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

    @Nikki Harmon, you asked "If cash flow is strong, what kind of percentage of ARV should you limit yourself to? I imagine that in a case with really good cash flow, you might consider full ARV minus repairs? Is that completely off base"?

    Mind you, when you are SELLING your property, like now, there should be no reason for YOU to need to sell at that sort of discount. Hopefully, you can wait for that owner-occupier who likes you property and wants to update it to their taste, and will pay you FULL as-is value.

    @Mark Ferguson has the wise policy of not offering over 80% of current value (so, don't sell him yours). 

    ANY home buyer can pay retail, any day of the week (though I don't know where they would be finding lots of properties that consistently cash flow by paying the full retail price - with borrowed money). Remember what this site is called - and I'm fairly certain that paying retail for property will not get you applying for those bigger pockets any time soon. The mantra around here is "you will already be in profit from day one, by buying at the right price" (ie. well below CURRENT market value). Cheers...

    Brent, if she sells at full arv minus repairs that is not a discount. If ARV is 300k and the home needs 30k in repairs she is asking if some one would pay 270k. I am not saying everyone will want a 20 percent discount, but I think 99.9 percent of people will not pay 270k on a house that needs 30k in work to get to 300k value when they could just buy an already repaired 300k house and not worry about repairs. That's not a discount at all.

    For one an owner occupied buyer may not be able to get a loan depending on how severe the repairs are. The OP also wants a quick cash sale which an owner occupied buyer is unlikely to be able to do. 

    Second if a house needs 30k in repairs the buyers probabaly can't finance that and will have to come up with 30k in cash and possibly wait for repairs to be done before they move in or have them done while they live there. I've been an agent and investor for almost 15 years and almost all owner occupant buyers don't want houses they had to fix. The ones that want fixer uppers are savvy buyers who can do the work themselves and want to get a smoking deal. 

    About the only time the ARV minus repairs might fly is in a crazy sellers market where their are simply no homes for sale and that is the buyers only choice.

    House is not in serious disrepair.  It needs updated kitchen and bathroom, and new flooring, some other minor stuff like replaced baseboards, and of course paint (but I feel like that is always a given with any property).  AC is pretty new and in good working condition, and roof was completely replaced and updated 7 years ago.  We still have the original paperwork for that.  

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

    @Nikki Harmon  put the 20k into the home and then sell for full retail. my experince with teh buying public mirrors Mark's   when there is work to be done what a retail buyer and you will think about the costs of repairs is usually way different your thinking 20k they are@Mark Ferguson

    thinking 40k and will offer accordingly   the buyers buy and large are not versed in remodel and updating and usually don't have access to subs that most fix and flip folks do so their costs are far greater.. 

     While we have considering putting the work in ourselves, and have been doing the work little by little ourselves, there are financial and emotional reasons for simply selling and moving on.  Most importantly, my husband's union doesn't have work down here, but has work where we are moving.  We did have a family friend that was preapproved to buy our home, several months ago, but it was contingent on him selling his home.  At the time, with me being at the end of my pregnancy, it worked out nicely for us to wait.  However, he was unable to sell home in time, and we could no longer wait for the possibility, so needed to get the property on the market.  And that is where we are at today.

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

    @Nikki Harmon  Someone above said to put the $20,000 into the property yourself and sell for retail. I agree completely.  If you do not have the $20,000, but have equity, borrow the money against the home. I have done this before. I call this a "reverse flip"...it's when the home is flipped, with the owner still owning the home!

    Private money lenders like myself, love this kind of a deal, because the risk is so low.  If the home is owned free and clear and you need $20,000, the risk to me placing a $20,000 1st mortgage is very low.  I don't loan in your State, but I am sure there are many private money investors who would want that deal. :-)

     We have strongly considered it in the past, as we own the home free and clear, but we have emotional and financial reasons for moving on.  Most importantly, my husband's union does not have work down here, but has work where we are moving.  We can only afford to move if we sell the home.  

