What is a Real Estate Wholesaler?

In between buyer and seller, a middleman known as a real estate wholesaler can exist. This middleman enters into a contract with a seller to buy their home and then assigns their right to buy it to a real buyer at a higher price, pocketing the difference at the expense of the seller.

Good Vibes Homebuyers are not real estate wholesalers. We are real end buyers with our own financing who have an established and proven system that cuts out the (predatory) middleman and allows homeowners to sell directly to us for a better deal.

What’s in it for you:

1. What real estate wholesaling is and how it works
2. Comparing real estate wholesalers to realtors and investors
3. How to spot and defend yourself against wholesalers

The impact of real estate wholesalers on homeowners

The practice of real estate wholesaling is not only legal in Texas, but it has become a widespread method for entry-level investors to generate massive profits off the back of hardworking folks just like you. In 2021, nearly 649,000 properties were sold off-market with an average wholesale fee approaching $19,600. That’s nearly $13 billion (about $40 per person in the US) in equity being stripped from the hands of honest homeowners and being placed into the pockets of real estate wholesalers who have no money of their own in the transaction.

How real estate wholesaling works

Real estate wholesaling is not all that different from how you think of “wholesaling” in the retail industry: there’s a producer who sells merchandise to retailers who then sell the products to an end buyer. When comparing the traditional way of wholesaling to real estate wholesaling, one significant difference exists: the retailers add value to the producers through their local distribution networks and advertisement of the producer’s products. Conversely, in the typical process for how real estate wholesaling works there is most often no mutual exchange in value:

1. The real estate wholesaler contacts you claiming they wish to buy your house, or you, after seeing or receiving their marketing material, call them saying you wish to sell your house.
2. The real estate wholesaler makes an offer and then negotiates with you. If an agreement is reached, a contract is signed. Once signed, the real estate wholesaler has what’s called “equitable interest” in your property meaning they own the right to buy it.
3. The real estate wholesaler blasts social forums and emails his “buyers list” saying they have equitable interest in your property and will sell it for a fee.
4. If a real buyer is found, the real estate wholesaler signs a new contract with the real buyer to hand over their equitable interest in your property.
5. The real buyer closes and the real estate wholesaler receives a fee, which is usually a pre agreed upon amount or the difference between the seller’s contract price and the real buyer’s contract price.

Another option real estate wholesalers use is what’s called a “double close” which means that the real estate wholesaler closes on the property, only to immediately sell it to the real buyer. Although doable, it’s less common because it forces the real estate wholesaler to have their own money in the deal and many don’t have the funds to do this.

What’s the difference between an investor and real estate wholesaler?

Simply said, the difference is having capital or having access to capital. A real estate wholesaler doesn’t need much capital to earn a profit as they don’t need financing or their own cash unless they choose to use a double close. Furthermore, real estate wholesalers are in it for quick profit with little-to-no-risk to them as the typical cost to secure equitable interest ranges from $10 to $100. In short, real estate wholesalers have complete control over a home’s sale plus the prospect of massive profits without anything more than $100 dollars at risk.

Real estate investors like Good Vibes Homebuyers are legitimate buyers who buy properties with their own money to generate income from renting or selling it for a profit later. Reputable investors will also typically provide sellers with value-add services like free local moving, extended stay options, cash advances, and help getting into a new home.

In short, real estate wholesalers have complete control over a home’s sale plus the prospect of massive profits without anything more than $100 dollars at risk.

What’s the difference between a realtor and real estate wholesaler?

Realtors are licensed individuals who serve as, to use the same term, a middleman between their client and the other party who are buying or selling. A real estate wholesaler acts similarly except that they’re the middleman between seller and the real buyer. Realtors work off commission and are typically compensated 3% of the sale price while real estate wholesalers typically receive a flat fee.

To become a real estate agent, you must pass a state exam and regularly take part in continuing education classes. Real estate wholesalers have no licensing or educational requirements and can even misrepresent how much a home is worth without repercussion.

FAQ’s – What is a real estate wholesaler

1.  How do real estate wholesalers make money?
By getting sellers to agree on a price below the home’s current value and then assigning the contract to a real buyer.
2. How do real estate wholesalers get homes under contract for less than their worth?
The fact is most don’t. They instead convince seller’s their property is worth more than it is, and, as a result, many real estate wholesaler contracts never close because they can’t find a real buyer.
3. Who can be a real estate wholesaler in Texas?
Anyone can act as a real estate wholesaler without any licensing or educational requirements.
4. Who is most vulnerable to real estate wholesalers?
Although anyone can fall victim, the most vulnerable are low-income earners and distressed homeowners in popular areas.
5. What tactics do real estate wholesalers use to get properties under contract?
Some of the most common tricks include bait and switch offers, bogus home inspections, highly inflated home valuations, and even reporting code violations to local authorities.

Thrive with Good Vibes Homebuyers

Sellers who work with us are guaranteed to get a better deal. Our focus is on big volume, not big profit, so we're able to offer you thousands more than any other real buyer. It’s time for you to thrive with Good Vibes Homebuyers ~ see your offers now!