BiggerPockets

Nomenclature is important here. If you made an offer *through* a wholesaler, that "wholesaler" looks like a broker real fast.

You don't have proof of equitable title? Is there not a contract to be assigned? If not, how exactly is this wholesaling?

Mike - if you believe that the property is worth what your paying for it, then why are you worried about how much the wholesaler is selling it for? He should have advertised it to you X amount of dollars and that included his assignment fee. If that was the case then you knew what you was paying for the property and it shouldn't matter what he paid for it. The wholesaler is getting paid for putting the deal together, as he should.

Sounds to me like your upset that he's going to make 10k (5k assignment + EMD) for this deal.

Thank you all for your thoughts:
Jeff, I responded to an add on zillow and I was not privy to any contract other than the word of the wholesaler that he had equitable title.When I inquired he sent an agreement stipulating that I was obligated I pay a fee on any property bought from a particular party.(this party turned out not to be the owner of record of the property I wanted)

Since I buy and have offers on several properties in this area I refused to sign such a limiting agreement. It turns out the party who was billed as the owner was in fact another wholesaler who had a contract to purchase or in some way control the property in question. This sent up red flags for me so I located the owner through a property search and found he in fact is in some arrangement with the 2nd wholesaler.

I will now attempt to deal directly with the owner of record and negotiate a deal that would allow me to pay directly to him and he could compensate the Wholesaler as his agreement with them.
My primary concern is since the second wholesaler wanted to do a double close after receiving a $5,000 earnest money deposit in his name, there was no simple way to make sure I would get the property other than to put that money in escrow with my title company, otherwise if the recorded owner reneged It could be hard to recoup my deposit.
I would agree to take an assignment of the contract but no contract was offered.

what is the normal arrangement when dealing with a wholesaler?

If I am understanding this correctly there is a 2nd wholesaler trying to make money off of a property that another wholesaler has tied up???

If this is the case you need to be working directly with the guy who has the property under contract.

This is why I never let other wholesalers shop my deals. They can bring me a buyer only "if we prearrange a fee" for them.

I understand what this guy is trying to do.....it is not uncommon for newbie wholesalers to get into real estate and start trying to shop other peoples deals even if they don't have permission.

Bottom line, get in touch with the first wholesaler. The second guy should have an arrangement with him and be getting paid through him, not by you.

Oh, and don't give him any earnest money. I'm sure you know this, but only give your escrow money to the title company, not some guy trying to shop another wholesalers deal.

Michael,

There are several ways a wholesale deal can be closed.

On an assignment of contract you would see the original contract between the wholesaler and seller. You and the wholesaler would agree to the assignment fee and at close title will cut the wholesaler a check for the fee.

Another route that the wholesaler could take is to double close the deal. This is where there are two separate contracts involved. There is a contract between the seller and wholesaler then a separate contract between the wholesaler and buyer (You).

With the double close you would have no knowledge of the previous contract. In this case, the wholealer pays closing costs between the a-b and b-c transaction, but it protects or hides the spread. Typically I use this approach if I'm working with a buyer I don't know well or if I am making more than 10k on the deal.

There IS alot of confusion out there. I've been mainly buying REO, SS, and bankruptcy court properties.

I did my first deal with a wholesaler recently. She assigned me the contract for a reasonable fee, a standard practice especially for wholesalers who don't have the cash to double-close. She wanted to be paid her fee prior to closing, when we executed the assignment document. I said absolutely not, what if the seller flakes out and refuses to close. She said she would then return my fee (I didn't know her from Adam at that point), and that she was taught to do it this way by her mentor, a major wholesaler in the area, and that if she didn't collect the fee I could cut her out of the deal. (I can't even think in such devious tems, but I guess it happens.)

I suggested putting her fee on the HUD, but she didn't want her seller to know what was going on, thought he might get upset and abort the whole deal. I was to be introduced to her seller at the closing as her "money partner".

I suggested that the title company could hold the money and disburse it to her after closing. The title company couldn't do this, they told us, but only after I'd cut a cashiers check to the title company. So it was pretty frustrating. Our "workaround" was for me to let her hold the cashiers check until after closing, at which time I exchanged that check for another made out to her.

You wholesalers, what went wrong in this scenario? How should it have flowed?

Good Morning David, your experience tells me that I am not over reacting. If I continue on with this I will only work with the owner of record. I will post the outcome.

David,

It was her responsiblity to either have the fee put on the hud or to double close. If it was a regular wholesale deal then title should have been able to double close using your funds, she wouldn't have to bring anything to the table.

If it was a shortsale, she would have had to get transactional funding to double close.

Either way, she should have had this laid out in her plan when she approached you. As a wholesaler and Investor myself, I never ask my end buyers to do anything but sign a purchase agreement if they are ready to buy.

It sounds like lack of experience got the best of her.

Thanks for the idea Steve: I will let you know how it turns out.
The wholesaler is working out an arrangement with the owner of record and I will be sending the owner an offer directly and he will arrange to pay the wholesaler from proceeds.

So this is how it turned out.

I'm afraid I have alienated the wholesaler, this is his partial response

"However, the biggest issue you have in all of this, Mr. Lauther, is that despite my repeated requests of you to deal directly with me, you have continued to contact (the property owner) to induce him to breach his contract with me and deal directly with you. Your conduct has given me a cause of action against you known as a tortuous interference with contractual relationships.

I am not stating this because I want to get involved in some action against to you but to stress upon you the importance of complying with my request to deal with me and only with me directly. I must insist that you cease and desist from any further contact with (the property owner) his agents, associates, contractors and assigns immediately."

I replied by wishing him well.

I have several questions regarding this failed attempt to use a wholesaler.

Is there any restriction regarding contacting the owner of record, property manager, or any other party.

I was perfectly willing to deal
through the wholesaler and never tried to circumvent his contract, but I was not able to determine his legal equitable interest.

Is there some document that I should have been given to determine this?

I am only inquiring so that if I should ever entertain another property I could avoid a repeat of this unpleasant situation.

The threatening tactics of this wholesaler precludes me from considering any property he is associated with but I am sure my inexperience added to this deal falling through.