Assignable Contracts: What's going on?
It all started for me with TikTok, honestly. TikTok has this algorithm that deciphers your interests based on your interaction with videos. I was seeing a lot of #sidehustle type of videos. Making children's books on Canva and selling them on Amazon....easy photoshop hacks you could sell on Upwork.....stuff like that. One content creator was pushing this idea of "real estate wholesaling". If you could convince someone to sell their house you could then assign the contract to someone who was willing to pay more for the property and then you would pocket the extra $10k, $20k, $30k....what a fabulous way of taking advantage of people and making tons of money!
Then I put it together with the "assignable contract" emails I get. Because I'm a real estate agent I end up on the email list for about ten thousand of these wholesale guys. The emails are often the same, with lots of red lettering and caps. Very short inspection periods, non-refundable earnest money, no inspections but you can buy the house "off market" and don't have to compete for it.
Let's break down what's going on here.
A guy knocks at your door. He offers to buy your home for ::wow!:: $200k. Utah is a non-disclosure state in practice, so what that means is that when a home sells the information is kept secret from the general public. No one besides real estate agents and appraisers, title and lenders know the actual sold price. If Zillow claims they know- what you are looking at is an algorithm.....a supposed number based on the list price. So the person who owns the house may not really understand what their home is worth, and the wholesale guy probably doesn't even really know what the home is worth. He likely has had no formal training, he's not a real estate agent, he has no access to sold comparables, and he likely doesn't really care about the seller's wants and needs. But on the other side of the coin, maybe the seller paid $60k for that house so $200k sounds like a great deal. The contract is fairly straight forward if you are used to reading contracts but there is a line in there that is very very important to the seller:
This means that the intent of the wholesaler is to effectively market the property by means of assigning that purchase contract and try to get someone else to buy the home for more than they originally offered the seller. They take home the profits- not the seller. It's written fairly plainly for someone who knows how to read a contract and who speaks and reads English. I have to wonder how much of this contract is explained by the wholesaler?
In this market when homes are generating multiple offers and regularly selling for 20% over list price, who in their right mind would sell their home to a wholesaler? I personally believe that these people are being preyed on, that the contract isn't being explained, and that these wholesalers are essentially stealing the equity out of people's homes. A good real estate agent is not only going to explain the entire contract but have the seller's best interests in mind. I personally will easily make a seller more money through careful planning, preparing, and marketing to render my 6% effectively free, and most importantly, the seller makes all of the profit when things go well. It takes careful consideration and timing in order to sell a house at top dollar and I believe this should be left to professionals.
If you or anyone you know has been approached by someone who has offered to buy their house, please reach out. Please let me help you determine what will serve you the best financially, let me help you understand what you home's true value is, and let me sell your house so that you reap the benefits of your investment instead of some unlicensed person who likely doesn't have your best interests in mind.