{"id":119373,"date":"2019-11-21T14:30:31","date_gmt":"2019-11-21T21:30:31","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=119373"},"modified":"2023-08-08T14:55:20","modified_gmt":"2023-08-08T20:55:20","slug":"wholesalers-do-not-assign-contracts-do-this-instead","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/wholesalers-do-not-assign-contracts-do-this-instead","title":{"rendered":"Why Wholesalers Should Never Assign Contracts Again (&#038; What to Do Instead)"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm?e=BIGPOC3214534148&#038;light=false\" width=\"100%\"><\/iframe>  \n\n\n\n<p><span style=\"font-weight: 400;\">Wholesaling through assignments is stupid. <\/span><span style=\"font-weight: 400;\">I hate to break it to you.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">I know, most people say <a href=\"https:\/\/www.biggerpockets.com\/blog\/ultimate-beginners-guide-real-estate-wholesaling\" target=\"_blank\" rel=\"noopener noreferrer\">wholesaling<\/a> is the best way to get started in real estate. And they present it like wholesaling is synonymous with assignments\u2014you can\u2019t do one without the other.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The fact is, though, this is 100 percent false.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">There are actually three ways to wholesale: <\/span><\/p>\n<ol>\n<li><span style=\"font-weight: 400;\">Through assignments<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Through a double close<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Through purchasing a property outright (and then selling it later)<\/span><\/li>\n<\/ol>\n<p><span style=\"font-weight: 400;\">I\u2019m not convinced any of them are the best route to go if you\u2019re just getting started in real estate investing.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">There is an alternative that not many people talk about. It&#8217;s one that gives you all the benefits of wholesaling through assignments with none of the drawbacks.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">I\u2019m going to share that alternative with you here. But first\u2026<\/span><\/p>\n<h2>Why Should You Take My Wholesaling Advice?<\/h2>\n<p><span style=\"font-weight: 400;\">This is my first blog post on BiggerPockets in several years. You are wise not to trust what I\u2019m sharing without some kind of qualifier.<\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-111011\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/05\/steps-feet-stairs.jpg\" alt=\"man with blue geans and sneaker shoes in stair\" width=\"702\" height=\"336\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/05\/steps-feet-stairs.jpg 702w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/05\/steps-feet-stairs-300x144.jpg 300w\" sizes=\"auto, (max-width: 702px) 100vw, 702px\" \/><\/p>\n<p><span style=\"font-weight: 400;\">I\u2019m Jaren\u2014nice to meet you! A few years ago, I helped scale a wholesale company from averaging eight to 12 deals per month to averaging over 25. <\/span><span style=\"font-weight: 400;\">We purchased all of these properties in-house, closed on them, and then turned around and sold them to investors.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">I was head of the dispositions team, which means it was my job to make sure we sold those 25-plus properties every month.&nbsp;<\/span><span style=\"font-weight: 400;\">While at this company, I also helped start an interview-based podcast all about wholesaling and got just shy of 100 episodes under my belt. <\/span><span style=\"font-weight: 400;\">We interviewed some of the best wholesalers in the country. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Needless to say, I\u2019ve learned a lot on the subject over the years. <\/span><span style=\"font-weight: 400;\">So, when I tell you that wholesaling through assignments is stupid, it\u2019s not because I\u2019m trying to discredit wholesaling.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">I just know there is something better out there, and I would be doing a disservice to our industry if I didn\u2019t tell you about it.&nbsp;<\/span><\/p>\n<p><strong><em>Related: <\/em><\/strong><em><a href=\"https:\/\/www.biggerpockets.com\/blog\/newbie-wholesaling-faqs\" target=\"_blank\" rel=\"noopener noreferrer\">Top 3 Newbie Wholesaling FAQs\u2014Answered!<\/a><\/em><\/p>\n<h2>Major Drawbacks to Assignments in Wholesaling<\/h2>\n<p><span style=\"font-weight: 400;\">When you wholesale through assignments, there are a lot of limitations. Let\u2019s quickly run through the major ones below.<\/span><\/p>\n<h3>1. You Have to Disclose How Much You Make to Your Buyer<\/h3>\n<p><span style=\"font-weight: 400;\">Due to the nature of assignments, your end buyer will always know how much you\u2019re making.&nbsp;<\/span><span style=\"font-weight: 400;\">You have to spell out how much your fee is in the assignment agreement, and if the buyer has a problem with how much you\u2019re making, they can refuse to do the deal. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">This gives them the upper hand in the negotiation, and there is nothing you can do about it.&nbsp;<\/span><\/p>\n<h3>2. Your Ability to Advertise the Property Is Extremely Limited<\/h3>\n<p><span style=\"font-weight: 400;\">A lot of wholesalers feel like it\u2019s not a good idea to disclose to the seller that their goal is to sell the property to another buyer. They feel that this would scare the seller away from doing the deal. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">(This is TERRIBLE business, by the way, and you should always operate with 100 percent transparency.)<\/span><\/p>\n<p><span style=\"font-weight: 400;\">But if you don\u2019t disclose this, how do you list the property for sale? How do you advertise it online without the risk of them seeing the listing on Craigslist or Facebook Marketplace? If the property is owner-occupied, how do potential buyers conduct walk-throughs in order to run due diligence?&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">It\u2019s an uphill battle from the start\u2026 (Are you beginning to see why I said it was stupid?)<\/span><\/p>\n<h3>3. You\u2019re at the Mercy of the Seller<\/h3>\n<p><span style=\"font-weight: 400;\">The reality is, whenever you assign contracts, you never really know if you\u2019re going to be able to close successfully until it actually happens.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If the seller changes their mind, it could ruin the deal <\/span><i><span style=\"font-weight: 400;\">and<\/span><\/i><span style=\"font-weight: 400;\"> your reputation\u2014especially if it happens within a few days of closing.&nbsp;<\/span><span style=\"font-weight: 400;\">There is nothing worse for investor-buyers than a deal falling through last minute.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If it happens frequently, pretty soon people are going to brand you as a flake that can\u2019t close. Even though the fault may lie with the seller, it\u2019s your reputation on the line, and it\u2019s not something you should risk.<\/span><\/p>\n<h3>4. Assignments Are a Gray Area Legally<\/h3>\n<p><span style=\"font-weight: 400;\">The last drawback to mention is how, in certain markets, wholesaling through assignments may be perceived as practicing real estate without a license. <\/span><span style=\"font-weight: 400;\">Assignments have a designed purpose, and using them to wholesale is a loophole that a lot of real estate professionals don\u2019t like.&nbsp;<\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-110229\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/04\/debtbad.jpg\" alt=\"Close up customer hand choose sad face and blurred smiley face i\" width=\"702\" height=\"336\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/04\/debtbad.jpg 702w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/04\/debtbad-300x144.jpg 300w\" sizes=\"auto, (max-width: 702px) 100vw, 702px\" \/><\/p>\n<p><strong>Here\u2019s an example of how an assignment is meant to work:<\/strong><\/p>\n<p><span style=\"font-weight: 400;\">Say you\u2019re a real estate investor who always avoids houses with basements. You have a lead that comes in that\u2019s a killer deal. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">At first, the seller tells you that the property doesn\u2019t have a basement. You\u2019re so convinced that this is a great deal that you submit a strong offer, which the seller accepts. Both of you sign a purchase agreement.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">After conducting your <a href=\"https:\/\/www.biggerpockets.com\/blog\/due-diligence-ultimate-guide\/\" target=\"_blank\" rel=\"noopener noreferrer\">due diligence<\/a>, however, you find out that the property does in fact have a basement\u2014the seller misinformed you.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Instead of walking away with nothing, something you could do is assign this property to a fellow investor in your network who you know doesn\u2019t mind basements.&nbsp;<\/span><span style=\"font-weight: 400;\">That way, the seller still gets to sell their property, the buyer gets an amazing deal, and you get to walk away with a little money for your troubles. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">It\u2019s a win-win for all parties involved.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This is how assignments were designed to be used: as a solution to a one-off deal falling though\u2014<\/span><i><span style=\"font-weight: 400;\">not as a primary acquisition strategy!<\/span><\/i><\/p>\n<p><span style=\"font-weight: 400;\">Someone could make a strong case that when a wholesaler assigns contracts, they\u2019re functioning as a listing agent without a license.&nbsp;<\/span><span style=\"font-weight: 400;\">In practice, what a wholesaler is doing is locating a seller and then going out to find a buyer for that seller and making a small \u201cfee\u201d for their services.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This is EXACTLY what a listing agent does for their clients!