  • Real Estate Agent · Davenport, FL · Member since 2015 · 45 posts · 6 votes
    11y
    Originally posted by @Mark Ferguson:
    Originally posted by @John Thedford:
    Originally posted by @Mark Ferguson:
    Originally posted by @John Thedford:

    @Paige Clarketwo simple reasons: read the full thread. This person has victimized the homeowner. I have purchased properties from sellers AFTER they were victimized by fraudsters just like this. It is a felony in the State of Florida to operate in this manner. See chapter 475 Florida statutes. How would YOU feel if some fraudster pulled this on you? Would it be OK?

     I'm not really sure what damages were done. She had the house under contract for 7 days and it fell through. Same thing could have happened if it was listed. 

    Mark: I partly agree. If she had a LEGITIMATE buyer that had inspections...then chose not to move forward, that would be HONEST dealing. This jerk LIED AND MISLED the seller. Furthermore, they are without a doubt operating as an unlicensed broker. That is a felony in the  state. They had no intention of buying. At what point is lying and deceit OK? It isn't.  As a matter of fact, I purchased a house in 2012 from a seller who kept asking "how do we know we can trust you". I found out why the concern. Another fraudster had pulled the same thing on them as the OP. These frauds aren't reneging on buying a car off the lot, they aren't changing their mind about something they put on layaway at Sears, they are messing with peoples lives, probably the biggest investment they ever will own, and something that often has extreme emotional ties. Why is the practice of real estate so heavily regulated? To protect the public (but you know that)! 

     So you are saying what makes this illegal is the buyers intention of whether he was the end buyer or not? How in the world can you prove what someone's intentions were when they made the contract? Laws and legalities are not based on intentions, but acts. The severity of the punishment may be determined on intention, but not the legality of the act itself. That is what contracts are for. To show what both parties agreed to in writing. The contract had an assignment clause which tells me he had the legal right to assign the contract. Is it legal to have an assignment clause in florida?

     What about violation of good faith and fair dealing? 

  • Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    11y
    Originally posted by @Nikki Harmon:
    Originally posted by @Mark Ferguson:
    Originally posted by @John Thedford:

    @Mark FergusonFWIW...when I talked to the state a couple weeks back they gave an opinion. It was a verbal opinion..so I can only state what I was told. Their opinion was: people that tie up houses with contracts and then attempt to MARKET THE HOUSE are brokering. Marketing the contract is not a licensed activity. Marketing a property, for another, is!  That is the best I can explain it.

     So what is marketing? Most of the good wholesalers send an email out to their list that is not public. If someone is advertising a house they have under contract as for sale with an address and price on Craigslist or somewhere public I would agree with you. 

     He had a link to his list with my property WITH MY ADDRESS PUBLICLY AVAILABLE on his company facebook. That us how I got a hold of it the first time. 

    Also, is there any determining factors in getting on an email list?  I signed up through his website, and had it in my inbox with 24 hours.  This is also how I've gotten a few other lists, no vetting process.   

    It appears to have a clear case of brokering if he had your house advertised. This is my opinion ...I am sure others may disagree. This is a perfect case to take to the regulators and let them sort it out. If I was a gambler, provided you have everything documented, etc I would wager a finding of brokering without a license. Fines? Penalties? Remedies? I have no idea as to their stance on this.

  • Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
    11y

    @Paige Clarke

    You stated there was no damage done. I agree, financially nothing really happened but there were risks that @Nikki Harmon did not knowingly sign up for. This should not be lost on people.

    When you sign up with a Real Estate Agent you KNOW that they will be marketing your property. You KNOW that your property will be put out online and you know that they will be working with other brokerages and that everyone out there knows your home is for sale and your address is being publicly advertised. You know that your agent and other agents are sending your home to their buyers.

    Sometimes for whatever reason people opt to sell directly to "cash buyers" to avoid all of this. I believe I read that Nikki's father was an agent. If she wanted to sign up to have her home advertised publicly she would have. This is just one of many reasons that guys like this are a joke and I am glad to see more people jumping on wholesales or as I consider them Illegal brokers.

    To often there is a pro wholesaling mentality around here and there should not be. People need to get an education and realize why we have a real estate industry.

  • Investor · Peachtree Corners, GA · Member since 2014 · 1k+ posts · 1k+ votes
    11y
    Originally posted by @Chris Field:

    I don't see the problem, he told you he would close the property lets see if he does.

