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Property Wholesalers muscle in while vested interests squeal

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By : John Smith    99 or more times read
These days some parts of America, especially poorer neighborhoods, are beginning to look like victims of bombing raids, as whole city blocks are up for bulldozing following a recession blighted by unemployment, failed mortgages, and foreclosures.

But it doesn’t have to be this way … that is, if the American spirit of free enterprise is allowed to work its magic.

Enter the real estate wholesaler from the left, please. America’s latest breed of entrepreneurs is paying cash for houses regardless of condition, then flipping them on for a profit of just $10,000 a few days later. Real estate wholesaling offers mixed benefits to communities – these include putting distressed homes back into the hands of those who care for them, but also adding a premium to houses that lower-income families battled to afford before they came along.

Nobody knows how many of these dark knights in armor there are. One thing’s for sure though, when their boards go up the neighborhood telegraph works overtime and the tills start ringing.

“It’s a feeding frenzy right now,” says Shawn Jardine, a real estate agent in Colorado Springs who sells foreclosed properties for banks and sometimes flips them too herself. “On one property listed for $65,000, I had 15 offers. The best offer won at $20,000 over asking price.”

The wholesale property market is dead simple if you have the capital and it’s no wonder there are so many takers. Most wholesalers don’t even hold title of a property themselves. Instead they just cede their rights in exchange for an assigning fee that becomes their profit. It’s all about finding bargains, and then matching them to other bargain hunters.

Or is it? Andrew Jakabovics at the Centre for American Progress in Washington, DC is less sure. Assigning fees drive median prices up, and property valuators are never sure whether a comparable includes one or not. Increased competition for troubled property is also making it harder for community groups to afford them, threatening opportunities to convert contiguous areas for new purposes.

So are property wholesalers a good or bad idea? There are two schools of thought, and which one you belong to depends on your position on the chessboard:

  • Established property realtors prefer to argue the risks associated with dealing with unregulated brokers who may know nothing about an area, and may disappear from town when the harvest has been reaped.

  • Other players debate on their behalf. Property wholesalers take on just about anything, they say, regardless of condition and often reputation, and, because they acquire an interest, flip a property on instead of just sitting on their stock.

We believe it’s all about motivation, and that the early bird deserves the worm – what’s your take?
Original Post: Property Wholesalers muscle in while vested interests squeal on

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