You may or may not be familiar with wholesaling real estate. But if you are planning to sell a house in the near future, it is something you should pay attention to.
Many of the signs that say “We buy houses for cash!” are actually wholesalers.
But what does this mean?
Are all wholesalers bad, or can they help you get the highest price for your house? We’ve covered all of these questions and more in this article.
If you don’t quite know what wholesaling means or are trying to figure out if it’s your best option, this article is for you.
Bonus: At the end, we’ve listed the top questions to ask wholesalers to ensure you get the best deal possible and everything goes smoothly.
Let’s dive right in!
What is Wholesaling Real Estate?
A real estate wholesaler is an investor who finds properties to buy and then sells them to other investors for slightly higher prices. They essentially act as the middleman between the seller and the end buyer, which is typically another real estate investor.
What is the Difference Between a Wholesaler and a Real Estate Agent?
You might be wondering how real estate wholesalers differ from real estate agents. First off, wholesalers generally work with houses that need some work. This isn’t always the case, but most homeowners that have a house in excellent condition decide to list their property with a real estate agent.
Secondly, wholesalers typically don’t list your home like an agent does. Instead, since most of them don’t have a real estate license, they market their deals to their pre-established list of buyers, which consists of flippers and landlords.
Lastly, when you hire an agent to sell your home, you sign a listing agreement with them. However, a wholesaler will sign a purchase and sale agreement with you to buy your house.
Two Ways to Structure a Wholesale Deal
There are two ways that a real estate wholesaler will typically structure a deal – an assignment or a double closing.
When doing an assignment, the wholesaler will assign their rights to purchase the house to another investor for a fee. In this case, you will actually sell the house to the end buyer.
With a double close, the wholesaler will purchase the house from you and then turn around and sell it for a slightly higher price to the end buyer. Sometimes both closings happen on the same day, and sometimes they are a month apart.
Will You Lose Money Selling Your House to a Wholesaler?
After reading that a real estate wholesaler acts as the middleman between you and the end buyer, you might think, “Won’t I make less money on my house that way?”
While you technically could make more money by cutting out the middleman, let’s compare it to working with an agent. Many homeowners attempt to make more money by selling their homes themselves instead of working with an agent. However, FSBO homes have historically sold for 26% less than houses listed with agents.
Why is that?
The biggest reason is that selling a house with an agent gets much more exposure. And more exposure typically results in a higher price.
The same principle applies when working with a wholesaler. An experienced real estate wholesaler will have an extensive buyers list, so they know which real estate investors will be willing to pay the most for your home.
So in many cases, working with a wholesaler will make you even more money!
Benefits When You Sell Your Home to a Wholesaler
There are many advantages to working with a wholesaler that might make it your best option when selling a house.
Sell Your House As-Is
Most wholesalers are looking for properties that need to be fixed up, so they don’t mind if your house needs repairs. They might not even get a home inspection. Even if they do, they won’t ask you to fix anything.
Cash Sale
Since most wholesalers work with cash buyers, they will make a cash offer on your home. This makes the sales process much smoother since lenders often complicate things. Also, if your house needs significant repairs, a cash deal might be the only way to sell it.
Can Close on Your Timeline
Need to close quickly? A good wholesaler can pull that off. Also, since they are not buying your house to live in themselves, they can give you the time you need to get moved out.
No Dealing With Listings and Showings
Instead of listing your property and having droves of potential buyers walk through it, simply get under contract with the wholesaler and let them take it from there.
When you list your house, you are hoping that someone will make you an offer. However, you don’t have to worry about that with a wholesaler. Once you begin working with them, you’re all set until closing.
You Pay Zero Fees
Listing a house with a real estate agent typically costs around 6% of the sales price. However, a real estate wholesaler will charge you zero fees.
In fact, they’ll even pay your closing costs for you!
Drawbacks of Selling Your House to a Wholesaler
Although there are several benefits of selling your house fast to a wholesaler, there are some potential drawbacks.
You Could Make More Money Listing Your House
If your house is in excellent condition and in a desirable area, you will most likely get the highest price by listing it with an agent.
