Rental Property Investor · Charleston - North Charleston, SC · Member since 2018 · 28 posts · 4 votes
I need advice on my recent trouble I’m having with a wholesaler.
As I am new to REI, I moved quickly on what seemed to be a good deal in Ladson, SC, that was being marketed by a wholesaler who, over the phone, seemed like a great guy. It turns out that he’s anything but that.
As it turns out, the seller of the home never actually held a title to this home, which basically means that this wholesaler has no house to sell. It seems like he was aware of it, but of course did not disclose any of that, because why be honest, right?
On the assignment contract that I signed, which I sadly did not fully understand that ramifications of, I committed to a $5K non-refundable assignment fee. My first thought was that I can just kiss it good bye, but then I started thinking about the fact the he had nothing to sell, and it’s potentially just fraud.
I’m wondering if I would just loose way more money assuming fees, my time, etc, if I have to start going through the judicial process.
Any advice from the community would be highly appreciated!!
Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
7y
It sounds like you just “committed” to pay the fee, but didn’t actually pay it. If so, sounds like you dodged a bullet.
Just make sure when dealing with wholesalers that you never pay any money directly to them (or the seller for that matter). All money gets held in escrow until closing.
Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
7y
It sounds like you just “committed” to pay the fee, but didn’t actually pay it. If so, sounds like you dodged a bullet.
Just make sure when dealing with wholesalers that you never pay any money directly to them (or the seller for that matter). All money gets held in escrow until closing.
It sounds like you just “committed” to pay the fee, but didn’t actually pay it. If so, sounds like you dodged a bullet.
Just make sure when dealing with wholesalers that you never pay any money directly to them (or the seller for that matter). All money gets held in escrow until closing.
as the market mellos out a little bit I think buyers should get cognizant that they dont have to play by the wholesaler play book of sending these monies to people not really knowing who they are.. no title report in hand.. etc etc. I understand that things got crazy and the wholesalers could get away with this.. but boy I would back any of them off if it was me.. Its just not the proper way to transact real estate. proper is EM to escrow REAL inspections.. subject to marketable title ( which this one does not have if Moses info is correct) then close. Just like we dont give mortgage brokers 5k up front before we get the loan.. although there are plenty of Faux lenders out there ripping people off.. LOL
Don’t sign things you don’t understand -no matter how good the deal sounds. Trust me it’s not the last great deal.
As others said if you paid the $5k it’s not worth chasing. If you didn’t pay it-Don’t!
In the future all money gets settled at closing unless you have a really good reason not to do it that way.
I chalked those mistakes up to tuition. However it is good to learn from your mistakes but better, cheaper, and more fun to learn from others mistakes. That is the beauty of the BP forums- thank you for helping others learn. Good luck on your next deal.
China, ME · Member since 2014 · 3k+ posts · 4k+ votes
7y
@Moses Brach I'd look into SC real estate law. Here in MA, that kind of wholesaling without a real estate license is illegal. If that's the case in SC, you can tell him that contracts formed for an illegal purpose are void at their inception.
Real Estate Investor · FL · Member since 2011 · 586 posts · 360 votes
7y
I'd be curious to see the assignment agreement, but the $5k should be non-refundable only if you fail to close, not the other way around. I personally wouldn't just let $5k go because the wholesaler screwed up, at the very least you should do everything possible to ruin his reputation and protect future victims. He might've already spent the $5k but once you start threatening lawsuits, filing police reports, going to the state RE board, I think he'll find a way to refund you.
Specialist · Little Rock, AR · Member since 2015 · 95 posts · 149 votes
7y
@Kyle J. and @Jay Hinrichs both have it right. Never pay a seller or a wholesaler directly. Send it to escrow.
Also, you should be looking at the underlying contract to know what you are supposedly buying. As I stated before, the actual contract may have something screwy in it like mowing the sellers yard for then next 12 months. If you are buying a contract, read the contract you are buying before signing.
***Words of wisdom for newer investors.*** IMO you should be paying most of your attention to seasoned investor here. We have seen the ups and down of markets and have lots of good and bad experiences you can learn from. Newer investors may have some great ideas to ponder, but experience is PRICELESS, as the commercial says on TV. And I am not saying newer investors are not right oftentimes and some of us that are longer in the tooth might sometimes be wrong too. At the end of the day we are all offering opinions, remember that too.
Realtor · Sandy, UT · Member since 2015 · 14 posts · 2 votes
7y
@Moses Brach Have you asked him for the money back as the contract wouldn’t be valid? If he won’t refund the money, I would ask for a cashiers check, I would take him to small claims where you can sue for the $5,000 for a small filing fee. If you tell him your suing him, maybe he’ll rerun your money, but I wouldn’t hold your breath. Go after him, don’t let get away with it.
@Kyle J. and @Jay Hinrichs both have it right. Never pay a seller or a wholesaler directly. Send it to escrow.
Also, you should be looking at the underlying contract to know what you are supposedly buying. As I stated before, the actual contract may have something screwy in it like mowing the sellers yard for then next 12 months. If you are buying a contract, read the contract you are buying before signing.
