Posted on 05/30/2021 12:39:31 PM PDT by blam
Wholesaling real estate is the process of finding a deeply discounted home and passing it along to an end investor. Bearing fast cash, wholesalers are flooding low-income neighborhoods, seeking distressed homeowners who want to sell quickly. Record low mortgage rates, low housing inventory, and a real estate frenzy have increased the amount of wholesaling conducted nationwide since the pandemic as many were lured in by YouTube tutorials.
The entire strategy behind wholesaling is finding a discounted property, get it under contract, and then flip it to an interested buyer for a quick profit. Bloomberg reports some wholesalers are using strong-arm tactics and misinformation to force sales. Wholesaling a house is a strategy unlike flippers, who obtain ownership of the home during the renovation period ahead of the eventual sale. A wholesaler negotiates with homeowners to find an investor (usually a cash offer).
“I don’t buy houses. I solve problems,” Scott Sekulow, who leads an Atlanta-area congregation of messianic Jews, told Bloomberg. He bills himself as the “Flipping Rabbi.” Many of his clients come to him who are distressed. Sekulow can find them an investor who will take over the property to flip for resale.
Sekulow said hedge funds are getting into the game. He told a conference of wholesalers: “When you can get in with them, they’re there paying stupid money.”
Wholesaling is entirely legal, but advocates for low-income areas say these folks are tricking sellers into deeply discounting their homes.
After residents in Illinois, Oklahoma, Arkansas, Kansas, and the city of Philadelphia, have been bombarded with wholesalers overrunning street corners with “We Buy Houses” signs, local governments have begun to crack down on these types of transactions.
“In my neighborhood in West Philly, I probably get three postcards a month from one of these guys,” said Michael Froehlich, an attorney with Community Legal Services of Philadelphia. “If you can get leads, you can dupe somebody into signing a contract for far less than fair market value, and you can make $30,000, $40,000, $50,000 on the house.”
(snip)
Excellent, this is one of the leading signs of a market top.
For the first few nanoseconds, I read the headline, and took it literally. “Wholesalers FLOOD Poor Neighborhoods!”
Then I thought, ‘That can’t be right. Doesn’t make sense!’
It makes an interesting visual, though.
I get texts and letters every week, sometimes up to 10 requests to buy my property. I don’t mind. I don’t even mind that my property taxes have gone up over $1000 a year in the last five years.
It’s like living in a gold mine.
It seems to me that they are functioning as property brokers.
I would think that they would have to be licensed as property brokers and to have the legal duty to property vendors that brokers would have under state law.
“My favorite sign says, “I Buy Ugly Houses”.
Yeah, that one is from the last real estate crash. The concept has been around a long time, and like other successful ideas, now a lot of people are doing it.
There seems to be a duty to deal “honestly and fairly” under Florida law.
https://m.flsenate.gov/Statutes/475.278
Sorry but those guys are crooks. Yeah I know they sometimes help desperate sellers but in this white hot market right now just about any home will sell on the market quickly.
Realtors are also crooks. OK that’s a bit harsh I admit, but 5%-6% to fill out some state-issued standardized forms? Gimme a break.
Finding ugly houses is easy in Florida.
So, if Texas residents are seeing 8-10% spikes in their property taxes each year, is county/city spending spiking by a similar amount? If so, I have a problem with that.
In the UK
“The average estate agent fee is 1.42% of the final selling price (inc VAT), according to a July 2018 survey by the Advisory for sole agency.”
for more information:
https://hoa.org.uk/advice/guides-for-homeowners/i-am-selling/how-much-should-i-pay-the-estate-agent/
Commercial real estate has taken a beating from Covid and Amazon.
Cash flippers buy, put in $10K of fix ups, sell for $20K profit to:
A cash flipper, put in $5K of fix ups, sell for $20K profit to:
A cash flipper, put in $2K of fix ups, sell for $20K profit to:
You guessed it - and all in one month.
Chinese “investors”?
We’ve been getting ads like that.
I will not sell our house to a foreigner when the time comes.
Sliding scale real estate commissions are sometimes used in Britain - see my previous link.
It is so crazy in central New Jersey right now, with multiple cash offers on decent properties, that some buyers are WAIVING INSPECTIONS to make their offers more competitive. Totally insane.
Im on a landlord forum and with the uncertainty of rent moratoriums as well as the Pedo Joe “administration” trying to outlaw private property ownership via over regulation and building gov’t projects aka “affordable housing” (TM) next door to single family zoning, ummm most landlords are selling to unsuspecting suckers, not buying.
I guess this is where P.T. Barnum comes in.
A market frenzy, yes, a top, maybe. The raw cash flowing in has made this a vastly different market from the 06-07 stupid money bubble. That was driven by stupid money flowing via “liar loans” into mortgages to create and then securitize the mortgages. This time, it is investor money buying rentals. There may actually be another couple of years left in this bull market in real estate.
“... most landlords are selling to unsuspecting suckers, not buying.”
My landlord buddy who has been buying steadily for 25 years, is trying to sell everything she can. Not only is the market at stupid highs, but the increase in taxes, fixed regulatory costs and the government interference with things like evictions...the writing is on the wall for small landlords.
You are wrong. They are using contract law as it was designed to be used.
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