Wholesaler Misrepresented himself

Wholesaler Misrepresented himself

Real Estate Agent · Davenport, FL · Member since 2015 · 45 posts · 6 votes

I am in the midst of dealing with a wholesaler that has left a bad taste in my mouth for the wholesaling business, and am wondering if this is common practice.

A little background:  So, I'm trying to sell my house and move to Central Florida for a job opportunity for my husband. The plan is for us to began a real estate business, with me focusing on it fulltime, and him eventually joining me once we are successful enough to afford it.  

The key to doing all of this is selling my home. It is an inherited home that needs updating.  We initially were selling it to a family friend so that it could stay within the family in a way, but that didn't work.  At this point, we are just interested in selling it quickly, and willing to leave a substantial amount of money on the table to do so, if necessary.  I had started filling out some of the "we buy houses" forms online to see if any investors would make it worthwhile for us.  I got several hits, and chose to go with someone who established themselves as a cash buyer who could close within 2 weeks.  I informed him of the comps in the area, and my knowledge of the property, and we haggled a price that my husband and I felt comfortable with.  I researched him a bit, seeing that he was a flipper and wholesaler.  At the time I was not too familiar with how wholesaling worked, and he had never mentioned wholesaling.  We signed an offer, sight unseen, with a 7 day inspection period.  He said he would be scheduling an inspector the next day.  The next day, he said he would schedule the inspector for early in the week because he wanted to come with him and was stuck in Broward (we are in Miami).  The following day(Saturday), he said his partner was in the area and wanted to take a look at the property. We obliged. On Monday(labor day), I asked when I should expect him and the inspector. He told me he would let me know Tuesday morning.  Tuesday morning, he asked if the inspector could come by at 7pm. I said yes and asked if he was coming also. He informed me he would not be.  Later in the day, he told me another "partner" was in the area and would like to visit the property. Again, we obliged, but I started to become more suspicious. I had already did some digging into his social media presence to see if he had listed our property with his wholesales over the weekend, and found nothing.  The next partner showed up at 5:30pm, and had another woman with her.  We chatted, and they took pictures, and left.  At 7pm, there was a knock on the door, and I assumed it to be the inspector, but it was someone different, someone who I had not been informed to expect.  I asked him if he was "blank", the inspector. He was not. He was another "partner", and mentioned "xyz" wasn't going to make it, but didn't "xyz" tell me that he was coming? No, also, I have no idea who that is. I spoke with "insert cash buyer name". "Oh, yeah. "Xyz" and "cash buyer" work in the same office." We go ahead and let this person view the property, and I check in with "cash buyer" to straighten if and when inspector is coming and who this guy was. He apologizes for his slip up, and not notifying me of the other "partner", says he will check in with the inspector and get back to me.  Inspector shows up. Now, I'm expecting and prepared for a full official home inspection.  This guy looks around the property for less than 10 minutes. He does no more than any of the "partners" do and leaves.  At this point, I'm very nervous about the whole situation, so I start digging again, and find that he has listed the property with his wholesales.  I do a bit of research on wholesaling and find out that there is a practice of putting a property under contract by identifying yourself as a cash buyer, trying to flip it to an end buyer, and then using the inspection period to back out if you can't flip it to an end buyer.  I confront the "cash buyer" with the knowledge that he has listed my property as a wholesale property.  I ask him if he intends to terminate the contract if he can't flip it to an end buyer. I don't want the property tied up unnecessarily as I am looking to move quickly.  His exact response: "Yes I either close on the property myself first or flip to an end buyer. I will know by the end of today so no worries about dragging it any further.  I knew your situation from the beginning that's why I kept the inspection to seven days only.  It's normally 15 days."  I wait until the end day and ask him what the plan is. He says that he has two cash buyers that would like to view the property tomorrow, and then will decide from there.(At least he us finally honest about who these people are)  I ask him if this means he intends to terminate the contract if he can't find an end buyer? His response: "Please give me till tomorrow afternoon I am doing absolutely everything I can to make this work. I know how important it is to you and your family"

I'm wondering if there is any recourse I have at this point.  I will wait and see what he says tomorrow, and maybe we will get lucky, and one of these investors will want the property. However, I don't have faith in that. The deal I made with him is great for an investor.  The money he has tacked on to wholesale it, makes it a little too expensive for an investment opportunity, I feel.  The whole situation has taught me some big lessons, and I'm trying hard to keep my cool.  Is this how it always works? 