    At the end of the day you signed a contract, go by what it says. If you don't like a contract don't sign.

     You think it is okay to lie repeatedly to the people with whom you are doing business? Really?

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

    @James Wise  the other issue is this person is sending over people to go through the house ,, many who he probably only knows on line.. who knows what type of people they could be... the OP thinks they are business partners and serious when in fact they could be who knows who and have who knows what motives.. craig's list weirdo's

  • Real Estate Investor · St. Louis, MO · Member since 2015 · 12 posts · 5 votes
    11y

    @Nikki Harmon

    Wow! What a thread. My general attitude is if someone has to misrepresent who they are and/or what they are doing then they probably are not on the up and up regardless of whether the behavior is "standard" in the industry.

    I would NOT be happy to find out people represented as "partners" and given access to my home and family were simply random people from the internet. 

    Thank you for posting about this situation. It's a cautionary tale for various reasons.

  • Developer · Astoria, NY · Member since 2015 · 88 posts · 12 votes
    11y
    Originally posted by @Nikki Harmon:
    Originally posted by @Paige Clarke:

    @Mark Ferguson @John Thedford

    I agree with Mark in the sense that I don't see the damage? I also feel like the "victimization" aspect to this is not entirely true. There was no hostile, non-permissible, negligent environment under which the contract was formed. 

    I suppose some could argue the fraudulent aspect- but not strongly enough- clearly as wholesaling is a very live and well profession. 

    Thanks for the response though

     He entered into a contract under good faith that he was a cash buyer intending to close on my property himself.  He never actually intended to close.  He paraded strangers through my property, including a phony inspector.  In our first conversation, I had told him I had several other appointments with other interested parties coming to see my house, the following week.  I canceled those appts based on having an offer, from someone who represented themselves as a cash buyer intent on closing on my property.  And while I understand there is an inspection period for him to find my property unacceptable, he never inspected my property.  He told me he couldn't find a buyer, so he couldn't close, once I confronted him about wholesaling my property.  My understanding is that you enter into a contract in good faith, meaning you intend to do what you are stating, which is close.  Sometimes things happen and the contract falls through, and that is not fraudulent.  However, misrepresenting yourself and having no intention of following the contract is definitely a violation of a good faith agreement. 

    I spoke with another wholesaler, and he was perfectly honest about his intentions, and what he would need/want from me.  While l can definitely understand the debate of legality, since he would be marketing my property and brokering a sale unlicensed, his honesty about what his intentions were speaks volumes. 

    Of course he intended to close, that's how he makes money, just with someone else's name.

  • Developer · Astoria, NY · Member since 2015 · 88 posts · 12 votes
    11y
    Originally posted by @John Thedford:

    @Mark Fergusoncome on man! You are a broker. You know what activities are considered brokering! If not, they are in the statutes.

    We have an MLS...multiple listing service. Why don't "wholesalers" have a WMLS--wholesalers multiple listing service? BECAUSE representing others in real estate transactions, for a fee, is a licensed activity.

    I feel like I am taking a test:) a state licensing exam!

     let me ask you, are they representing others if they double close? I know this isn't what happened but the end goal is the same exact thing.  They wholesaler still would have backed out of the deal if they did not find an end buyer so according to most its "morally" still wrong but 100 percent legal.

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

    @Ken T.  I posted about my client in MS... who got into big trouble then ended up in Jail.. the issue was the fist cease and desist he got was at the time he advertised the homes for sale on his website .. the state looked at the title and deduced he did not own them at the time he was advertising them for sale on his turn key website.

    buyer from CA had a bad turn key experience which opened up pandora's box  IE she made a written complaint.. this led to investigation and this operator was fined and issued a cease and desist... It was at that time I created a transactional funding facility for him so that he actually owned the properties ( IE was owner of record prior to marketing them) that went on for a few years until we had a parting of the ways... he then went back to his old habits this time he got caught again and he was thrown in jail LOL... ugh... it was not pretty. 

    its the act of marketing a property that you do not own that is the relevant action that is what we refer to as brokering without a license. 

    so then the reality of most wholesalers is they must market.. they advertise they send out e mail solicitations to a buyers list this is marketing... 