&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Sure, the assignment agreement does provide a loophole that can be exploited. But would it really hold up in court? <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Practically speaking, there is very little difference between what a wholesaler does through an assignment versus that of an agent representing a seller.<\/span><\/p>\n<p><strong><em>Related: <\/em><\/strong><em><a href=\"https:\/\/www.biggerpockets.com\/blog\/wholesaling-lies\" target=\"_blank\" rel=\"noopener noreferrer\">The 8 Most Common Lies Newbies Believe About Wholesaling<\/a><\/em><\/p>\n<h2>Why People Assign in the First Place<\/h2>\n<p><span style=\"font-weight: 400;\">One of the main reasons why so many people are attracted to wholesaling through assignments is that it provides a way for them to get started in real estate with little to no initial cash investment. And t<\/span><span style=\"font-weight: 400;\">hough this is technically true, it\u2019s a lot easier said than done.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Again, there is a much easier alternative that gives you all of the benefits of wholesaling through assignments with none of the drawbacks\u2026<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Are you ready for the big reveal?<\/span><\/p>\n<h2>Simply Become a Real Estate Agent<\/h2>\n<p><span style=\"font-weight: 400;\">Remember earlier when I said that, in practice, there is very little difference between what a wholesaler does through an assignment and what a listing agent does for a seller?&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">What if you simply become a licensed real estate agent, who markets to motivated sellers, builds a network of investor-buyers, and then just structures it so the buyer paid you commission?&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">You\u2019d never run into any legal issues, you\u2019d get direct access to the property for showings, and the seller would expect you to take pictures and have listings all over the internet! <\/span><span style=\"font-weight: 400;\">In addition, you\u2019d have even more resources, support, and exposure, because you\u2019d have access to the local MLS and Realtor association.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If you structure it so the buyer pays the commission, the seller has nothing but upside. Especially in instances where the property is distressed, it would be a no-brainer.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">You\u2019d be getting started in real estate, making great money, wouldn\u2019t need a lot of capital to get started\u2026 You really can\u2019t argue with what I\u2019m saying! It\u2019s a WAY better option!<\/span><\/p>\n<h2>Conclusion: Wholesaling Through Assignments Is Stupid<\/h2>\n<p><span style=\"font-weight: 400;\">My goal in writing this post was to try and help at least one aspiring real estate investor avoid the swamp that is wholesaling through assignments.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">I hope I\u2019ve made my point. I\u2019ll see you in the comments section.&nbsp;<\/span><\/p>\n<p><a href=\"https:\/\/www.biggerpockets.com\/biggerpockets-business-podcast\" target=\"_blank\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-119124\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/11\/business-podcast-ad-for-blog.jpg\" alt=\"\" width=\"706\" height=\"125\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/11\/business-podcast-ad-for-blog.jpg 706w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/11\/business-podcast-ad-for-blog-300x53.jpg 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/11\/business-podcast-ad-for-blog-702x125.jpg 702w\" sizes=\"auto, (max-width: 706px) 100vw, 706px\" \/><\/a><\/p>\n<p><em>Do you agree or disagree with my opinion about assignments?&nbsp;<\/em><\/p>\n<p><strong>Weigh in with a comment below.<\/strong><\/p>","protected":false},"excerpt":{"rendered":"<p>Wholesaling through assignments is stupid. I hate to break it to you.\u00a0I know, most people say wholesaling is the best way to get started in real estate. And they present it like wholesaling is synonymous with assignments\u2014you can\u2019t do one without the other. The fact is this is 100% false. Here&#8217;s a better alternative.<\/p>\n","protected":false},"author":502204,"featured_media":117289,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5526,7119],"tags":[],"class_list":["post-119373","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-wholesaling","category-biggerpockets-daily"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/119373","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/502204"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=119373"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/119373\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/117289"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=119373"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=119373"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=119373"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}