I have recently entered into a purchase agreement on a wholesale deal. I just did a quick search and realized the seller is not listed on the property assessors site. Has anyone been burned in a wholesale deal? Please note I am using a title company to close the deal but this is cash so there is no bank backing me if it turns into a fraud situation. this is my first time dealing with a wholesaler
I think anyone who has done more than a handful of wholesale deal has been burned or would have been if they hadn't stuck their guns and been super careful. I've had wholesale deals run into issues with redemption rights, title issues, earnest money disputes, limited property , hidden material facts, and closing timeline discrepancies.
Most of these issues were caused by short sighted business practices, a lack of transparency with sellers, and poorly crafted contracts. There is a reason why most states want people brokering real estate to have a training certification and a code of ethics to be held too...
I imagine this will vary depending upon the deal, are these issues after you close or before? I just dont want to run into losing 50-60k
Are you dealing with a LEGAL LICENSED WHOLESALER or an unlicensed broker? There are really no protections dealing with someone skirting and breaking laws to broker without a license. The fact that laws and ethics mean nothing to them should be taken into consideration when dealing with these types of people. NO THANK YOU!
Oh, yeah, I actually ended up in litigation over a wholesale deal gone bad. In this case, it was the seller who was the bad guy, though it was a newer wholesaler who did not handle things very well. Seller knew on the front end that it was a wholesale deal, but then refused to close at last minute. (It wasn't a huge wholesale fee, maybe $5k, so I didn't feel like the seller was getting fleeced) Ok, whatever. I was just going to let him out of the contract and move on (usually not worth fighting) Then he refused to release my $5k earnest money. (I think he figured we'd end up splitting it just to save the hassle.) No basis whatsoever to do so, so I ended up suing for specific performance. Got the house at a discount from what I would have paid but it was a major hassle. Wholesaler got no fee after my costs. Nasty business and I no longer do business with wholesalers unless I know them very well and know everything is on the up and up.
@Ryan Keeslar Just talk to the wholesaler. Ask them if they have the deal locked up with the home owner directly or if they are daisy chaining the deal which means they got it from another wholesaler and that's why the names aren't matching. Fyi, it's the title company that protects you not the bank. If title verifies that the property has clean title and the name on the contract matches the owner name on the property then it's all good. Where you may be getting burned is that there might be a multiple wholesalers involved so you might be paying about 2-3 different wholesalers.
@Ryan Keeslar @Louis Davis Louis is right, if the title company clears it, you should be good to go. We have been through lots of variations on who is selling the house and what liens, judgements are attached. And some buys don't go through. But in the end that is a bit of the price you pay for getting good deals when they do go through and the title search should identify any issues and the title company is not going to give title insurance unless they are certain no one is going to make a claim. Trust them, they do this everyday all day