    If your really interested in if its a accepted practice in your state you should simply write down how you do business in detail and send it into the Real estate commission ( or whatever moniker they run under in your state) and ask for a opinion letter... once you have that then you will know if your right or wrong in your process's.... No one other than those agencies can tell you if its legal or accepted practice in your state... however I am pretty certain that in all 50 states.. Unless there is a state that has no real estate commission and licenses are not required at all... any actvity of offer properties for sale is brokering without a license.  the exemption from what we see in the states that are cracking down is you can offer a contract.. but it cannot describe the home send pictures of the home beds baths etc etc.. you can only say you have this contract for sale.

    so for those who thing they need to get started as wholesalers this is a pretty restrictive covenant and probably keeps them from getting any traction.

    although from my experience with receiving yellow letters and other marketing for my properties the amount of follow up is pathetic and the people I talk to clueless by and large.. IE they have no experience... so I suspect out of everyone who gives this a shot you have a success rate of anyone being a wholesaler for more than say 24 months is probably 10% of those that try it.  and its those 90% of wanna bee's who really are not equipped financially or with a level of understanding RE that create all this bad business and have the regulators now targeting that quasi business practice.  I know for certain is a wholesaler bungled me up I know what i would do.  Although as a seller probably not going to happen to me as I can usually smoke them out in a short amount of time.. I simply ask for a copy of a checking or savings account in their name with the purchase price of the property in that account if they can provide that we can move forward.

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

    @Ken T., you have tried very hard throughout this thread to defend Wholesaling, but then you said: "The wholesaler still would have backed out of the deal if they did not find an end buyer so according to most its "morally" still wrong but 100 percent legal". Do you REALLY defend wholesalers who renege?

    You also posited: "let me ask you, are they representing others if they double close"? But why ask that? Sellers couldn't care less whether there is a single or double close. But no sort of closing happened here! THAT is what is INDEFENSIBLE! Do you get it?...

  • Wholesaler · Salt Lake City, UT · Member since 2009 · 1k+ posts · 401 votes
    11y

    The guy learned to play the I am a cash buyer game but hasn't learned that the game has rules too. I would tell him he has 24 hours to cancel the contract in writing or you are going to file a complaint with the district attorneys office for fraud and them file a lawsuit for fraud by misrepresentation. He said he was a cash buyer, not he was going to find a cash buyer and assign it, and where I come from that meets the misrepresentation guide lines. I am a cash buyer means just that, he is not, nor able to be a cash buyer unless he can obtain the cash and have it under his person control in a timely manner, the asignnee is the cash buyer not him, and I doubt any judge would rule in his favor, his statement was intentional and misleading.

    , I have tried to retire since the first of the year but recently one of these wholesale jerks showed up and the seller, who met me during a hospital stay, gave me a call asking if I could just sit in and listen to what an investor who was going to make an offer on his home is offering and to give him my opinion. The investor, really a wholesaler, shows up and I am introduced as a friend that stopped by. This guy couldn't give a straight answer if his life depended on it. I stayed silent until he said he was a cash buyer and so the deal wouldn't be delayed or killed by some banker. So I said, so you personally have all the cash at the present time? He said yes.  Me, that's great, where is it right now? He said what do you mean? I said where is it now, right at this moment, under your mattress, in a bank account, if you have it it has to be somewhere, where is that somewhere. His answer, it will be there when we need it. 

    Well I said it seems to be that your really a wholesaler planning to assign the contract to a real cash buyer is that right? He said no, I have a partner who has the cash. I said great, then you are both going to be on title together, right?  Yes he said. I the turned to my friend and said you guys can come up with a price but don't sign a contract until his partner is here to sign it too and all of you have agreed to the proper terms and conditions that should be in this type of contract to protect all of you. Wholesaler quickly says I'm not interested in this property any more, I'm going to pass on it.

    My friends wife later said now we have lost the buyer. No I said the real buyer is the guy he was going to assign the deal to, we will just find him.  They wanted a very fast sale for very personal reasons, and they came over to my place the next day, and a day on the phones resulted in a cash buyer at a fair price. Closed in 3 days. We placed a sold sign on the property just in case the wolf drove by just to bug him, if he had learned to be honest and fair and ethical in his dealings, that property would have been another good, and quick deal for him. Money in the bank. But the sellers were able to leave the money with more money by not doing business with the "pickpocket".

