Hello BP Community-
I'm a new user and future Real Estate Investor in Central FL. I was wondering if anyone from my area would be able to share a Wholesaling Contract template with me that includes a "walk away" clause and assignment paragraph. I want to make sure that if I am unable to assign the contract I am still able to walk away from the deal.
I'm working on creating an efficient and smooth system for all the potential offers I have on my plate at the moment and in the future and The Florida Realtors Residential Contract seems like overkill for the types of properties I'm making offers on.
I'm looking for a legal and short version of The Florida Realtors Residential Contract in PDF form that I can fill in and email with my tablet while I'm in the field.
Is this a pipe dream?
Thanks in advance for any advice or help.
Jeff
@Jeff Cutter Hi, welcome to BP!
Sounds like you have construction experience, but no real estate experience or understanding of rules, regulations or laws pertaining to real estate.
There are 4 types of wholesalers. 1, the bunch that don't understand, 2. the bunch that do and don't care, 3. predatory dealers and 4. bulk buyers who attack a portfolio of properties and peel them off to single buyers.
#1 are usually victims of bad advice, guru crap, they think they know, but don't have a clue. #2 & 3 are simply bad players in real estate, the low life types. #4 usually are dealing with sophisticated sellers, buying, say 20 homes at a time, they will line the transactions up and most likely have a real estate license.
Go to my profile, click on my avatar/name, then go to my blogs, wholesaling, see Jane wholesale, be sure to read the comments. Pay attention to Zack's problems and tort laws.
We get comments like Dimitri's everyday, usually they are in the first group, lack business law and real estate law and bringing an attitude of dealing as you might in personal property to real estate with them, that means they don't understand real property concepts or the basics of real estate.
As to your comments, you don't understand real estate basics, the why things are done the way they are.......or you may know and don't care to follow the rules of the game.
The example you gave with termites is horsefeathers, in no state is a buyer required to follow through with latent defects, unless the contract is cash and sold "as is". That's BS.
John's comments got you dancing around the bush, ethical and knowledgeable operators or investors don't use or need weasel clauses. They also don't use tactics of deceiving a seller that gurus and most wholesalers (who lack knowledge) usually employ.
Brian mentioned other approaches you can take, even with no money, to take title and avoid license requirements as well as tortuous conduct explained in my blogs.
Read Tic, Tac, Toe about tenants in common, then think seller financing a fractional interest, taking control of a property under an agreement with the other owner, then selling as an owner.
Gurus sell simple steps for simple dreams. Question is, do you want to be a dream chaser or a professional? Read, learn the basics, then do! :)
I would also like to add that I have assembled a buyers group and the chances of actually walking away from a great deal is pretty slim. I do my due-diligence before I make an offer and I would only walk as a last resort but I want to be able to put contingencies on a shorter contract.
Am I dreaming?
If you are leading the seller to believe you will buy the property and you have no intention of actually closing...is that OK? Entering into a contract using deception gives most wholesalers a BAD name. Maybe there is a more honorable way to operate..like HONORING your word? Just a thought!
@Bill Gulley and @Brian Gibbons.....
Of course I'm going to honor my word. My absolute intention when making an offer is to buy it either to rehab or resell it depending on which market I buy in. The implication of using deception does not apply here.
The purchase contract is an attempt to keep both parties honest. What if the seller did not disclose or honestly did not know about a very relevant item that could be very costly to me and is not discovered until after a thorough home inspection is done. I would want an out or a concession. I don't think that's being deceptive in any way.
I just inspected a wood frame house in Palm Bay that the realtor stated nothing was wrong with it and just wanted a clean WDO. His buyer put up $3000 with the offer and upon inspection I discovered a huge active sub termite infestation that went all the way to the top plate in 3 corners of the house. Enormous damage had been done. None of this was visible to the untrained eye.
The buyer had no out in that situation and couldn't get her money back.
That is the kind of situation I want to avoid so I don't think your reply is really relevant in my question.
