Wholesalers Flip Houses, Distorting the Market
Real estate investors, who call themselves wholesalers, are snapping up distressed properties, often paying all cash and seeking a discount, preferably from a cash-strapped home owner.

Then the real estate wholesaler flips the homes — often so fast that he never takes possession of the title. Instead, he signs a contract with the home’s owner and then signs the contract over to a new buyer for an “assigning fee” — the wholesaler’s profit.

"Wholesaling is finding a bargain for a bargain hunter," says Michael Jake, a Colorado-based real estate investor.

Critics of the practice say it makes it harder for lower-income families to take advantage of a down market, not only because good deals are snapped up quickly but also because the practice distorts the market.

"It makes the bottom [of the market] very frothy and hard to figure out where real value is," says Andrew Jakabovics, associate director for housing and economics at the Center for American Progress, a Washington, D.C., think tank.

Source: Christian Science Monitor, Tracey D Samuelson (05/17/2010)