    In one area that I did a lot of wholesaling in during the late seventies, and early eighties, the wholesalers had sort of a MLS, and greedy, or unethical guys were given the label "pickpockets" and not allowed to play with us. Investors soon learned if they did business with the pickpockets, the calls from the "MLS" seemed to dry up and they had to find their own deals, and they wanted to spend their time doing deals not finding them. The pickpocket had to learn how to do the deals themselves, or change his marketing location.

  • Wholesaler · Chicago, IL · Member since 2015 · 245 posts · 102 votes
    11y

    Its not the wholesaling business its the people. 

    Curt Davis explained it to me like this:

    "I find that guys wholesaling get nervous because what happens if you cant sell but you told the seller you are the buyer. Rather then have to pretend I am the buyer you might approach it like this:

    Seller, I work with a large network of cash buyers located both locally and also from around the country. I would like the opportunity to present it to them for the next 30 days and see if I cant bring a cash buyer. If at the end of the 30 days I have not been able to secure a cash buyer, we can either part ways as friends or we can discuss lowering the price and I can put it back out to my list again

    This approach takes the pressure away of making them think your the buyer and also takes out any weasel clauses like " subject to 3rd party or partner inspection " in the event it doesn't sell."

    I hope this helps.

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y
    Originally posted by @Trevon Peracca:

    Its not the wholesaling business its the people. 

    Curt Davis explained it to me like this:

    "I find that guys wholesaling get nervous because what happens if you cant sell but you told the seller you are the buyer. Rather then have to pretend I am the buyer you might approach it like this:

    Seller, I work with a large network of cash buyers located both locally and also from around the country. I would like the opportunity to present it to them for the next 30 days and see if I cant bring a cash buyer. If at the end of the 30 days I have not been able to secure a cash buyer, we can either part ways as friends or we can discuss lowering the price and I can put it back out to my list again

    This approach takes the pressure away of making them think your the buyer and also takes out any weasel clauses like " subject to 3rd party or partner inspection " in the event it doesn't sell."

    I hope this helps.

     Well Trevon,  

    Curts advice, frankly is kind of weird coming from a licensed RE broker.. is instructing you to sell real estate without a license.. You are advertising a property to the public with the expectation of compensation and you have no license to do that.. this is a lot of what this thread is about.. and the way some wholesalers are butchering these deals people are going to start to get up set and start filing complaints which they have been doing in some states.. the regulators then say hey we have a predatory problem and they concentrate on finding and shutting down this illegal activity.. I am again surprised Curt would give this advice.. Its a fine statement to deliver to the  seller very soft sell and such.. But that is the speech a licensed broker gives a client to take a listing and sell the property. 

  • Real Estate Agent · Orlando, FL · Member since 2013 · 270 posts · 40 votes
    11y

    Doesn't it fall under the guideline of "equitable interest" When you have a good faith deposit with the property? So technically you have some moniker of ownership within an inspection period.

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

    @Ceasar Blackman  you can have an equitable interest in a contract and assign said contract.. but you cannot do what 99% of wholesalers do and that is advertise the property like a RE broker would IE pictures of the property  descriptions ext. 

    its a very narrow tunnel that is allowable to assign a contract which most wholesalers since they are usually trying to start in the business frankly don't have the contacts so they resort to craigs list and other mass media to basically market the property and not the contract.

  • Dana WhickerPro Member
    Investor · Fernandina Beach, FL · Member since 2014 · 557 posts · 374 votes
    11y

    Imagine the CL ad "Signed Purchase Agreement For Sale".  

    "I have in my possession a contract to purchase this awesome property.  It's such an awesome deal that instead of buying the property myself, I put the contract up for sale to see if someone would pay me to assign the property to them.  I have $100 EM deposit on this property so you can't just run around and get contracts like this on your own.  You have to come to someone like me!"

    I'm OK with that being legal.  I think most people would be. 