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Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
11y

"Wholesaler misrepresented himself."

"Water turned out to be wet."

See this reply in the discussion

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Karl Krentzel  your licensed to transact business in this fashion big difference from unlicensed individuals that tie up sellers props then stick them on craigs list like an agent would or a website and then sell the home or contract...  If it was legal you would not need a Real Estate brokerage industry at all we would just all run around selling others properties like they do in China

  • Investor · Houston, TX · Member since 2012 · 15 posts · 2 votes
    11y

    That's bad business by this "wholesaler" I'm a wholesaler and you always let the seller know what you are doing. If you are going to assign your contract to an end buyer it must be stated in the contract. A good wholesaler has legit cash buyers and knows exactly what his cash buyers are looking for so when he gets a signed contract its a done deal and everyone involved wins.

  • Investor · Fort Lauderdale, FL · Member since 2015 · 13 posts · 6 votes
    11y

    A good wholesaler will never enter into a sale agreement without the intent and ability to close the deal.  There isn't anything wrong with trying to wholesale the deal to a cash investor, but he should have been honest with you and told you what exactly what his intentions were.  Just remember, every profession has the good, bad and ugly!

  • Real Estate Agent · Davenport, FL · Member since 2015 · 45 posts · 6 votes
    11y
    Originally posted by @Stefan Augustyniak:

    A good wholesaler will never enter into a sale agreement without the intent and ability to close the deal.  There isn't anything wrong with trying to wholesale the deal to a cash investor, but he should have been honest with you and told you what exactly what his intentions were.  Just remember, every profession has the good, bad and ugly!

     I strongly believe you are right.  If he had been up front in the beginning with something along the lines of, "This property doesn't work for me, but I have someone buyers that might be interested," I could make an informed decision and would feel good about choosing to use his services.  However, I did not choose to use his services. I chose to sell to him directly, because that us what he told me was happening.  I feel he took on the property just to see if he could make some money off it, without researching to see if he could get an investor at the price HE set for it. Ugh. 

  • Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
    11y
    Originally posted by @Nikki Harmon:
    Originally posted by @Stefan Augustyniak:

    A good wholesaler will never enter into a sale agreement without the intent and ability to close the deal.  There isn't anything wrong with trying to wholesale the deal to a cash investor, but he should have been honest with you and told you what exactly what his intentions were.  Just remember, every profession has the good, bad and ugly!

     I strongly believe you are right.  If he had been up front in the beginning with something along the lines of, "This property doesn't work for me, but I have someone buyers that might be interested," I could make an informed decision and would feel good about choosing to use his services.  However, I did not choose to use his services. I chose to sell to him directly, because that us what he told me was happening.  I feel he took on the property just to see if he could make some money off it, without researching to see if he could get an investor at the price HE set for it. Ugh. 

     That is absolutely what he did.  That is what "wholesalers" are told to do, every day, including on BiggerPockets!  "Just get a property under contract, and then try to find a buyer.  If you have a deal, finding a buyer will be easy.  If not, you can always walk away using your contingency clauses."

    So, if he is asking for more time, I would strongly advise you to look at the contract very closely.  Maybe scan it and post it here so we can help.  You may be able to get him in a twist.  If the only contingency he has that allows him to walk away is the inspection contingency, and he lets that pass, you've got him.

  • Real Estate Agent · Davenport, FL · Member since 2015 · 45 posts · 6 votes
    11y
    Originally posted by @Richard C.:
    Originally posted by @Nikki Harmon:
    Originally posted by @Stefan Augustyniak:

    A good wholesaler will never enter into a sale agreement without the intent and ability to close the deal.  There isn't anything wrong with trying to wholesale the deal to a cash investor, but he should have been honest with you and told you what exactly what his intentions were.  Just remember, every profession has the good, bad and ugly!

