Philadelphia Homeowners Lose Millions to Wholesale Investors
Posted by Gregory Damis - CNHS on
Mar 30, 2023
We've seen the signs all over the city. “We Buy Houses,” a message that seems harmless enough. I get at least one phone call a day, from essentially a telemarketer with an offer to buy one of my properties. Oftentimes, they don’t even know what property they are calling about. For me, it’s a nuisance, but for some such as those with aging assets or homeowners facing possible foreclosure, these wholesale investors seem like they offer a solution.
A recent study by Nowak Metro Finance Lab at Drexel University looks at the differences in price and geography between houses that sell on the Multiple Listing Service (MLS) and those that sell off the MLS, to investors and to individuals, in Philadelphia between January 2018 and June 2022. The findings are staggering. Homeowners that sell to wholesale investors do so at an average of 51 percent or $126,000 less versus transactions between individual buyers and sellers on the formal market.
That represents a potential $500 million in home equity captured by investors instead of homeowners.
When it comes to these off-market transactions, there is hardly any oversight, and most of those targeted are in already marginalized neighborhoods such as West and North Philadelphia. Wholesalers will target homeowners with non-stop text messages, phone calls, flyers, and door-knocking. Philadelphia is one of just two localities that have taken action against these wholesalers with do not call lists and requiring wholesalers to have a real estate license. But, can we do more to stop these wholesale investors from capitalizing on innocent homeowners?
Knowledge is power. Share this newsletter with a friend and let them know about the danger posed by wholesale investors.