By: Skyler Moore
A wholesaler is a person or business that purchases distressed properties at a low enough price to be resold immediately to an end user, investor or business for a quick profit.
This profit typically ranges from $5,000 to $10,000 depending on the size of the property. The need for wholesalers and reason for their mark up, is because they have the relationships to purchase distressed real estate and also have to have the cash to purchase a property. It is rare for any distressed property to be financed that is purchased through auctions or banks.
The current real estate environment is a great opportunity for buyers and investors to pick up discounted properties from wholesalers, but buyers and investors must be cautious.
As a true wholesaler in the Denver investment property market, I have seen a few wholesalers and a lot of scammers. My company has bought, fixed and closed over 70 homes in Denver in the last 24 months and has not yet lost on a deal due to our meticulous process.
Every week, I have a novice real estate “investor” approach me that wants to attach themselves to my company and “sell” for us, or wants to know if they bring a buyer if they can “assign” a contract.
Although there is nothing illegal about assigning a contract (buyer A has buyer B lined up with a singed contract, buyer A closes and immediately sells to buyer B for profit), it is almost always a waste of time for the buyer or investor.
These techniques are taught by a lot of “gurus” and “real estate colleges” that show novice investors how to make money in real estate without any risk or money of their own. It does work and people do make money at doing it, but more often, a deal blows up and everyone ends up wasting their time, which is money in this game.
A lot of properties seen on the web are not actually owned by the person representing them. Sometimes middlemen are needed as a group may have buyers, but does not have the local market knowledge necessary to operate, but buyers and investors must also be careful that they are not being sucked into an assigned contract deal.
If you are approached by someone who says they are a wholesaler, be careful and conduct your due diligence. Most buyers will not be able to obtain a direct wholesale property due to capital requirements and knowledge that is learned through experience.
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