Intersection Signs
When is the last time you saw a sign at an intersection that said “We Buy House Quick” or “Sell your house fast for cash”? If you don't live in the woods, I’m sure the answer would be in the last couple days.
Why are there so many We Buy Houses signs and where do they coming from?
The answer is real estate wholesaler’s. When you hear wholesaler’s you probably think of big retail stores. There is one similarity between them. They are middlemen. The big retail store is the middlemen between the manufacture and the consumer. The real estate wholesaler is the middlemen between the seller of a property and the potential buyer.
Here is an example, if you can't wrap your head around this idea.
You inherit a property from your friend who died in a car accident. One weekend you take a drive to look at the property and you realize it needs a ton of work. Your schedule is already overloaded with a full time job and kids at home. With all that in mind you feel overwhelmed with this new acquisition. On your way back home you see a sign at an intersection “We Buy Houses for Cash, fast Settlement”. It sounds great, so you make the call and speak with a guy named Dale. You schedule to meet Dale at the property the next day. After seeing the property Dale makes an offer of $20,000. You tell Dale you thought it would be worth more and he increases his offer to $22,000. You still think it’s low, but since you don’t have the time to do the work yourself, you take it. Two weeks later you met Dale at the settlement office to sign the paperwork and collect your money.
Now here is what really happened. Between the time Dale got you to sign the paperwork and settlement, Dale was able to find an investor to buy the property for $35,000. On the day of settlement, you see another guy waiting in the lobby, but you have no idea who he is. As soon as you leave, this other guy, the investor, goes into the sale room you were in and signs the paperwork to transfer the property into his name.
This is what they call an assignment of the contract. The original contract was assigned to the investor. Steve never had to pay a dollar for the property and he collects a check for $13,000 after the investor signs his paperwork.
You just left $13,000 on the table. If you would have found that investor or another investor you have made more money. Or if you listed it with an Real Estate agent you would have made out better. The point of this is to make sure you do your homework. When you inherit a property it can be an overwhelming event. You don’t even know where to start or how it will fit into your already busy schedule. If you decide to sale to an investor, you can still do research on them. You can look online for their website, testimonials, and anything else that would help you confirm they are legitimate. This doesn’t necessarily mean they are legitimate, but it is a good sign if they have a decent website and testimonials.
In review, real estate wholesalers are just out to make quick money. They aren't all bad, some of them actually work hard to be the middleman and they don't try to make a killing on every deal. On the other hand, there are a bunch of wholesalers that will give you a dollar for your property if they know you will take it. Again do your research because in the end it could cost you a lot of money.