     I strongly believe you are right.  If he had been up front in the beginning with something along the lines of, "This property doesn't work for me, but I have someone buyers that might be interested," I could make an informed decision and would feel good about choosing to use his services.  However, I did not choose to use his services. I chose to sell to him directly, because that us what he told me was happening.  I feel he took on the property just to see if he could make some money off it, without researching to see if he could get an investor at the price HE set for it. Ugh. 

     That is absolutely what he did.  That is what "wholesalers" are told to do, every day, including on BiggerPockets!  "Just get a property under contract, and then try to find a buyer.  If you have a deal, finding a buyer will be easy.  If not, you can always walk away using your contingency clauses."

    He isnt asking for any time beyond his inspection period, which ends Friday.  Once I confronted him about what he is doing, he is trying to make it work and would know at the end of the day, yesterday. End of day came, and he said that he had worked cash investors (finally referring to them as what they are and not "partners" and "inspectors" lol). That wanted to see the property today, and asked for me to give him until this afternoon.  One canceled, and the other came and went. I've since texted him for an update, and he says that he has one and will call me around 2pm. Fingers crossed, this all works out.  We will see at 2pm, and I'll post an update after I speak with him. 

  • Real Estate Consultant · Memphis, TN · Member since 2015 · 70 posts · 82 votes
    11y

    I have been to a few wholesale classes and was taught a few "tricks".  Many of these people trying to get into wholesaling are bird dogs.  If the inspection period says 7 days and it expired, you are off the hook, no matter what.  I don't know what his contract states but usually it is written in very simple language.  If A is not fulfilled by X date, then B happens (i.e. end of contract).  Wholesalers will go through their buyers list and still look for other avenues to sell your house quickly.  I think at this point it doesn't matter if they are licensed or professional.  They can assign the deal to someone else if the contract states that.  Common practice.  I am not licensed, as I don't have to as an investor (and as it doesn't limit me quite as much if I was licensed), but it appears to me that this is a contract and whatever the contract says stands.  If anything is out of line, it can be a breach or the contract will end at which time either party can walk away.  Should anything go beyond these terms, they can be amended and must be signed by both parties.

    Some escrow companies and realtors will take a look at it for free and tell you if it is legitimate (if you want to save money or just get an opinion from an independent party). Some real estate attorneys offer free consultations with specifics relating to the deal, not just theoretical scenarios.

    On another note, what scares me is that you let all these people into your house snooping around.  I would ask them for ID and have appointments with these people set up in advance.  Too many things have already happened with female realtors letting prospects into houses or property being stolen while being inspected.  Some are thieves and pretend to be professionals and we are trusting to let them in only to find out later we have been robbed (this has happened with a neighbor in a prime area in LA where I used to live!). 

    At this point you haven't lost anything (thank goodness!), just be very cautious and follow the contract to a T so nobody can come back later to say otherwise.  Put it in writing that the contract is "null and void as of x date".  You already have all your notes, which is great!

    Thank you for keeping us in the loop!

  • Developer · Astoria, NY · Member since 2015 · 88 posts · 12 votes
    11y

    I'm sorry this is not a problem in my book, the only problem i see is that he wasn't upfront about assigning it.  there is nothing illegal about what he did.  This however, is proof that any wholesaler must be upfront about what they do. PS he obviously didn't get a good price for your home if he had to have 6 people come look at it, so yay for you. 

