We are new to the investing world, so I may get some beef for posting this blog. However, for our business model, I feel it is important to provide my 2 cents.
One of my frustrations with today’s world is the amount of spam calls I receive on a daily basis, mostly from cold callers or robots wanting to buy my house with some ridiculous offer. I am sure many share this frustration.
Mainly due to this frustration alone, any business that advertises that “We’ll buy your house cash now!” or anything similar are automatically scrutinized with a negative stigma. No one likes to be bombarded by unsolicited people who want to buy your house and who make insulting offers.
This practice is called Wholesaling. The Wholesaler searches and finds properties that are below market value, puts it on contract, and then reassigns that contract to a fellow investor for a fee who then purchases the property and improves its value.
First off, let me correct this stigma…
The foundation and processes of Wholesaling are very positive with a very worthwhile purpose. There are many homeowners who are in “distress” and are in need (for whatever reason) to sell or remove the burden of homeownership. There are people out there facing foreclosure, have unaffordable repairs needed, or unable to sustain the cost of ownership. This is the target audience for all real estate investors.
I have personally met many Wholesalers in our local network of Investors. They are all great people, often young and driven… In short, they are impressive. Their intent is no different than any other investor. Wholesales are a fantastic resource for investors who have the capital and experience to rescue a distressed homeowner and improve the value of a property.
Again, as investors, we aim to help those who are in need. Our business model is different in that our tools allow the homeowner to initiate discussion and reach out to us. But after talking to a homeowner and after working to make a fair deal for both parties, we may choose to keep the deal for ourselves or we might assign it to a fellow investor in our community that is more suited for the specific situation. Each deal is unique and every investor (or investing business) has something different to offer. Nobody understands that more than Wholesalers.
The Problem…. The competition is fierce! Using public data and AI resources, there are tools that have built targeted databases. In an effort to find a deal before a competing company, Wholesalers use these databases as their source info in an attempt to find distressed homeowners by going down the list and making calls. The result has led to those annoying spam calls.
Because of this annoyance, there are some states and localities that are writing legislation against “Predatory Homebuyers”, requiring these companies communicate their business model to their consumers. If these laws were to pass, I believe it will actually help with the negative stigma as their business model is solid and positive.