What is a Wholesaler? A Homeowner’s Guide to Real Estate Wholesaling

If you’re considering selling your home to a cash buyer, it’s important to understand how they operate. Many cash buyers are actually wholesalers—but what does that mean for you as the homeowner? This guide explains real estate wholesaling, common practices, and why choosing a trusted investor-buyer like Wedgewood Homes can make all the difference.

What is Wholesaling in Real Estate?

Wholesaling in real estate is a short-term investment strategy where an individual or business, known as a wholesaler, finds a property for sale, secures it under contract, and then sells the purchase rights to another buyer for a profit. 

Here’s how it works:

1. A wholesaler either presents the homeowner with a cash offer or the homeowner contacts the company to request one.
2. They negotiate a contract with the seller.
3. Instead of buying the property outright, they sell the contract to an investor or end buyer at a higher price.
4. The wholesaler keeps the difference between the initial contract price and the final selling price as their profit.

Wholesalers generally approach homeowners in one of two scenarios:

• The property is distressed or needs significant repairs.
• The homeowner is eager for a quick sale due to financial or personal circumstances.

The allure of wholesaling is the promise of a simple, fast cash deal. However, homeowners should understand the finer details of the process to make informed decisions.

Common Real Estate Wholesaling Methods

To better understand wholesaling, it’s important to explore the three most commonly used methods:

1. Assignment Contracts

This is the most straightforward wholesaling method. A wholesaler:

• Finds a property and negotiates a purchase agreement with the seller.
• Includes an “assignment clause” in the contract that allows them to transfer their purchase rights to another buyer.
• Sells the contract to an investor, earning an assignment fee (e.g., if the wholesaler puts the property into contract for $100,000 and then sells the contract to an end buyer for $110,000, the wholesaler pockets $10,000 in profit).

While simple, assignment contracts can make homeowners feel uneasy since the person who negotiated the deal won’t actually be the one buying the property.

2. Double Closings

This method involves two back-to-back transactions. The wholesaler:

• Closes on the property and officially takes ownership.
• Sells the property immediately to an end buyer, often the same day.

Double closings are typically used when the anticipated profit margin is larger. However, this method can raise red flags for sellers, as wholesalers need access to financing and might charge higher fees to cover the cost of two closings.

3. Novations

Less common but still notable, novations allow wholesalers to:

• Replace the initial purchase agreement with a new contract involving the end buyer.
• Collect a fee for facilitating the sale after the buyer purchases the property directly from the seller.

While novations can work in specific scenarios, they often add complexity, and sellers risk complications if the wholesaler fails to find a buyer in time.

What Happens if a Wholesaler Can’t Find a Buyer?

Wholesaling may sound like a win-win at first, but what happens when the wholesaler fails to find an investor or end buyer before their contract deadline? Here are a few potential outcomes:

1. Walking Away via Contingencies

Most wholesalers include contingency clauses in their contracts, such as inspection or financing contingencies. These allow them to legally exit the deal without significant financial repercussions. Unfortunately, this means the seller is left back at square one, with wasted time and no sale.

2. Loss of Earnest Money

If contingencies expire, the wholesaler might forfeit their earnest money deposit. While this typically represents a small loss for the wholesaler, the seller receives only minimal compensation for their time.

3. Renegotiating Terms

Sometimes, wholesalers attempt to renegotiate with sellers to either extend the closing date or reduce the price. This can be frustrating and may result in the property returning to the market.

4. Investor Partnerships

Some wholesalers form partnerships with other investors to secure buyers. While this may result in a successful sale, it can delay the process and mean the homeowner ends up with less money than if they had worked directly with the investor.

5. Purchasing the Property Themselves

Occasionally, a wholesaler might purchase the property outright to avoid losing their deal. However, this requires their own financial investment and may not be their preferred route.

For homeowners, these uncertainties make wholesaling a riskier option, especially if you’re relying on a quick and straightforward sale.

Why Wedgewood Homes Offers a Better Solution

If you’re a homeowner considering selling to a wholesaler, partnering with an investor-buyer like Wedgewood Homes offers distinct advantages.

Why choose Wedgewood Homes?

• Guaranteed Purchase: Unlike wholesalers, Wedgewood Homes is the buyer. We don’t rely on finding another buyer to close the deal.
• Certainty and Speed: Avoid the risks of delayed closings or cancellations. Wedgewood Homes provides reliable timelines tailored to your needs.
• No Hidden Fees: Say goodbye to assignment fees or complicated clauses. Our straightforward process means no surprises.

Plus, we’re not just buying properties—we’re committed to revitalizing neighborhoods by restoring homes and creating beautiful spaces for future homeowners.

Here’s how it works with Wedgewood Homes:

1. Submit your property details online.
2. Receive a fair, no-obligation cash offer.
3. Choose your closing date and get paid.

Don’t Settle for Risks and Uncertainty

Selling your home is one of the most significant financial decisions you’ll make. While a Cash Buyer might promise convenience, if they are a wholesaler, it comes with risks and question marks that can leave you vulnerable.

Instead, choose reliability, transparency, and trust. Wedgewood Homes provides homeowners with better options, so you can feel confident that your property is in good hands.

Thinking of selling your home? Fill out a Cash Offer Request Form today to get your free, no-obligation offer and take the guesswork out of your next move.