Pros and Cons of Selling to a Wholesaler Wholesalers who have been doing this for a long time have a strong investor network and can deliver on their promise. They can find a buyer for their home when no one else could have. This is an alternative to selling your property on your own. The first closing would consist of you buying the property from the seller and the second would be for you to sell the property to the new buyer.
In reality, both closures could be scheduled for the same day, in succession, but it would double their closing costs and, in most cases, transactional financing would be required, further reducing their net profits. It is likely that, in some cases, going with two closures could generate profits for a wholesaler as a whole. If the new buyer is receiving a loan, this creates all kinds of problems for the wholesaler. The two-close approach is very difficult unless the buyer is working with a mortgage broker who specializes in the art of originating loans without title conditioning requirements.
In addition, many loan insurers will reject a wholesaler's allocation fee on the final statement of account. That's why most wholesalers sell their trades to all investors in cash. Our team, along with some brilliant closing lawyers, created a wonderful way to get paid for wholesale offers when the buyer is receiving a loan, but that's one of many patented techniques that we retain only for those who are members of my Apprentice Program. The wholesaler and seller enter into a contract that, ultimately, the wholesaler sells to another buyer.
When a wholesaler has sold its fair share in an agreement, it is now up to the new buyer and seller to conduct business together, with the wholesaler out of the picture. This transaction requires a wholesale real estate contract between the seller and the wholesaler. This means that there is no exchange of money between the wholesaler and the seller, not at least until the wholesaler finds a buyer. The price of a wholesale offer will almost always be significantly below market value and the wholesaler has no obligation to disclose information about the market value or to help the seller close the sale.