If you think hiring a Realtor is expensive you should see how much wholesalers are charging!
What is a wholesaler?
A modern wholesaler is an unlicensed person who finds sellers who want to sell their property. They tell the seller that they will buy their property at the agreed upon price between the seller and wholesaler.
However, the wholesaler does not actually buy the property. They look for an investor/buyer to buy it with cash and assigns the contract to that cash buyer before closing.
Example: A wholesaler finds a seller who wants to sell their property for $400,000. Then the wholesaler will find someone to buy it for $450,000 and they will keep the $50,000 difference.
At the same time they tack on a fee that the buyer pays for and that’s how they make their money.
Recently I was involved in a wholesaling transaction where the wholesaler’s fee was $100,000. Yup $100,000 I couldn’t believe it!
The same transaction could have netted the seller more on market while the Realtors commission would have been around $22,000. To each their own.
Why people become wholesalers
For one you don’t need to go through the work of getting your real estate license. It can be a large profit margin and you can do it with little start up costs. I’m not saying being a wholesaler is easy. It most likely involves a lot of prospecting and calling around.
Another reason is that there is virtually no liability. No license = no liability.
Is wholesaling legal
Yes surprisingly it is. I really don’t know what wholesalers tell people as far as them purchasing the property and what happens if they can’t find a buyer.
Should I buyer a home from a wholesaler
Buyer beware! From what I’ve learned is that wholesalers no nothing about the property. They don’t disclose or have their owners fill out a disclosure statement either. It is Hawaii law to provide the buyer with a disclosure statement.
Do wholesalers follow or even know this? Probably not.
Recently I checked out another property from a wholesaler who stated the subject property was on a septic tank. However it was not and there was another huge issue with the property that was not disclosed.
Really make sure to do your research on a property that a wholesaler is advertising. Do not rely on the wholesaler or seller to disclose anything about the property.
