New Houston Wholesaler contract question

6 Replies | Houston, Texas

As a wholesaler with a signed TREC contract with the seller of a property, what prevents the potential buyer from going directly to the seller and offering a lower cash price? Does the TREC contract contain language that prevents the seller from talking to anyone else concerning the sale of the property for a specific time period? Thanks in advance!

Any contract is legally binding to the parties expressed on the contract itself. If you are referring to the 1-4 SF contract, there is space allotted for agents which would also be legally binding. 

The Listing Agreement has a protection period though. If an agent was the procuring cause of the transaction and so stated on an agreement he should have some protection. Good luck if they want to cut you out though.

So really the answer is, did you get your name on anything?

Does it prevent them from “talking” to a potential buyer?....No
Does it prevent them from selling to this person once your contract expires?....No

Maybe you should read your contract to answer these questions?

@Leslie Gaines

Not really. They can go around you and sell it someone else too. That's why many wholesaler file the Letter of Intent or memorandum in county to seal it. If you do it, when they sell it and title will not get clean title and they cannot proceed forward. But be careful it. 

Appreciate the response from everyone.

My question was hypothetical. I am a newbie to wholesaling, unlicensed and in the fact finding stage. I am curious to what stops a potential buyer from circumventing the process of a wholesaler and once he discovers the property address, he then approaches the seller to buy direct from them instead of an assignment deal with the wholesaler? Just wondering how often this happens to wholesalers?

The best thing to do is what Vijaianand Thirunageswaram said in his comment.  Get it under contract, have the seller sign the memorandum of contract (that might not be the official document title, can't remember), take that down to the courthouse and file it then follow through with all the provisions of the contract on your side.  The TREC definitely has some provisions that prevent the seller from opting out without penalty and I know it has language in it that would allow a lawsuit for specific performance.  

It is a relationship business and if you have a good relationship with the seller, most won't take calls from anyone else.  Same goes for buyers.  Surely some day someone will do you wrong but buyers who do that won't last long because their reputation will precede them.  

I agree with @Bill Spell . As a buyer who works with a few wholesalers my relationship is worth way more. I would never think of going around them. You want to be the person they call first with a hot deal. Save a few thousand bucks to burn a bridge? thanks! Too bad we need contracts to protect us from people with little business sense and lack of integrity.