American Property Wholesalers: Good, Bad or Ugly?

American Property Wholesalers: Good, Bad or Ugly?

we-buy-houses-foreclosures

Property wholesaling is big business in the American housing market right now. When it comes to property, wholesaling is different from what it means in any other industry. Property wholesalers are flippers, who buy distressed properties cheap, and sell them for a few thousand dollars profit before the ink is even dry.

They are causing quite a stir at the moment because of the sheer volume of properties sitting on their playing field, and because of the immeasurable impact they have on the market.

For anyone that doesn’t know, wholesalers sell properties fast on behalf of people that can no longer pay their mortgage. They do not take ownership of the property, they simply take the owners contract and sign it over to the new buyer with their profit in the form of an assigning fee.

In March alone almost 370,000 properties received foreclosure notices, the highest monthly total since online foreclosure marketplace RealtyTrac began tracking them in January 2005. 2009 was a record year; with 2.8 million American homes repossessed, but, because of the growth this year culminating in the record-breaking March, analysts are fearful that this year could be even worse.

Wholesalers certainly are not fearful, if anything they are gleeful. How everyone else feels about their glee, and their business, is as mixed as the properties they have to choose from.

On the one hand: with millions of homes empty and many of them near-uninhabitable, a mini-industry that is helping to get homes sold before they are repossessed is surely a good thing, especially because they are being sold to investors who will profit from fixing up the properties and selling them or renting them out.

On the positive side they are also part of the economic recovery. It is not the wholesalers’ fault that people are struggling to pay their mortgages, so their making a good living from the business is bringing money back into the economy twice; the banks are getting their money and the wholesalers will be spending their earnings.

On the other: those involved in social housing initiatives say that the wholesalers mark-up — small as it is — is often enough to mean the difference between a low income family being able to buy or not. Others say that they cloud the picture of what prices homes are selling for, making it difficult for the bottom to be found.

However, these homes have been repossessed and are going to be bought and sold anyway, so it is that which clouds the market not the way in which they are sold, in which case wholesalers are probably helping the situation by helping to clear the repossessed stocks quicker.

Photo credits: TheTruthAbout via Flickr