Real Estate

Why is an economic downturn a good time to wholesale real estate?

As with any period of economic downturn, comes a wave of financial “hard times” for many homeowners. These tough times are causing a spike in foreclosure rates which is a result of many homeowners no longer being able to keep up with their mortgage payments.

Lending institutions in tough economic times are forced to foreclose on delinquent borrowers and will repossess thousands of properties they really do NOT want to keep as bank property inventory. Banks will often offload these properties to real estate investors at dramatically reduced payment amounts. These properties are purchased and then immediately resold at a profit by real estate wholesalers. This investment style is called “short selling.”

In addition to banks stocking up on bank-owned or REO (real estate owned) inventory, wholesalers will also see a big rise in “private sellers” who will slash their home prices in an attempt to head off any problems. of foreclosure that may be heading your way!

A recession will usually cause a wave of both “private” and “bank-owned” real estate to flood the market at the same time. This sudden influx of available real estate inventory will kick off a serious “Buyers Market” situation. Sellers who are in some sort of crisis and need to sell very FAST are forced to sell their homes at deep discounts just to avoid losing their homes to the bank in foreclosure. It’s a vicious cycle that “snowballs” as the recession worsens. Welcome to “2009”!

Experienced wholesalers find it easy to find amazing deals at these HOT “Buyers” markets. Many people believe that wholesalers are simply “taking advantage of other people’s misfortunes”, and some people will conclude that wholesalers are somehow evil! I see it completely differently, while I believe that the wholesalers are doing justice to both the Banks and the Private Sellers. The wholesalers are buying up all the dead weight of the banks and helping the banks “cut their losses” and are keeping thousands of private homeowners from going into foreclosure and possibly even bankruptcy.

Simply put, great-priced real estate inventory is plentiful in times of recession, making it the perfect time for savvy wholesalers to make a ton of quick cash. Boo!

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