Are Wholesalers Hurting Local Buyers?

5 Replies

When I work as a real estate broker here in Denver, I do primarily buyer rep. As you all know it is getting harder and harder to get buyers under contract with the lack of inventory. Recently I've been noticing many properties going under contract then showing up on my wholesale emails. It is frustrating because my buyers - starter home budget owner occupiers - are getting beat out by wholesalers. And it's surprising because I'm seeing that the offer prices must be significantly lower from the wholesalers. What are your thoughts on this Denver investors?

It's not fun but it represents the market. Saw a show home finish house sell for full price cash. It then shows up on the MLS 3 months later for about a 25% mark up ($285,000 to $350,000). How are they helping the market? Inventory is low and cash is king. At some point the music will stop again and we'll see who is left without a seat.

They're helping themselves make money. Nothing wrong with that, but as Bill said, they may get theirs in the end.

You question really comes down to "are buyers who are willing to pay more hurting buyers who are willing to pay less". Of course they are. That's always true in any situation where there is limited supply and strong demand. Buyers who will pay more get the limited supply and those you aren't can't buy. Makes it seriously difficult for those of us who want to buy but won't pay crazy prices.

We will see what the situation is like in a few years.

The situations that are confusing me are when my buyers have offered above list but don't win the bid, and then I see the house on a wholesale email for below list and know that the purchase price offered must be even lower to give the wholesaler their margin. Is that because they are getting under contract for "cash" terms, counting on selling to someone with hard money or cash?

Lot of reasons a seller might choose one offer over another. Wholesalers do often say they're going to buy with cash and close quickly. Even if its a double close or assignment that may be an easier close than a first time home buyer with a FHA loan and a request for concessions.

Sometimes short sales (in particular) have to be listed on the MLS for a time. But the deal and the buyer may be all pre-arranged.

If the house has any sort of issues, the seller may know a lender is going to balk. Especially FHA, but even conventional can be a problem.

Could be other things going on, too. Inventory is incredibly tight here now, especially for cheap house that would make good rentals.

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