But if you have any good info as it relates to my original question I would be most appreciative.
I want to make sure that if I am unable to assign the contract I am still able to walk away from the deal.
That is from your post.
I apologize. In an effort to save time that was a hacked copy and paste from another users post and I should've removed that line.
I'm looking for a short version of Florida's Purchase contract, if there is such a thing, with a contingency clause and assignment paragraph.
Sorry for the confusion.
Welcome to BP @Jeff Cutter
Based on your Palm Bay example, you seem like you are not just someone looking to put houses under contract to keep them off the market, then weasel your way out if you can't assign the deal. Hopefully you have thick skin and will hang around because people seem to either love or hate wholesalers around here, and there is very little in between.
With that said, take a look at examples of assignment contracts at Biggerpockets.com/files. I think that free members have access to that part of the site, but I may be wrong. I did a search for "wholesale" on there and came across a ton of documents. I'm sure you'll be able to find what you're looking for in that part of the site.
Oh and by the way, send me a message so I can get on your buyers list! :)
if you intent is to "tie up a property" and never take title, that is what the regulators what to shut down. Buy with private money, buy with hard money, buy sub2, buy on a TIC contract,then
resell to cash buyer,
that is the way to wholesale in Florida
Oh excellent. That's very helpful. Thank you. I really appreciate your input.
I'm not going anywhere. I'm still feeling my way around the forums and I realize there are some people who have been here for awhile and are shotgun ready to attack. Same as any other forum I have ever been on. There's always flamers. Makes no difference to me. I know what I'm trying to achieve.
You are right about my intentions. I'm just trying to figure out a way to make the whole process more efficient in order to achieve higher yields, in an ethical way. I see an enormous amount of real estate every week on my travels and I always keep my eyes open for all the telltale signs of abandoned/distressed houses. They are all over in the nooks and crannies of all the neighborhoods I go into daily. I have so many properties to evaluate I can't keep up.
Thanks much for the tip.
Brian I may or may not take title to the property. I may or may not "whole sale" the property. It depends on the shape of the house and the market it's in and what I ultimately feel is in my best interest. If the rehab is beyond my skill set then its going to be wholesaled. If I can realistically tackle the rehab then I will take title.
I don't understand this negative connotation about "wholesaling"? I'm using a common method to take a decomposing house and it put it in the hands of an experienced. Can you please explain why your way is superior to a double closing? As far as I can tell there is nothing illegal or unethical about that method. Am I missing something?
@Jeff Cutter Hi, welcome to BP!
Sounds like you have construction experience, but no real estate experience or understanding of rules, regulations or laws pertaining to real estate.
There are 4 types of wholesalers. 1, the bunch that don't understand, 2. the bunch that do and don't care, 3. predatory dealers and 4. bulk buyers who attack a portfolio of properties and peel them off to single buyers.
#1 are usually victims of bad advice, guru crap, they think they know, but don't have a clue. #2 & 3 are simply bad players in real estate, the low life types. #4 usually are dealing with sophisticated sellers, buying, say 20 homes at a time, they will line the transactions up and most likely have a real estate license.
Go to my profile, click on my avatar/name, then go to my blogs, wholesaling, see Jane wholesale, be sure to read the comments. Pay attention to Zack's problems and tort laws.
We get comments like Dimitri's everyday, usually they are in the first group, lack business law and real estate law and bringing an attitude of dealing as you might in personal property to real estate with them, that means they don't understand real property concepts or the basics of real estate.
As to your comments, you don't understand real estate basics, the why things are done the way they are.......or you may know and don't care to follow the rules of the game.
The example you gave with termites is horsefeathers, in no state is a buyer required to follow through with latent defects, unless the contract is cash and sold "as is". That's BS.
John's comments got you dancing around the bush, ethical and knowledgeable operators or investors don't use or need weasel clauses. They also don't use tactics of deceiving a seller that gurus and most wholesalers (who lack knowledge) usually employ.