***Words of wisdom for newer investors.*** IMO you should be paying most of your attention to seasoned investor here. We have seen the ups and down of markets and have lots of good and bad experiences you can learn from. Newer investors may have some great ideas to ponder, but experience is PRICELESS, as the commercial says on TV. And I am not saying newer investors are not right oftentimes and some of us that are longer in the tooth might sometimes be wrong too. At the end of the day we are all offering opinions, remember that too.
When EF Hutton speaks they should listen ( now lets see how many remember that gem).
I wonder if the wholesalers show the contract before they get the 5k or do these folks have to send in the 5k then they get a peak at the contract.. ???
Orlando, FL · Member since 2018 · 27 posts · 10 votes
7y
@Moses Brach I’m not sure the laws in your state, but in Florida this is felony fraud.. by a criminal or ignorant “wholesaler.” Id go by your police department and file a report. It will take months to possibly get resolution, but restitution a year from now is better than nothing.
Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes
7y
I would reach out to the local authority having jurisdiction. For future reference the term "wholesaler" 99.9% of the time means they are assigning a contract to you. You are taking their place as the end buyer. Was the deal a good deal even with them not being the owner? If it is I would close and make my money.
1. He knew the seller didn't have rights to sell the property.
2. He found out through the process trying to close the seller had no rights to the property.
In either situation, the contract is invalidated by the fact you can't assign a contract to purchase something if the owner is not involved. The difference is if he was aware, then it is fraud and he can be criminally prosecuted.
I would file a criminal complaint, so it can be investigated. If he tried to pursue you in court for the money, having proactively gone after him criminally would only help your case. It will also distract him from civil proceedings, because his time and money will be spent on criminal defense.
Don't get hung up too much on what the contract says. Contracts are regularly invalidated by the court when they contain illegal provisions. I always love it when a wholesaler or even landlord says, but my contact says.. That assumes the contract is legal and enforceable.
Rental Property Investor · Charleston - North Charleston, SC · Member since 2018 · 28 posts · 4 votes
7y
@Jay Hinrichs I actually did already pay the $5K. I am at least going to try to recover it, but I will limit the amount of effort as I do have other things going on.
Rental Property Investor · Charleston - North Charleston, SC · Member since 2018 · 28 posts · 4 votes
7y
@Kyle J. Thank you for the tip, too bad that I learned the hard way, but I will echo what @Carl Fischer said: Real life experiences, to me, qualifies as schooling and its financial losses as tuition.
Rental Property Investor · Charleston - North Charleston, SC · Member since 2018 · 28 posts · 4 votes
7y
@Charlie MacPherson - Thank you Charlie. I will look into that. I am pretty sure that the contract in his possession was invalid as the supposed seller to did not hold title to the property.
Rental Property Investor · Charleston - North Charleston, SC · Member since 2018 · 28 posts · 4 votes
7y
@Braden C. The agreement simply says "nonrefundable" with no other conditions. I have reached out to him to give him a chance to return the money, but if he does not, I will take the appropriate action, at least to protect others.
@Jay Hinrichs I actually did already pay the $5K. I am at least going to try to recover it, but I will limit the amount of effort as I do have other things going on.
I would go to the police department in that city were he is at.. that's just grand theft.
1. He knew the seller didn't have rights to sell the property.
2. He found out through the process trying to close the seller had no rights to the property.
In either situation, the contract is invalidated by the fact you can't assign a contract to purchase something if the owner is not involved. The difference is if he was aware, then it is fraud and he can be criminally prosecuted.
I would file a criminal complaint, so it can be investigated. If he tried to pursue you in court for the money, having proactively gone after him criminally would only help your case. It will also distract him from civil proceedings, because his time and money will be spent on criminal defense.
Don't get hung up too much on what the contract says. Contracts are regularly invalidated by the court when they contain illegal provisions. I always love it when a wholesaler or even landlord says, but my contact says.. That assumes the contract is legal and enforceable.
Joe, what you are saying makes a lot of sense. I have given him until the 12th to return the money. If I don't get it by then I will at least threaten him with criminal charges, and if he doesn't want to avoid that, I will actually pursue it.
@Jay Hinrichs I actually did already pay the $5K. I am at least going to try to recover it, but I will limit the amount of effort as I do have other things going on.
I would go to the police department in that city were he is at.. that's just grand theft.
@Jay Hinrichs I actually did already pay the $5K. I am at least going to try to recover it, but I will limit the amount of effort as I do have other things going on.
I would go to the police department in that city were he is at.. that's just grand theft.
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
7y
@Moses Brach I would not wait until the 12th and I would not threaten him. A crook like this will either hide the money or disappear if you give him time. Contact the police today and talk to a fraud detective. File a lawsuit immediately for the $5000 and get him served before he disappears. I know you are trying to be nice and give him time, but trust me that is a mistake.
If he gives you the money back, you can always call off the cops or cancel the lawsuit.