Hands up if you have ever seen a sign on the side of the road that says “Johnny buys houses” or “we want to buy your house for CASH”. Everyone? Ya, me too. I’ve also received letters in the mail from various entrepreneurs that have offered to buy my house for cash, in days, without having to pay any Realtor commissions. Some of these letters appear to be handwritten even though they are photocopied and apparently, they are used by many other entrepreneurs throughout the province. What do I do with these letters? Laugh and throw them out. However, there is a small group of people that this marketing actually speaks to and they end up calling that number in search of an all cash offer that they must think is too good to be true.
What I am talking about today are the efforts of real estate “wholesalers” a relatively new spin off of the real estate investor that most folks are familiar with. Now, when I say “real estate investor” that could mean any number of things. From the mom and pop landlord, to the “house flipper” and all the way to the mega corporations that own massive portfolios of commercial real estate across the country. There are so many ways to invest in real estate and for the most part, nobody here is being taken advantage of. Of course there are terrible landlords that exploit tenants everywhere in the world, and terrible tenants that seek to take revenge on every landlord they can. But that’s a different conversation for a different day. Today we are talking about the annoying and morally bankrupt folks that email those letters and put up those street signs. Wholesalers.
Last week, the CBC ran this article, which I have seen shared on Facebook countless times: https://www.cbc.ca/news/gopublic/cash-for-houses-go-public-1.7003796. In this article, we meet a woman that was feeling the squeeze of her growing mortgage payments beginning in January 2022. She says she was desperate to find a way out of this scenario and ended up contacting a local company that paid cash for houses without all of the typical “hassle”. No open houses, staging, showings, painting and especially no real estate commissions would be paid. With the promise of “cash in her hand-quickly” she met with the owner/operator of this company. Despite the fact that she knew she would not be getting fair market value for her home, she signed a contract during that very same meeting. Things just get worse from there and eventually she finds out that this company is now doing all of the things she was trying to avoid so that they could, in turn, sell her home for fair market value by using the services of a realtor. A realtor that was also married to the wholesaler. The irony is too good to ignore.
See, these cash for homes companies have no interest in actually owning anyone’s home. They have an interest in flipping your house on the open market for what it is actually worth. Here’s how this works:
Wholesaler goes into somebody’s home under the pretence of saving them a huge headache and a lot of money.
They sign a contract with the homeowner that allows them to market the home in a way they see fit.
They find a buyer for that home and sell it to them for more than they agreed to pay to the original homeowner.
They make a profit.
There is so much wrong with this, it’s hard to find a place to start. First and foremost, any homeowner that thinks these people are trying to help them, please give your head a shake. This is an unregulated, unlicensed scammer that is trying to make a buck off of you. They are targeting desperate and vulnerable home owners that might think they have no other option.
The woman in the story above said multiple times that she didn’t fully understand the contract she signed, but did so because she felt pressured. When the wholesaler decided to renegotiate the contract and offer her less money, again she signed because she felt pressured. This whole industry is akin to the HVAC sales people that used to go door to door and offer to replace your furnace and A/C for a fraction of the cost of a new unit through a rental program. Those types of sales are now illegal and banned across Canada because companies like Reliance were taking advantage of homeowners that were uneducated and potentially desperate. It’s disgusting.
In the story, the woman agrees to a price of $560,000 for her house after being offered $575,000 originally. The wholesaler then hires a cleaner, a stager and a photographer to market her home on the MLS. She did not know that the wholesaler was going to do this and thought he would be moving into her house. The wholesaler then enlisted the help of his wife, who is a licensed Realtor, to list the home and sell it. The person who said they were going to save you thousands by helping you avoid paying a Realtor did that exact thing because they know that is the best way to get fair market value for a home. Again, the irony is slapping us in the face.
The wholesaler negotiated in bad faith, manipulated the homeowner, was deceitful, and then made $50,000 after the home sold for $610,000 on the MLS. What a piece of shit. I know there are a lot of people that don’t like Realtors for whatever reason, but 99.9% of licensed agents in Ontario would never sell out their own client like this. The wife who sold the home was reprimanded by RECO (Real Estate Council of Ontario) for acting in bad faith and not disclosing that she had a commercial interest in the sale of the home. She was forced to take an online class about ethics “at her own expense” which was probably $500 or less. Big whoop.
There is a “cash for houses” company that operates in London and the surrounding area and their marketing materials are everywhere. Their CEO is a Realtor. They market themselves as a friendly young couple with a dog. How could they possible be taking advantage of you, they seem so nice! Their letters look the exact same as all the other wholesalers in Ontario. Be smart and don’t let yourself be taken advantage of.
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