CLEVELAND — Local experts are warning that real estate wholesalers, who sometimes post “We Buy Houses” signs around the city, often take advantage of homeowners. 

What You Need To Know

  • Wholesalers don’t actually intend to buy homes in most cases, but get property owners stuck in contracts to sell for a price below market value

  • Local real estate agent Michael Cancelliere said these contracts typically include what’s called an “assignment clause,” which allows the wholesaler to sell the contract to another buyer at a higher price — and then keep the difference

  • Cleveland City Council Member Kris Harsh said this predatory practice has a large impact on the housing market in the city

“So, you call one of these signs and say you want to sell your house,” Michael Cancelliere, a real estate agent at Howard Hanna, said. “The person on the other end is going to put your home under contract for exceptionally favorable terms to them.”

Cancelliere said the people putting up “We Buy Houses” signs are using a strategy called real estate wholesaling. 

He said wholesalers don’t actually intend to buy homes in most cases, but get property owners stuck in contracts to sell for a price below market value.

These contracts typically include what’s called an “assignment clause” — which Cancelliere said is a red flag to look for before signing.

It allows the wholesaler to sell the contract to another buyer at a higher price — and then keep the difference. 

So, if you sign a contract to sell your home for $100,000, and the wholesaler “assigns” that contract to another buyer for $110,000, you’d get the $100,000 guaranteed in your contract, and the wholesaler walks away with $10,000.

“So sometimes, it does close at market value,” Cancelliere said. “But the person that owns the home is not receiving that market value.” 

These homes often end up in the hands of investors, who don’t take care of properties as well as owner-occupants. 

“The end user can really be anybody, but most likely, it’s somebody that’s not going to invest back into that property,” he said.

The offer to sell a house through this process may seem appealing to people in a tough position who want the sale to go through quickly, but Cancelliere said it’s not worth the loss of wealth.

“When you sell your home for less than it’s worth, you lose out on those gains,” he said. “And those gains can be really life changing for a lot of people.”

Cleveland City Council Member Kris Harsh said this predatory practice has a large impact on the housing market in the city. 

“The predatory investor market is ravaged neighborhoods,” Harsh said. “There are some neighborhoods that have lost significant value because of this type of investor.”

In an effort to prevent more residents from losing out profits, Harsh encouraged people to rip “We Buy Houses” signs out of the ground this spring — with free ice cream to the person who ripped out the most as an incentive.

“You’re talking about letting go of something that could potentially be passed down to your children or other family members, and if you have to let it go, that’s understandable. But maximize your profit,” he said. “The only people that can really help you do that are real estate agents.”

Cancelliere said real estate agents have an obligation to get homeowners the most money possible in their property sales — state law requires they act in their client’s best interest.

“Wholesaling is a threat we should take seriously if we want Clevleand homeowners and not Cleveland renters,” Cancelliere said. “Wholesaling is a big threat to the marketplace.” 

Wholesalers don’t just use the signs posted in the community to reach homeowners; Cancelliere said he’s also heard of people getting text messages, mailers, emails and calls.

We called some numbers on “We Buy Houses" signs in Cleveland to request an interview, and those who answered declined to comment.