  • Chris ClothierBusiness Member
    Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
    11y
    Originally posted by @Jay Hinrichs:

    @Ceasar Blackman  you can have an equitable interest in a contract and assign said contract.. but you cannot do what 99% of wholesalers do and that is advertise the property like a RE broker would IE pictures of the property  descriptions ext. 

    its a very narrow tunnel that is allowable to assign a contract which most wholesalers since they are usually trying to start in the business frankly don't have the contacts so they resort to craigs list and other mass media to basically market the property and not the contract.

     That is a GREAT distinction and should be read by everyone in this thread.  There is a line that cannot be crossed when wholesaling a deal.  The line starts being crossed when the marketing takes place on a huge public forum and no longer includes the contract itself and moves to actually marketing the property as if you already own it. 

    When I first got started in Colorado, One of the very first deals I had a chance to complete - I had a real estate agent call me and threaten to sue me (not sure he could have, but he could have reported me to the Colorado real estate commission) if I did not remove my advertisement for sale of a property I had under contract, but he was the listing agent of record. My deal had not closed yet and I was buying it from another wholesaler. I had a valid contract and I explained to him that I had equitable interest in the property. He explained I had a contract and not the property itself. He did not care what I did with the property or even trying to sell the contract, just do not mass market it as a property I had for sale while his listing was still active in the MLS until we closed.

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

    @Chris Clothier  I think with the advent of all of the guru's and sites like BP  were everyone talks about the best way to get started in RE is to wholesale.

    you have thousands of folks doing it and of course some with very poor results and complaints being filed.. and Agents getting upset etc etc. 

    will be interesting to see how this all unfolds over the coming years.

    It sure would be much easier if us in the business of value add could just tie up the property tell the seller we will close once we do a full rehab and have our end buyer in place. thereby avoiding holding costs  :)  and driving up profits  !!!

  • Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
    11y
    Originally posted by @Trevon Peracca:

    Its not the wholesaling business its the people. 

    Curt Davis explained it to me like this:

    "I find that guys wholesaling get nervous because what happens if you cant sell but you told the seller you are the buyer. Rather then have to pretend I am the buyer you might approach it like this:

    Seller, I work with a large network of cash buyers located both locally and also from around the country. I would like the opportunity to present it to them for the next 30 days and see if I cant bring a cash buyer. If at the end of the 30 days I have not been able to secure a cash buyer, we can either part ways as friends or we can discuss lowering the price and I can put it back out to my list again

    This approach takes the pressure away of making them think your the buyer and also takes out any weasel clauses like " subject to 3rd party or partner inspection " in the event it doesn't sell."

    I hope this helps.

     That is brokering real estate. One needs a license to broker real estate. It is very simple.

  • Real Estate Redeveloper · Reno, NV · Member since 2015 · 209 posts · 65 votes
    11y

    I have learned quite a bit about wholesaling and how to work with wholesalers from this thread.

  • Woodland Hills, CA · Member since 2014 · 43 posts · 1 vote
    11y

    I have a question.  Can a licensed real estate agent wholesale contracts or deals without a real estate broker?  I am getting kind of confused now

  • Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
    11y
    Originally posted by @Brenda A.:

    I have a question.  Can a licensed real estate agent wholesale contracts or deals without a real estate broker?  I am getting kind of confused now

     Agent's don't technically earn fees or commissions. Brokers do and then they pay the agents a cut of the fee or commission. So an agent would not be able to earn fees or commissions independent of their broker.

    The very best thing for any agent to do in a situation where they want to earn a fee or commission is to list it with the commission structure completely spelled out for the seller.

    "I "Agent" will sell your property for X and you "seller" will pay me 6%"

    I would caution real estate agent's who want to wholesale. Essentially what an agent is doing would be a Net listing. Net listings are frowned upon by most real estate commissions.

    Net listings are frowned upon because it is a slippery slope that could lead to an agent misrepresenting the value of a property to their seller in order to earn a large amount of money as their fee or commission.

    Say an agent knows a home is worth 100k but the seller is not aware of this.  The agent tells the seller "hey I can get you 70k and I will keep the rest as my commission" This is the same thing as an agent signing a contract to buy a house for 70k knowing they can "flip" the paper for 100k as opposed to telling the seller to list it for 100k with the agent taking a commission of 6 or 7% or whatever % is typical for the area.

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