick sales but may not reflect the true worth of your home. Moreover, the process can involve less transparency compared to traditional sales. Before selling to a wholesaler, evaluate their reputation and the offer's fairness. Consider the potential impact on your home's value and any hidden fees. Ensure you understand the terms and the speed of the transaction to make an informed decision.”
4. Wholesalers Take Money Out of the Seller’s Pocket
“There are a few main disadvantages - the largest is that they are attempting to sell the contract they have with you (the seller). Typically, their contract includes an exit clause if they are unable to procure a buyer for your home prior to the closing. That can leave sellers high and dry at the last minute. Another disadvantage is that they monetize the gap between what you (the seller) receive and what the end buyer agrees to pay, money that would otherwise go into the seller's pocket. I would try to find an end buyer who will directly add value to the house.”
5. Wholesalers Add an Additional Layer of Cost
“Working with a wholesaler adds an additional layer of cost. Wholesalers are not the end buyer and they're typically looking for cash buyers and then adding their additional costs to the sale of your home.”
6. Wholesalers Make Big & Grand Promises
“Wholesalers can be very helpful in some situations if they are good at their job and you need to sell your house fast. There could be multiple downfalls to selling your home to a wholesaler, and most of them stem from novice or uneducated wholesalers. To wholesale means that someone will assign a contract to someone else and take a fee for it. A lot of times wholesalers have big and grand promises, wording their services in a way that sound too good to be true. To prevent being in the wrong situation with wholesalers then I would ask lots of questions. Ask how longthey have been doing this, where they are from, who they plan to sell to. Become curious and seek to understand.”
7. Wholesalers Are Just Middlemen
“The wholesaler is not actually buying the house. If they do not find a buyer, the sale will fall through. Wholesalers are middlemen often taking a large fee. If you sell direct to an investor/end buyer, you may be able to keep more money from the transaction because you won't be paying a wholesaler.”
Real Estate Wholesalers vs Cash Home Buyers
When you’re thinking about selling your home, it’s important to know the difference between real estate wholesalers and cash home buyers. Both offer alternatives to the traditional selling process, but they’re not created equal.
Real Estate Wholesalers are like middlemen in the real estate market. They’ll agree to buy your home at a discounted price and then try to find someone else who’s willing to pay more. While this might lead to a quick sale, it’s not always a sure thing. The whole process depends on the wholesaler finding a buyer, which can cause delays or even result in the deal falling through. Plus, because wholesalers make their money by flipping contracts, the offer you get is usually lower than what your home is really worth.
On the flip side, Cash Home Buyers are much more straightforward. When you work with a cash home buyer, you’re dealing directly with the person or company that’s actually going to buy your home. There’s no middleman, no waiting around for someone to secure financing, and no uncertainty. Cash home buyers give you a fair offer based on your home’s condition and the current market, and they can close the sale quickly—sometimes in just a few days. This simple, direct approach makes the whole process easier and more predictable.
If you’re looking for a reliable, fast, and hassle-free way to sell your home, going with a cash home buyer is usually the better option.
How to Tell If You’re Selling to a Real Estate Wholesaler or Cash Home Buyer
When you’re ready to sell your home, knowing whether you’re dealing with a real estate wholesaler or a cash home buyer can make a big difference in your experience and the outcome. Here are some key signs to help you identify who you’re working with:
Contract Terms:
A real estate wholesaler will often include a clause in the contract allowing them to assign the agreement to another buyer. If you see language about “assigning the contract” or “assignability,” you’re probably dealing with a wholesaler. A cash home buyer typically doesn’t include these clauses because they intend to purchase the home themselves.
Buyer Communication:
Wholesalers usually act as the middleman, meaning they might be less transparent about the buying process. If the person you’re dealing with is vague about their intentions or mentions finding another buyer, they’re probably a wholesaler. Cash home buyers are usually upfront and clear that they will be the ones purchasing your home directly.
Purchase Price:
Since wholesalers make their profit by reselling the contract, their offer might be lower than market value. If you receive a particularly low offer, it’s worth asking questions about their process. Cash home buyers offer a fair price based on the current market and your home’s condition because they’re planning to buy and potentially hold or renovate the property themselves.
Offer & Closing Timing:
Wholesalers might need more time to finalize the sale since they have to find a buyer to take over the contract. If there’s hesitation or delays in making an offer or setting a closing date, this could indicate a wholesaler. Cash home buyers typically move quickly, make firm offers, and set prompt closing dates—often in as little as a few days.
By paying attention to these details, you can better understand who you’re working with and make an informed decision that best suits your needs.
Avoid the Uncertainty of Working with Wholesalers & Contact the Cash Home Buyers at New Again Houses Today!
Dealing with wholesalers can be confusing and unpredictable, often leaving you with more questions than answers. At New Again Houses, we cut through the uncertainty with a simple, transparent process. Our cash home buyers offer straightforward deals with no hidden fees or surprises. When you work with us, you avoid the hassle and stress of working with wholesalers. Contact New Again Houses today for a fair cash offer and a smooth, stress-free selling experience.
