Did you know that over 6 million homes were sold in the United States over the last year?
With Americans moving all around the country, the property market has never been more active. However, property prices have steadily been on the rise as well. This offers the perfect opportunity for wholesale in real estate.
Wholesale real estate investments are incredibly beneficial for both the seller and property investor. For sellers, it’s a quick way to sell your home. For investors, it’s a brilliant way to flip a home for a profit.
Interested in learning more about real estate wholesaling? You’re in the right place. Here’s everything you need to know about wholesale real estate.
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What Is Wholesale Real Estate?
In a traditional home sale, a seller will put their home on the market and wait for an offer to come in. This can take a long time depending on the property market at the time. Even though modern platforms now exist to help you sell your home, the entire process can take months and end up costing you money.
Selling your home can end up costing you money as you would have to complete cosmetic repairs before listing the property online. In addition to this, you may want to pay for professional real estate photography. This can further increase the total cost of selling your home.
Real estate wholesaling takes a completely different approach. Wholesaling in real estate is a specific business venture in which you sign a contract with a trusted wholesaler to sell your home on your behalf. This contract basically allows the external company to advertise and sell your home for you.
Part of this contract will be the agreed-upon amount that you want to get for your home. While the wholesaler does not buy the home for you or pay you that sum upfront, when the sale does go through, you are entitled to the contractual amount.
If the wholesaler manages to do some repairs, increase the property’s value, and sell the home for more than the contractual price, they get to keep the profit. This incentivizes the company to sell the property for as much as possible, maximizing their profit in the process.
How Does Wholesale in Real Estate Work?
Wholesaling is a very simple process. A wholesaler enters a contract with the seller of a property to gain permission to sell the home for them. This is similar to the relationship a real estate agent has with homeowners.
While real estate agents will charge a percentage of the sales price, wholesalers will pay you the full amount as stipulated in the initial contract. This means that there are no hidden fees or scaled incentives. The wholesaler knows that the extra margin that they manage to sell the home for is their profit. This transparency is important as it strengthens the partnership between the wholesaler and the seller of the home.
Wholesalers are experienced real estate companies that know the property market like the back of their hands. This enables them to access a larger network of prospective buyers for your home. This means that they are the ones in the best position to sell your home fast.
At the end of the day, you know what price you want for your home. By agreeing on this price with a wholesaler, you’re just taking stress and pressure off your shoulders. This effectively hands over responsibility for the home’s sale to an industry professional.
Unlike other services that require you to pay out of pocket for assistance, wholesalers will tell you that they are taking the profits. This means once the home is sold, you’ll be happy with the sales price, and they will be happy with the profit margin they were able to pull off.
How Real Estate Wholesalers Make Their Money
The first thing that wholesalers do is find a property that they think is undervalued. Once they find a property like this, they will independently evaluate the home and list all the necessary repairs that need to be done.
They will then take these repairs into account and calculate a more accurate valuation for the home. This price is important as they will then come to an agreement with the seller of the home based on this price. The agreement will give permission to the wholesaler to sell the home while also stipulating the price the seller wants to receive once the home is sold.
Wholesale real estate companies will try to get this price as low as possible so that they can extend their own personal profit margins. This is because the agreement will state anything received above the asking price listed is deemed a profit. This profit is not split or shared in any way but is held completely by the wholesaler.
Real estate wholesalers will do everything they can to boost the sales price of your home. This includes doing essential repairs on the property itself. In most cases, they will do a pre-listing inspection on the property. This inspection highlights all the issues in the home and ranks them in order of impertinence.
Real estate wholesalers are real estate professionals that understand how these little things can affect the final sales price of the home. To help boost the property value, they may opt to make these improvements themselves.
Once these repairs are done, they will go all out to find a buyer for your home. This includes paying for professional real estate photography for your home. This will then be used to publish marketing materials about your home.
How Long Do Negotiations Take?
After a buyer is located, they will negotiate with them to get the best possible sales price for the home. This process may take longer if you were doing it individually but is much quicker with professionals that have experience in negotiation.
Negotiations can vary from property to property but are generally quite quick. At the end of this process, a final sales price is confirmed for the property. This will enable the sale to go through at the negotiated price.