  • Real Estate Agent · Davenport, FL · Member since 2015 · 45 posts · 6 votes
    11y
    Originally posted by @Sabrina Brown:

    I have been to a few wholesale classes and was taught a few "tricks".  Many of these people trying to get into wholesaling are bird dogs.  If the inspection period says 7 days and it expired, you are off the hook, no matter what.  I don't know what his contract states but usually it is written in very simple language.  If A is not fulfilled by X date, then B happens (i.e. end of contract).  Wholesalers will go through their buyers list and still look for other avenues to sell your house quickly.  I think at this point it doesn't matter if they are licensed or professional.  They can assign the deal to someone else if the contract states that.  Common practice.  I am not licensed, as I don't have to as an investor (and as it doesn't limit me quite as much if I was licensed), but it appears to me that this is a contract and whatever the contract says stands.  If anything is out of line, it can be a breach or the contract will end at which time either party can walk away.  Should anything go beyond these terms, they can be amended and must be signed by both parties.

    Some escrow companies and realtors will take a look at it for free and tell you if it is legitimate (if you want to save money or just get an opinion from an independent party). Some real estate attorneys offer free consultations with specifics relating to the deal, not just theoretical scenarios.

    On another note, what scares me is that you let all these people into your house snooping around.  I would ask them for ID and have appointments with these people set up in advance.  Too many things have already happened with female realtors letting prospects into houses or property being stolen while being inspected.  Some are thieves and pretend to be professionals and we are trusting to let them in only to find out later we have been robbed (this has happened with a neighbor in a prime area in LA where I used to live!). 

    At this point you haven't lost anything (thank goodness!), just be very cautious and follow the contract to a T so nobody can come back later to say otherwise.  Put it in writing that the contract is "null and void as of x date".  You already have all your notes, which is great!

    Thank you for keeping us in the loop!

     It was a bad situation all around, but I made sure my safety was of utmost priority.  I also have children in the house.  No appointments were set without my husband in the house, and most often, my husband and several other men in the house (we are trying to move so we have been packing and had help packing from friends and family.)  All had to identify themselves and be the person that I was told would be coming.  One however did show up that I was not expecting, and I promptly called the person I was dealing with to ask who this person was.  Apparently, he had forgot to tell me.  I really think it was more that there was confusion as to who his fake property inspector was supposed to be.  

    He verbalized to me that he cannot close, and that the numbers don't work for him to retail the property (though this is what we discussed originally, and there was never any mention that he was doing anything other than that, and he has never actually been to the property to decide and figure out repair costs).  Supposedly he does have an offer from someone else, but way below our contract price, and coincidentally, his original offer amount on the property sight unseen.  I take note that all of our other conversations have been through text and email, beyond the initial phone call, but this one he chose to verbalize.  I told him I would discuss it with my husband.  I have since emailed him that since he verbalized that he cannot close at the contracted price, we are requesting he send a written and signed termination of our contract.  

    I really wouldn't have a problem with his action if he was up front and did not lie throughout the entire process.  

  • Real Estate Agent · Davenport, FL · Member since 2015 · 45 posts · 6 votes
    11y
    Originally posted by @Ken T.:

    I'm sorry this is not a problem in my book, the only problem i see is that he wasn't upfront about assigning it.  there is nothing illegal about what he did.  This however, is proof that any wholesaler must be upfront about what they do. PS he obviously didn't get a good price for your home if he had to have 6 people come look at it, so yay for you. 

     That is my only problem.  I wouldn't have had a problem if he was upfront about the situation.  I really don't think he ever intended to close it as a flip for himself as he said.  I don't think he even researched the comps I spoke about.  It is a good deal as a flip, or a buy and hold, but it isn't a good deal once a wholesaler tacks almost 12,000 on top of it.  If he had been upfront, maybe we could have worked out something that would be appealing to his investors.

  • Professional · Cypress, TX · Member since 2015 · 309 posts · 17 votes
    11y

    @Nikki Harmon....why not take this opportunity to build your buyers list and see if you can sell it yourself? (Due diligence). Or just list it with a Realtor.

  • Developer · Astoria, NY · Member since 2015 · 88 posts · 12 votes
    11y

    @Nikki Harmon 100 percent agreed, some of the comments here are a bit crazy tho @John Thedford!  actually i have a question for you Nikki.  What in your opinion is the best way he could have shown this to other investors if he was upfront with you, I always felt it could be an awkward situation for you to consistently show other investors your home while it's under contract.  Do you think he was worried you could just offer the home to the other investors if you knew they were really the end buyers?  He still went about it wrong just trying to think from his viewpoint.