Brian mentioned other approaches you can take, even with no money, to take title and avoid license requirements as well as tortuous conduct explained in my blogs.
Read Tic, Tac, Toe about tenants in common, then think seller financing a fractional interest, taking control of a property under an agreement with the other owner, then selling as an owner.
Gurus sell simple steps for simple dreams. Question is, do you want to be a dream chaser or a professional? Read, learn the basics, then do! :)
You are definitely missing something. Sounds like you are reading old materials and trying to apply them in 2016.
I don't do anything in Florida (yet), so I'm no expert where you are. What people are saying is that there's been an explosion of people getting told that wholesaling is an easy, low cost way to get into real estate investing and there are people out there training people to make offers on houses that they cant buy, market them for 30 days, then if they cant sell them just walk away. This really muddies the waters. It drives up prices and expectations from sellers for those of us that are out there actually looking to buy them, but more importantly it can really royally screw a distressed seller thinking they have their house sold in a tight situation and you don't perform. Because of that, Johnny Law is coming in to protect the citizens.
Dodd-Frank pretty much killed the double close. At least the double close of using your second buyer's money to pay for the first. I've done those, they used to fine, but I don't know any closing agent still doing them. You can still do a double close with transactional funding, but you have to be on the chain of title and the funds have to be separate.
Assignments are still legal and still work around here, but if you put a house under contract with the sole purpose of assigning it then you are acting as an unlicensed broker, not a buyer. It wouldn't take much to prove that if you advertise the property in any way. Why have a licensing agency if you can circumvent it so easily? I cant even imagine if someone in the securities industry tried to pull something like that off, and we often deal in bigger dollars...
The wholesaling industry has gotten big enough and there are enough newbies out there doing things wrong that the consumers are bitching and the brokers and agents are going WTF,? There is no doubt in my mind that there are more rules and regulations coming down the pike on that one, they will be trying to put you out of the activity. And frankly I think they should.
I buy from wholesalers regularly. Not saying they cant bring value to what we do, I'm just telling you why you're getting those responses and what to expect over the next year or two and why. Its not that wholesaling itself is bad, its that its not being done right by entirely too many people. Again, why license people who broker real estate if people can broker real estate without a license? The people that take the time to get licensed and play by the rules are going to cry foul and they are going to win.
Like Brian said, there will still be ways to wholesale, but they will absolutely be coming after the people that are essentially brokering without a license very soon, might as well do it right from this point, its coming soon IMO.
Also, I call BS on the $3k non refundable for that kinda termite damage. Its a material misrepresentation, if they lost that money they didn't fight it at all.
Anyway, knock yourself out, its your business, I'm not telling you how to run it.. Talk to other wholesalers in the area and see what they can do and use for a contract. There are some here, just read them, its not rocket science. I use Realtor forms for listed properties (8 pages), the one I use for buying direct from homeowners is one page and very simple.
You jut dont need a lot of lawyer mumbo jumbo. If you're buying directly from a homeowner, just give them $100 E/M. And walk away from it if things go south. I act like that's standard and have almost never paid more than that if there wasn't a Realtor involved.
From another post:
What people are saying is that there's been an explosion of people getting told that wholesaling is an easy, low cost way to get into real estate investing and there are people out there training people to make offers on houses that they cant buy, market them for 30 days, then if they cant sell them just walk away. This really muddies the waters. It drives up prices and expectations from sellers for those of us that are out there actually looking to buy them, but more importantly it can really royally screw a distressed seller thinking they have their house sold in a tight situation and you don't perform.
This is EXACTLY the problem. The OP says people want to attack, etc...yet they post they want to enter into contracts with no intention of buying and want to get out of them if they cannot assign them. It is not the poster, it is the method of doing business that causes problems. Every time a new person comes along and reads about this, another one thinks this is an OK way to do business.