Real estate wholesalers make their money by trying to get the final sales price higher than the contracted amount that they agree on with the client. The difference is their profit margin, so they are incentivized to sell the home for the highest possible price.
Real Estate Wholesaler vs Real Estate Agent
As mentioned above, real estate agents offer a similar service but differ in a few crucial ways. Real estate agents and real estate wholesalers both help you sell your home. However, they operate in very different ways.
Real estate agents help you sell your home rather than sell it for you. This means that they will help find buyers and even showcase your home for you. While this is a major help, wholesalers do much more for sellers. Wholesalers do repairs, stage homes, host an open house, and even market your home for you.
Wholesalers are far more invested in your home’s sales price as their entire profit margin relies on them selling your home for the highest possible price. Real estate agents are generally paid according to a fixed percentage of the sales price.
While many may think this is fair, it also means that they are not incentivized to get you the price you want for your home. Regardless of what price your home sells for, they get their fixed percentage. This is why wholesalers may be a better option for you.
At the beginning of the process, wholesalers come to an agreed-upon price for your home. They are then incentivized to sell your home for more than what you want so that they can benefit from receiving a profit. If they can’t sell your home for more than the price you want for it, they won’t make any money from the sale. Either way, you’re more likely to get the money you want for your home from a wholesaler.
Who Should Consider Wholesale Real Estate?
Wholesale real estate is perfect for people who want to sell their homes but don’t have the time to do it themselves. Since wholesalers do most of the heavy lifting for you, it’s a much simpler option for individuals or families that don’t have time to spend on finding a buyer.
This is also perfect for individuals that want to sell their home as is. If there are things in your home that you know you have to fix before selling, handing the sale over to a wholesaler may be the best option. This is because the wholesaler will take everything into account and still try to get your target price for you.
Benefits of Wholesale Real Estate
As mentioned throughout this article, there are tons of benefits to partnering with a real estate wholesaler. These benefits apply to both homeowners wanting to sell and property investors that wish to flip homes for a profit. Here’s a quick guide to the benefits of wholesale in real estate.
Homeowners can benefit from partnering with a property wholesaler. Here are a few of the most noteworthy benefits.Have Professionals Value Your Home
Valuating your home can be a stressful and expensive process. By working with a real estate wholesaler, the entire process is much more streamlined. They will value your home for you and factor in the repairs that need to be done as well. This gives you an accurate view of what your property is worth.Get Professional Marketing
Property wholesalers often come with the tools they need to sell your home fast. This includes professional photography to help market your home all over the internet. These companies flex their network to help sell your home in a fraction of the time.
For Property Investors
If you’re looking to flip homes, consider becoming a real estate wholesaler. This is a low-risk way to flip homes for a profit. Here are a few benefits of entering the real estate industry.Simple To Learn
While you may think wholesaling real estate is difficult to learn, it’s actually very simple. The entire business model is simple, allowing you to master it in no time. This makes it the perfect way to enter the real estate industry as a beginner.No Credit Required
If you wanted to flip a property traditionally, you would have to buy it first. This often requires you to have access to credit facilities. By signing a wholesale agreement, you can repair the home and sell it without having to purchase it. This also helps reduce the risk of the overall investment as you’re just selling the home on behalf of the owner.
How To Wholesale Real Estate
Thinking of entering the wholesale real estate market? Here’s a quick guide on how the entire process works.
Step 1: Find a Property with a Motivated Seller
Step 2: Determine the Value of the Property
Step 3: Sign a Contract with the Seller
Step 4: Locate an Interested Buyer
Step 5: Negotiate for the Best Rate
Thinking of Selling Your Home?
If you’re thinking of selling your home, there are benefits to signing a contract with a wholesaler. While it may not be very common, wholesale in real estate is a win-win situation for everyone involved. As a seller, you’ll have experienced real estate professionals handling your home’s sale for you. This can save you time and money, keeping you focused on your move.
At iBuyer, we have years of experience in the property market. This enables us to buy and sell homes in the blink of an eye. Want to learn more? Submit your address and create an account to get multiple cash offers on your home.