Even if your house needs repairs, you could potentially make more money by fixing it up yourself and selling it on the MLS (Multiple Listing Service). If this is your situation, you must decide if it is worth it to go through the hassles of renovating your house or if you prefer the convenience of a wholesale deal.
Working With a Rookie Wholesaler
Unfortunately, not all wholesalers are created equally. Wholesaling is the most common real estate investing strategy amongst new investors because it often doesn’t require much money to get started.
However, working with someone inexperienced can be a major headache for you. Not only that, but rookie wholesalers are often too ambitious and offer too much for properties. While this might sound okay at first, they will often back out of contracts when they realize they offered too much, leaving the homeowner at square one.
When working with a real estate wholesaling company, you should ensure they are experienced and know what they are doing.
Questions to Ask a Wholesaler Before Selling Your House
Before signing an agreement with a wholesaler, you should ask them some questions to ensure everything goes smoothly. Here are some questions to get started with.
How Many Buyers Do They Work With?
Experienced wholesalers have extensive buyers lists that help them sell your house quickly. The larger their list of buyers, the greater your chances of success and the more they can pay for your home.
Do They Have Buyers in Mind for Your House?
Many wholesalers can skirt around the first question, but this one is more direct. Experienced wholesalers often have multiple real estate investors in mind when looking at a property. The best ones have reliable cash buyers on speed dial because they’ve bought many of their wholesale deals.
What If They Can’t Find a Buyer
The last thing you want is for the wholesaler to back out of the deal because they can’t find a buyer. And this happens all the time, and real estate wholesaling has gotten a bad name because of it.
However, there are reputable house buying companies out there that genuinely serve homeowners who need to sell their houses.
It is best to work with a company that flips houses themselves and doesn’t solely wholesale real estate. These companies have multiple options for each property, so the chances of your deal falling through are much smaller.
What Are Their Contingencies?
It doesn’t matter if they give you a high offer for your house if you never get to the closing table. A reputable wholesaler should only have one contingency in their contract at most, which is a simple inspection or due diligence clause. This allows them to inspect the property within a set period after signing the agreement to ensure no major unforeseen issues.
When the contingencies are kept simple, you are much better protected as the seller. If they back out for any reason other than what is stated in the contingencies, you get to keep their earnest money.
How Does the Process Work?
This general question allows the wholesaler to explain the sales process to you. If they are experienced with real estate transactions, this should be no problem for them. However, if they can’t answer this intelligently, you likely need to work with someone else.
How Long Until Closing?
Ultimately, it should be up to you when closing should be. An experienced wholesaler should be able to accommodate your ideal timeline. This must be within reason, of course. The fastest any real estate transaction can occur is about one week, which is due to the time it takes for the title company to pull all the paperwork together.
Do They Assign Deals or Close on Them Themselves?
Working with a wholesaler that closes on deals themselves is a much better option for you. These investors are much more versatile because they have the capital to purchase your house themselves if they can’t immediately find a buyer to assign it to.
It is not necessarily bad if a wholesaler plans to assign their contract on your house. It is just a red flag if they solely rely on this strategy.
Should You Sell Your House to a Real Estate Wholesaler?
Working with a wholesaler can be an excellent option, especially if your home needs a hefty amount of repairs and you’d like to sell quickly.
As we’ve mentioned, working with an experienced wholesaler will make all the difference in the world. If you use the tips here and ask the questions we’ve suggested, you can quickly determine the experience level of each one you talk to.
When done correctly, selling your home to a wholesaler will result in a stress-free experience that gives you cash in your pocket.
We wish you the best in selling your house!
Need to Sell Your House in Huntsville?
If you need to sell a house in Huntsville AL or any of the surrounding areas, we’re here to help! We are local home buyers that specialize in buying houses in tough situations.
We wholesale some of our deals, but we also flip some ourselves and keep others as rentals. This versatility makes us well-equipped to handle your situation properly. Also, because we have multiple options, you can count on us to get your deal closed.
If you’d like to sell your house fast and at a fair price, get in touch with us today!