@Jeff Cutter I do hope you see this is the wrong way to treat sellers and the wrong way to build a good relationship. Referrals are key to many businesses and RE is no different. One of my best purchases was from a seller who had been jerked around by one of these operators. One of the biggest obstacles was getting them to trust me because of previous experience.
I saw a reference above to Dodd-Frank.
Dodd-Frank does not apply when it is an all cash transaction.
Dodd-Frank does not apply to businesses, only individuals.
@Jeff Cutter It seems like your friend should have been able to get out of the contract with a termite issue under the contingent on inspection area of the contract, however it must say it in the contract. Keep your head up, wholesaling is not an easy task, especially if you are honest and truly look to help the seller. That is the way to make GOOD Money. Always look to make sure your cash buyer and your seller at a win win transaction. If you keep that as your focus the money will soon follow. Also if you come across any deals in Melbourne FL near Florida Tech or Palm Bay Fl I would be interested in looking at what you have.
Brent
Excellent! These responses are golden and I really appreciate all the input.
Disclaimer: In spite of the implications made in the some of the comments I do not ever intend to deceive, lie, or have "no intention" of buying a property, or weasling out, or be involved in any otherwise unethical business transaction. I'm not looking to take advantage of anybody or "get rich quick" or follow the dreaded guru approach. I'm here to learn the legal and ethical way to pursue my objectives and goals as well as develop an efficient process in doing so.
Having said that:
As Bill observed, I do have 2 decades of construction experience but very little knowledge of the endless constellations of legal minutiae. I'm not opposed to splitting hairs over words but I believe my time could be more productive in other areas.
@Bill Gulley Your reply has been very helpful in giving me a totally different perspective on the "wholesaling" concept as a business practice/service. I have read and will be re-reading your blogs and the comments. I am also researching/studying the concepts you discuss and propose and seeing if they can be applied in FL. I would like to ask if you could direct me to the source involving a statement you made in comments in one of your blogs: "You can't advertise any property for sale unless you hold legal title, this is what got wholesalers nailed in FL, or if you are a licensed agent/broker." Who got nailed and when and what were the consequences? I'd like to research that.
The realtor I was dealing with on the termite house was shady from the get-go. I had never dealt with him before. I just got a call from him out of the blue that he needed a time sensitive WDO done and he would meet me at the house. From the minute I arrived he started pressuring me to give him a clean WDO and that a treatment had just been done and there was nothing wrong so I really didn't need to do an inspection. My BS detector went off and soon I found what he was trying to hide. He even brought in a fly by night pest control co. to dispute what I observed. I ultimately had to have a contractor come in and cut 3'x3' holes in the wall to prove that there was a lot of hidden damage. This was a vacant bank owned property. That realtor got very upset with me and said his buyer put down $3000 and wasn't going to get it back because of me and made all kinds of trash threats. I laughed at him and and hung up the phone. I wasn't privy to the terms of the purchase agreement but I believe that realtor was just truly ignorant and tried to save face. I've butted heads with many realtors over the years but this guy was the worst so far.
Anyhoo,
The houses I'm looking at are vacant, dilapidated and mostly out of town owners. Some are bank owned, which is another story. I have cultivated a solid buyers list (means true investors, not relatives) of which some are professional rehabbers and my intention is either turn it over to one of the rehabbers for a fee or partner with another investor on a rehab where I manage the rehab. If there are no major structural/foundation issues I'm comfortable organizing, coordinating and managing the job myself.
@Darrell Shepherd Great info and advice Darrell! Thanks for the input. I need to research the Dodd-Frank deal. A guest on one of the BP podcasts is a strong proponent of the double close, in fact she says that all she does and has done it many times. Shes not a guru either.
@John Thedford Thanks John for directing my post to Bill and Brian. Excellent material there.
@Account Closed You must be looking to go to work for Harris, Grumman, or SpaceX?
Jeff, if you've got that much construction experience, find a good one and I'll bring the money and split it with you. Ive been looking to do some stuff in Florida.
@Jeff Cutter, No no I have some investment properties in Palm Bay and Melbourne and I am looking to get more buy and holds.
