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What Is Wholesale Real Estate?

Documents associated with a real estate sale.
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  • Written By: Esther Ejim
  • Edited By: Kaci Lane Hindman
  • Last Modified Date: 10 August 2014
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Wholesale real estate is a term that is used to describe the process by which an individual makes some money from the sale of real estate through the application of shrewd business principles. In the case of the wholesale real estate, the individual usually bypasses all of the usual processes that people who wish to purchase some form of real estate go through. For example, the norm for people who wish to purchase a piece of property is to obtain the services of some type of real estate agent, who will serve as a middleman, orchestrating the negotiations between the person selling the property and the person who wishes to purchase the property. This means that the real estate agent will tag on some sort of fee for this service, usually in the form of a percentage of the closing fee, or some other form of agreed specifics.

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This not only increases the final amount the purchaser of the property will eventually have to pay, but it also decreases the aggregate amount the seller will make from the sale of such a property. The wholesale real estate offers certain tangible benefits in the sense that it allows the seller and the buyer to connect directly, dispensing with the services and associated fees of the broker or agent. As such, the person purchasing the property is able to buy it at a lower rate, with the intention of reselling the same for a profit. The trick to the success of wholesale real estate is for the person purchasing the property to buy only property that is going for far below the market rate for the equivalent of such a property. This allows the person to sell the property at either the going market rate or to sell the same for a little bit under the market rate.

A wholesale real estate agent can obtain such cheap property through the purchase of a category of real estate that is classified as distressed or through buying discounted bulk property. The reason for the distress could be due to any number of reasons that stem from both legal and personal sources, such as in the case of a person who is moving out of the country and needs immediate cash, or even the sale of homes that may have been foreclosed by banks. Most times, the wholesale real estate agent will merely lock down a contract that has a contingency clause allowing such a person to opt out of the contract in the event that he or she does not make the expected sale. This person will then look for a buyer for the property and use the money from the buyer to pay off the owner of the property, while still making some profit.

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