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.
Flipper/Rehabber · Woodland Hills, CA · Member since 2019 · 10 posts · 4 votes
7y
@Moses Brach I’m sorry to hear that I am a wholesaler and that is not how I run business. The first thing I do is make sure they clear title and all information provided to me by seller is accurate. I am sure that the contract is invalid some how unless he has some sort of clause
Rental Property Investor · Atlanta, GA · Member since 2017 · 221 posts · 188 votes
7y
@Moses Brach Did you pay a non-refundable earnest money deposit or assignment fee? Either way, if seller doesnt have rights to sell then theres no deal.
I wouldn't let 5k go just like that. Did you actually pay the money??
Where are things now? What happened after you realized seller has no rights? If you don't get your money back, i would go legal for sure. Something doesn't add up here
Rental Property Investor · Charleston - North Charleston, SC · Member since 2018 · 28 posts · 4 votes
7y
@Chuks Erinne - The fee was paid on the same day the contract was signed. From what I understand, the seller bought this home from another party through seller financing a while back and never executed any documents that proved that the sale actually happened, at least not as far as county and city records are concerned.
From what I‘ve heard, the seller is actually a standup guy, but the whIolesaler Is a liar and a theif. He actually kept on asking me to wire him another $9K before we close the deal because otherwise, he will sell It to someone else.
Realtor · Charleston, SC · Member since 2018 · 84 posts · 51 votes
7y
Wholesalers are dbags who want to take shortcuts and skip out on getting licensed. In my opinion, they are all sketchy for the most part and I won't even speak to one who's bringing me a "deal of a lifetime".
Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
7y
Why would you want to deal with people that skirt laws? Most of them are operating illegally. Here is what I warn people about before they deal with these types:
BEFORE you deal with any unlicensed broker consider these ideas:
1. Always require WRITTEN comps that can be substantiated
2. Always require WRITTEN bids from LICENSED contractors
3, Always require WRITTEN comps to substantiate ARV
4. NEVER pay a non-refundable fee
5. Always correspond via email so there is written record to bring suit in the event of misrepresentation.
Remember, these are middlemen trying to play RE agent without a license. Make sure they provide GOOD comps. Make sure if they are representing an ARV value make them provide ARV comps. If they make claims about rehab costs, make them provide WRITTEN bids from contractors. They are brokering real estate so make them PROVIDE good quality information like you could get from a licensed broker. Many of these unlicensed brokers simply make up figures that sound good but cannot back them up.
Unlicensed brokers generally have no insurance. From personal experience most just pull their ARV out of thin air. Lets see: claim it costs x and it will sell for y. If someone uses an agent, an agent won't provide or should NOT provide the BS an unlicensed broker does. They should not or do not provide rehab figures (to protect themselves). They should tell a prospective buyer to get their own bids. They can provide comps in some situations on an updated unit vs an original unit. Agents have something to lose, can be fined, and have their license suspended or revoked. Unlicensed brokers, acting as fringe operators skirting the laws have nothing to lose. They are acting as an agent without the laws, ethics requirements, education, and insurance that are vital IMO.
Under FL law people using contracts to circumvent licensing are breaking the law. It is a 3rd degree felony to broker RE without a license. Those using contracts are BROKERING. Here is the statute: 475.43 Presumptions.—In all criminal cases, contempt cases, and other cases filed pursuant to this chapter, if a party has sold, leased, or let real estate, the title to which was not in the party when it was offered for sale, lease, or letting, or such party has maintained an office bearing signs that real estate is for sale, lease, or rental thereat, or has advertised real estate for sale, lease, or rental, generally, or describing property, the title to which was not in such party at the time, it shall be a presumption that such party was acting or attempting to act as a real estate broker, and the burden of proof shall be upon him or her to show that he or she was not acting or attempting to act as a broker or sales associate. All contracts, options, or other devices not based upon a substantial consideration, or that are otherwise employed to permit an unlicensed person to sell, lease, or let real estate, the beneficial title to which has not, in good faith, passed to such party for a substantial consideration, are hereby declared void and ineffective in all cases, suits, or proceedings had or taken under this chapter; however, this section shall not apply to irrevocable gifts, to unconditional contracts to purchase, or to options based upon a substantial consideration actually paid and not subject to any agreements to return or right of return reserved.
Real Estate Investor · Saint Paul, MN · Member since 2017 · 543 posts · 474 votes
7y
@Moses Brach As mentioned by another poster, tell him you must have a cashiers check in hand within 24 hours or your next call will be to the attorneys general office. And regardless of what happens, that call should be made any way. I have found that people trying to bend the rules or commit fraud really do not like to hear from the state. And believe me, attorneys general really like this sort of thing. It is why they are in office. Might also consider a local news outlet - makes for a good story.