@Darrell Shepherd I'll be in touch with some numbers.
@Brent Bowers Are you looking for buy and holds only (SFH or multi unit or both) and are you using a property manager for your current assets.
Jeff, Dodd Frank changed TILA, TILA changed ALTA, ALTA changes closings, therefore Dodd Frank changed double closings.
BP is not a school, it's a social networking platform for folks interested in real estate. BP allows guests to speak, a social forum, those who do speak provide their opinions. The purpose is to generate dialog for the site. Other purpose is to allow the speaker to generate business, one way or another.
I have not looked at all the podcasts, nor have I read all the blogs, or the books offered, but what I can tell you is that not a single presentation went by that did not make my BS Meter at least flutter, some caused strange noises and a few blew up my Meter!
Your BS Meter is not properly calibrated.
Most of what you read on the internet is folklore, ideas, strategies, programs, some niche operation. Most of it will have legal and ethical issues, not just at some state level but federally and what is accepted practice nationally.
The only thing that's every new in real estate are (or will be, is) law(s). There are no secrets in real estate.
I spend between 10 to 20 hours a week researching laws, guideline changes, changes in business practices, I seriously any investor or operator on BP does that, I say that because of what I read here. Some errors are like a .22 going off, some are like a 155 Howitzer, wholesaling is more like a bunker buster, it's a big deal. Financial laws get into the atomic bomb area. Some things will get you a cease and desist letter, then perhaps a visit with an administrative hearing, then a judge.......some things send you to prison.
Gurus are usually the source of trouble. Investors that follow gurus can too. Those that have ideas without a proper, formal training can cause havoc. A RE Broker does not receive the training needed to address regulatory policy, not unless they have had other legal training. Just because someone claims they made a lot of money doing something doesn't mean what they did is correct.
There are things that you can do in RE that may not be correct, you might go 20 years and never have an issue, then again, it could be your first deal, or second or tenth, you never know.
Laws we must follow aren't just in real estate, but in business. Truth in advertising, banking and finance, transfer of title of personal property, fair dealing, securities laws, contract law, torts and it goes on and on. You don't need to be an attorney or a CPA, you do need to recognize when you need other professionals and follow their advice.
Uniform law, to offer something for sale, offer title to it, you must hold title, you must own it, the exception is a broker. If you don't own real estate you can't offer to sell it, unless you're under a brokerage. Agency Laws (not real estate agencies) but conditions under the law that places you in an agency relationship must be understood. Partners have responsibilities to other partners. I can't advertise your car for sale without your consent and a license to do so. A contract is personal property, I own it, hold it, I can sell my contract, the other half of that right is so long as I'm in compliance with other laws. If I start selling contracts to buy wheat, I will need a securities license.
To be in real estate honestly and ethically, you will have to stay current in the rules of the game. That doesn't mean spend 20 hours a week researching, it means finding reliable, qualified and knowledgeable sources for information.
Such sources must be related to the topic of interest, government sources, finance attorneys, real estate attorneys, CPA firms, professional organizations, NAR, ALTA, AIA, and quasi government entities like Fannie Mae or FDIC. All of these have "white papers" reports, legal opinions, title opinions, changes in laws and practice. Reputable schools are another source, by reputable I mean accredited colleges and universities, private schools that specialize in business, finance or real estate (run by qualified administrators by education, experience and knowledge, not some guy teaching a program, that is a guru.)
You can get great ideas from your peers, other investors or operators, other professionals in an area but, you need to ensure those ideas are in compliance before you act on them. Telling the judge you learned something on a podcast isn't going to fair well.
