What is “Wholesale” Real Estate?

Ilyce Glink gives her answer to a question over on Inman.com today:

How do you define wholesale in the real estate market? I was driving through a neighborhood that my wife and I like very much. One of the properties that have been on and off the market for several years has a “For Sale” sign in the yard again. But this sign says, “For (Whole) Sale.” We cannot find the property listed on any of the MLS sites we have searched. The sign has only a phone number on it.

What is the difference between buying or selling wholesale and the regular way of buying and selling?

Ilyce has “no idea what the seller of this property is doing,” but offers up some possibilities. She misses one very likely one, though.

Wholesale is a very common term among real estate investors—specifically professionals who buy 10 to 50 properties every month, not the speculators that buy pre-construction or depend on appreciation to bail them out.

Although not widely publicized, real estate wholesalers typically only deal with other investors that can pay cash for a quick (7- to 10-day) turn. Wholesalers focus on extremely distressed properties, the kind that most people would turn their noses up at if they went into them, no matter what the price or discount to market. These types of homes may have electrical, mold, foundation or other issues that the general public steers clear of. Wholesalers mainly sell to investors that have a rehabbing business. Unless you are familiar with how to build a house from the ground up, have a stomach for risk, or just want to take a flyer on a property, then stay away. Leave the property to the professional investors/rehabbers.

I would keep tabs on the property, however, as a rehabber needs to get the property turned quickly to cash out and move on to the next deal. Most rehabbed houses have all new electrical work, appliances, and/or other systems, and end up being virtually new houses.