  • Developer · Astoria, NY · Member since 2015 · 88 posts · 12 votes
    11y

    @Zac Preston what do you typically tell the seller "I find homes for investors and then assign the contract to them" ?

  • Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    11y

    @Nikki Harmon, I tend to agree with @Ken T. when he said "he obviously didn't get a good price for your home if he had to have 6 people come look at it", but not about the part where he said "so yay for you", that is, if you were accurate with us about giving him a sizeable discount because of your need(?) to sell quickly. It is looking like you were/are trying to have your cake and eat it too - quick sale, for next to no discount!? Maybe it's just that you and he have different definitions when it comes to "acceptable" discount, delay, profit margin, condition, number of follow-up conversations, blah blah...

  • Real Estate Agent · Davenport, FL · Member since 2015 · 45 posts · 6 votes
    11y
    Originally posted by @Ray A.:

    @Nikki Harmon....why not take this opportunity to build your buyers list and see if you can sell it yourself? (Due diligence). Or just list it with a Realtor.

    I was led to believe I had sold it myself. I was never told he was wholesaling the property. The only reason I know that he wholesales as well as flip, and that he had listed my property for wholesale, was through my own research. I had informed him that I had several other prospects that I would be speaking to, and that if we did not find an offer we liked, we would be listing it on this past Monday with my father, who is a licensed realtor. We were trying to see what kind of offer we could get beforehand, and he made us a really good one, or so we thought. I guess it was one of those "too good to be true" situations. Now that the contract is canceled, I am going about contacting all my prospects again, though more cautiously, and gearing up to list it on the MLS if that doesn't work out.

  • Professional · Cypress, TX · Member since 2015 · 309 posts · 17 votes
    11y

    @Nikki Harmon, post the property here on the BP Marketplace.

  • Real Estate Agent · Davenport, FL · Member since 2015 · 45 posts · 6 votes
    11y
    Originally posted by @Ken T.:

    @Nikki Harmon 100 percent agreed, some of the comments here are a bit crazy tho @John Thedford!  actually i have a question for you Nikki.  What in your opinion is the best way he could have shown this to other investors if he was upfront with you, I always felt it could be an awkward situation for you to consistently show other investors your home while it's under contract.  Do you think he was worried you could just offer the home to the other investors if you knew they were really the end buyers?  He still went about it wrong just trying to think from his viewpoint.

     I think this comes down to integrity.  If he had told me up front what he was doing, I would have no problem showing it to his investors.  I would assume the point of his job is that he has quick access to investors that I may not.  He is basicly marketing my property for me to his investors, saving me my own time and money in marketing.  Obviously, he deserves to be compensated for his services, and it would be disrespectful of me to attempt to go around him, and I would have no integrity.  Does that make me naive, to assume that people should work within their word, and should be valued for their services?  It is a fine line between being cautious and becoming jaded, I guess.

  • Real Estate Agent · Davenport, FL · Member since 2015 · 45 posts · 6 votes
    11y
    Originally posted by @Brent Coombs:

    @Nikki Harmon, I tend to agree with @Ken T. when he said "he obviously didn't get a good price for your home if he had to have 6 people come look at it", but not about the part where he said "so yay for you", that is, if you were accurate with us about giving him a sizeable discount because of your need(?) to sell quickly. It is looking like you were/are trying to have your cake and eat it too - quick sale, for next to no discount!? Maybe it's just that you and he have different definitions when it comes to "acceptable" discount, delay, profit margin, condition, number of follow-up conversations, blah blah...

     Maybe we do.  Maybe my pricing is wrong, as I'm inexperienced, but as an experienced professional looking for good deals for himself and his (now that I know he is offering it up to them, which I didn't before when we entered into the contract) investors, wouldn't he have been expected to do his research and make an offer than he could deliver on?  