Good luck.......and Happy Holidays! :)
@Jeff Cutter you queried Bill on some illegal tactics used by some "wholesalers". I talked to DBPR a couple months back about your question of advertising a house you don't own. We have a REIA just north of Naples that was been teaching this practice. They even have an agreement drafted for the homeowner to sign stating the "buyer" or should I say fraud giving them permission to advertise and show the house. That my friend is a listing agreement. Nobody can give anyone written permission to violate laws. I can sign a statement giving you permission to rob a bank, but you will still be arrested! If you are serious about staying legal the DBPR will be speaking next month on what constitutes unlicensed brokerage activity. Don't believe everything you read on BP or anywhere else. Get the facts. Question them? Call DBPR and get questions answered. It would also be informative to read CH 475 Florida statutes. If you want to come hear DBPR speak and maybe get specific questions answered PM me for details. It will be on Jan 7 in Ft Myers. FYI, people allegedly violating any FL licensing laws will find their name on www.myfloridalicense.com. You then go to unlicensed activity and then search unlicensed complaints. One of our REIA directors recently stated there are three locals now under investigation for these activities. I would not want my name to appear there. It is public record and will never go away. This could be seen by future potential business partners as a negative shadow cast on them were they to partner with someone on the state list. I suspect the state will be coming down more stringently on some of these practices due to the number of owners being victimized by these scam artists. Go read many of the posts on the "wholesaling" forum and see the number of posts stating "oh my, my 60 day inspection period is running out and I haven't got a buyer". IMO, if a good attorney could find a pattern of this fraud it could open them up to quite the lawsuit. Personally, many of them deserve it.
Jeff Join all the REIAs in your area, all of them. Then network with fellow wholesalers face to face. Real estate is a people business thus having just an electronic (BP) peer group is but a fraction of what every investor needs to learn, solve problems and be successful.
@Jeff Cutter I currently have SFHs, but I am interested in Multi family as well as long as it cashflows. I currently manage the properties myself, however I am trying to get away from that. I need someone to go and inspect my properties quarterly to ensure tenants are taking care of the place.
Frankly, I think this wholesale freight train carrying the circus is going to crash, many will be injured for a long time.
Ever fill out an employment application and check the box that says;
Have you ever been convicted of a felony ?
Say goodbye to your gun rights all you gun sling'ers!
Forget any professional license, you may not get to cut hair much less deal in real estate or insurance.
Oh, I need a security clearance for this job? Never mind.
Oh, I need to be bonded to drive this truck? Never mind.
Oh, yes dear, so you won't marry me? Never mind.
Hello sir, we got a report that someone was trying to do some real estate transactions in this area, we'd like to talk to you, just step outside, ......please turn around and put your hands behind your back, we're just going to talk to you. Yes, your employer knows we are here!
Applying for another job are we?
Look, $32.00 an hour, commercial construction, must be bonded and insured......another HUD project, oh never mind.
What do you mean I don't qualify to rent from you? Oh, never mind.
Now you're 65, Oh crap, I can't even move into public housing......
I thought social services was to help the poor........sir, you need to apply at the food bank at the Sisters of Mercy, they are a religious organization, not in the state system....Oh, never mind.
Yep, it's a wonderful life, wise guys!
Happy Holidays! :)
Welcome to BP!
As you can see from the responses you have hit a never with some folks. You sometimes find that here. Some people are passionate about keeping wholesaling to a minimum. May be because they are a realtor and wholesalers hurt their business or may be they are just trying to help provide information.
Just know that there are good people on here mostly trying to give suggestions and guidance because they enjoy helping others. I just like to trust but verify what the responses are and why they might be giving these types of responses.
BTW you will here a lot of realtors say that wholesaling is illegal in FL or they will phrase it so that you think it is illegal. Based on the advice of a local broker who manages a brokerage with over $100,000,000 in sales per year I did a little research that made me believe and understand what the state of FL really meant with the law.
I believe that someone stated that there are 3 locals under investigation. I know that there has to be hundreds of wholesalers in FL. I have personally had multiple wholesalers contact me in a day. For only 3 to be under investigation tells me that either the state is not concerned with wholesaling or that some folks might be misinterpreting the law in a manner to suit their own beliefs.
Good luck and I hope your research gives you the results you are looking for.