Pros & Cons of Wholesaling Homes in a Seller’s Market
If the tide hasn’t turned for you yet and your local area isn’t in ‘sellers’ market’ territory already, it soon will be. So the question for those real estate investors focused on wholesaling homes is; are you ready for it?
Real estate investors know that they have been spoiled to a large degree during the last seven years of depressed housing where foreclosures and outrageous discounts and ridiculously cheap homes are a dime a dozen. Still, at the same time everyone has been crying out for a rebound and many investors made their best money in the red hot market at the end of the last boom. So what are the real pros and cons of wholesaling homes in a sellers’ market?
5 Cons of Wholesaling Homes in a Sellers’ Market
1. Home Prices are Headed Up
Of course one of the most significant symptoms of a seller’s market is higher home prices. This has many investors grimacing with pain as they see how much profit they missed out on by not buying more sooner. However, it is only really relevant compared to the resale prices and spreads that are achievable.
2. Discounted Properties Harder to Find
Of course in a hot market distressed and discounted homes can feel harder to find. This makes early planning and having multiple sources of deals already working.
3. More Competition
Increased competition is coming, but that doesn’t mean you won’t find deals. Know your advantages and do better at meeting sellers’ needs.
4. Bigger Deposits
One of the most frustrating parts of a sellers’ market is home sellers demanding larger deposits. Don’t let this slow you down. Wholesaling HUD homes can be a way to find low down payment properties and fast closings with transactional funding can also help.
5. Unreasonable Sellers & Agents
When real estate agents and sellers get overconfident they want to demand the world. They’ll be tougher on terms and deadlines, and not so forgiving if you need to close late. So have your ducks in a row to avoid escrow disputes.
4 Pros of Wholesaling Homes in a Sellers’ Market
1. Money is Easier to Come By
While some real estate investors may still be struggling to get mortgages or raise capital as the market improves so will the money flow as confidence grows and greed makes lenders loosen up to seize more of the pot.
2. Selling Faster
A sellers’ market means homes selling fast. For a wholesaler there is nothing better than turning around a home in hours.
3. Sell for More Money
More demand also means being able to demand more money for your homes and increase profit margins even if you paid more for a property than it cost last year.
4. Maintaining the Advantage in Negotiations
In a seller’s market, you the investor also get to enjoy all the advantages of negotiating from a position of power, which also means demanding the terms you want.
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