Why is an economic recession such a good time for real estate wholesaling?
As with any period of economic recession, there is a wave of financial “hard times” for many homeowners. These tough times lead to an increase in foreclosure rates that are the 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 that they really DO NOT want to hold as bank inventory. Banks will often discharge these properties to real estate investors with drastically reduced liquidation amounts. These properties are then bought and then immediately resold at a profit by the real estate wholesalers. This style of investing is called “Short Sales.”
Aside from the rise of banks with bank-owned or REO (real estate owned) inventories, wholesalers will also see a large increase in “private sellers” slashing their home prices in an attempt to avoid any problems of ownership. foreclosure that may be at the head of your way!
A recession will generally trigger a wave of both “private” and “bank owned” real estate flooding the market at the same time. This sudden influx of available real estate inventory will start a serious “buyer’s market” situation. Sellers in any kind of crisis who 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 just turns into “snowballs” as the recession worsens. Welcome to “2009”!
Seasoned wholesalers find it easy to find amazing bargains in these HOT “Buyers” markets. Many people believe that wholesalers are simply “profiting from the misfortunes of others”, and some will conclude that wholesalers are somehow evil! I see it completely differently, whereas I believe that wholesalers are doing justice to both banks and private sellers. Wholesalers are buying up all the deadweight from the banks and helping the banks “cut their losses” and are preventing thousands of private homeowners from going into foreclosure and possibly even bankruptcy.
Simply put, well-priced real estate inventory abounds in times of recession, making it the perfect time for savvy wholesalers to make a ton of quick cash. Booya!
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