  • Developer · Astoria, NY · Member since 2015 · 88 posts · 12 votes
    11y

    @Nikki Harmon "the point of his job is that he has quick access to investors that I may not. He is basicly marketing my property for me to his investors, saving me my own time and money in marketing. Obviously, he deserves to be compensated for his services, and it would be disrespectful of me to attempt to go around him"

    Great point! I wish everyone thought the way you did :)  it can be a struggle though! but i'd rather be upfront and lose a deal then lye and get no deal.  If only more people in this world thought like that. 

    @Brent Coombs I know my investors won't buy unless there is 55-80,000 profit to be made.   it may sound like a lot (and it is) but the average seller would go crazy if they knew there was almost 100,000 profit after the sale.

  • Investor · Philadelphia, PA · Member since 2010 · 739 posts · 372 votes
    11y

    He/she was just trying to get a contract on your house, mark it up, and flip to one of his investors without telling you.

    Were you being lied to?  Probably

    Were you being scammed?  No.  If you got what you wanted for your house, why do you care?

  • Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
    11y
    Originally posted by @Ken T.:

    I'm sorry this is not a problem in my book, the only problem i see is that he wasn't upfront about assigning it.  there is nothing illegal about what he did.  This however, is proof that any wholesaler must be upfront about what they do. PS he obviously didn't get a good price for your home if he had to have 6 people come look at it, so yay for you. 

     Except for the dishonesty and lying, everything he did was fine!  So what's your glitch?!?!?

  • Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
    11y
  • Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
    11y
    Originally posted by @Nikki Harmon:
    Originally posted by @Brent Coombs:

    @Nikki Harmon, I tend to agree with @Ken T. when he said "he obviously didn't get a good price for your home if he had to have 6 people come look at it", but not about the part where he said "so yay for you", that is, if you were accurate with us about giving him a sizeable discount because of your need(?) to sell quickly. It is looking like you were/are trying to have your cake and eat it too - quick sale, for next to no discount!? Maybe it's just that you and he have different definitions when it comes to "acceptable" discount, delay, profit margin, condition, number of follow-up conversations, blah blah...

     Maybe we do.  Maybe my pricing is wrong, as I'm inexperienced, but as an experienced professional looking for good deals for himself and his (now that I know he is offering it up to them, which I didn't before when we entered into the contract) investors, wouldn't he have been expected to do his research and make an offer than he could deliver on?  

     You're assuming he actually is an experienced professional, based on his online presence.   It is very likely that is faked.  Most wholesalers making sight-unseen offers, and with no real buyer lined up (hence the parade through your house) don't know anything at all about real estate. 

    You should list with a broker.  You can still get a quick sale if you price right, you will probably get enough more by listing it to cover the commission, and you will have an actual experienced professional protecting your interests.

    You don't want to do business with people claiming that there is nothing wrong with lying to sellers unless it is specifically against the law.

  • Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
    11y

     Everything Thedford wrote is entirely correct.  She should report this dirtbag to the FREC.  The likely result will be a cease-and-desist letter (if this was the first complaint against him.)  That C&D alone will be enough to prevent him from ever being licensed.  If the commission already had him on their radar, significant fines could result.  

    People involved in any industry have a responsibility to self-police, and keep the dirtbags from ruining it for the rest of us.

    That is why complaints are important, and why I have decided to file a formal complaint against any and every wholesaler who contacts me.  They will get a C&D, and then they will never get a license and pollute the legitimate industry.

  • Real Estate Agent · Davenport, FL · Member since 2015 · 45 posts · 6 votes
    11y
    Originally posted by @Chris Purcell:

    He/she was just trying to get a contract on your house, mark it up, and flip to one of his investors without telling you.

    Were you being lied to?  Probably

    Were you being scammed?  No.  If you got what you wanted for your house, why do you care?

     I didn't get anything for my house.  He could not deliver on the contract he signed, which was a guaranteed cash closing by 9/21.  If I hadn't have confronted him about what he was doing, he would have dragged it out even longer.

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