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Contract says that I am the buyer

Doug Eric Gueirn
Posted Apr 4 2023, 21:22

Can someone clear up for me where when I fill out these contracts, where it says "Buyer" I have to put in my LLC and name. I get nervous about this because I don't want to be sued for not having the money to buy the property. Also what makes me nervous is the fact that I don't tell them that I am not the buyer of their property but have to say that I have "Partners" when I really don't.

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Steve K.#3 Multi-Family and Apartment Investing Contributor
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Steve K.#3 Multi-Family and Apartment Investing Contributor
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Replied Apr 4 2023, 22:05

Yeah, definitely don't sign a contract saying you have the intent and ability to buy a property if you have neither because that would be inducing the seller to enter into an agreement under false pretenses/ "fraud in the inducement" (misleading the other party as to the facts upon which he/she will base his/her decision).  The contract could be voidable and you could even be held liable for any damages the seller incurs due to you tying up their property by lying to them. So don't lie. Also don't get legal advice from BP or any wholesaling "gurus". Talk to an attorney.  

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Doug Eric Gueirn
Replied Apr 5 2023, 01:53
Quote from @Steve K.:

Yeah, definitely don't sign a contract saying you have the intent and ability to buy a property if you have neither because that would be inducing the seller to enter into an agreement under false pretenses/ "fraud in the inducement" (misleading the other party as to the facts upon which he/she will base his/her decision).  The contract could be voidable and you could even be held liable for any damages the seller incurs due to you tying up their property by lying to them. So don't lie. Also don't get legal advice from BP or any wholesaling "gurus". Talk to an attorney. 

That makes sense. What are the wholsalers using as contracts to make these deals? What clause states that "I" am the entity securing the contract and having the right to sell or assaign the contract to the person who intends to buy the property?

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Eliott Elias#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
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Eliott Elias#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
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Replied Apr 5 2023, 03:37

Have an option period in your contract. You can back out for any reason during this timeline. I suggest JV'ing your first deal.

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Steve K.#3 Multi-Family and Apartment Investing Contributor
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Steve K.#3 Multi-Family and Apartment Investing Contributor
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Replied Apr 5 2023, 09:47
Quote from @Doug Eric Gueirn:
Quote from @Steve K.:

Yeah, definitely don't sign a contract saying you have the intent and ability to buy a property if you have neither because that would be inducing the seller to enter into an agreement under false pretenses/ "fraud in the inducement" (misleading the other party as to the facts upon which he/she will base his/her decision).  The contract could be voidable and you could even be held liable for any damages the seller incurs due to you tying up their property by lying to them. So don't lie. Also don't get legal advice from BP or any wholesaling "gurus". Talk to an attorney. 

That makes sense. What are the wholsalers using as contracts to make these deals? What clause states that "I" am the entity securing the contract and having the right to sell or assaign the contract to the person who intends to buy the property?


 You'll need an assignment clause and make sure to be transparent with the seller on what your intention is. Ideally you'll have a buyer (or several) lined up already so that you're not just tying up the property without providing any value. If you do that you could cause financial damages to the seller and potentially find yourself in hot water (for example if they're facing foreclosure and your actions cause the clock to run out on them, or the market turns for the worse while you're under contract, and you don't actually find a buyer and don't perform on the contract, then the seller would be worse off than if they had never talked to you). You should talk to an attorney about the correct contract language/ assignment clause and all the legalities of wholesaling in your location so that you stay within the law. I wouldn't get legal advice on here, and wholesaling legally can be tricky. 

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Matthew Kwan
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Matthew Kwan
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Replied Apr 5 2023, 10:10

Even if the contract is under a LLC as the buyer, but the underwriter would still request for an operating agreement to verify whoever the buyer is linked to it @Albert Bui @Carlos Valencia

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Replied Apr 5 2023, 10:46

It sounds like you're jumping in and not understanding what wholesaling is. You have equitable interest in a property you can assign to an end buyer. First, stop thinking you are lying to sellers because there is value to be added by wholesalers. If it makes you feel comfortable, first, I will go the bird-dog route to connect with actual investors and buyers and go out and find deals for them. That will get you to experience doing off-market research and lead generation. Secondly, you must ensure you get the property at a considerable discount and have clauses on your contract to opt out of the deal. I have rebuttals if the seller asks questions about whether you are buying the property. Please send me a DM

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Doug Eric Gueirn
Replied Apr 5 2023, 14:19
Quote from @Steve K.:
Quote from @Doug Eric Gueirn:
Quote from @Steve K.:

Yeah, definitely don't sign a contract saying you have the intent and ability to buy a property if you have neither because that would be inducing the seller to enter into an agreement under false pretenses/ "fraud in the inducement" (misleading the other party as to the facts upon which he/she will base his/her decision).  The contract could be voidable and you could even be held liable for any damages the seller incurs due to you tying up their property by lying to them. So don't lie. Also don't get legal advice from BP or any wholesaling "gurus". Talk to an attorney. 

That makes sense. What are the wholsalers using as contracts to make these deals? What clause states that "I" am the entity securing the contract and having the right to sell or assaign the contract to the person who intends to buy the property?


 You'll need an assignment clause and make sure to be transparent with the seller on what your intention is. Ideally you'll have a buyer (or several) lined up already so that you're not just tying up the property without providing any value. If you do that you could cause financial damages to the seller and potentially find yourself in hot water (for example if they're facing foreclosure and your actions cause the clock to run out on them, or the market turns for the worse while you're under contract, and you don't actually find a buyer and don't perform on the contract, then the seller would be worse off than if they had never talked to you). You should talk to an attorney about the correct contract language/ assignment clause and all the legalities of wholesaling in your location so that you stay within the law. I wouldn't get legal advice on here, and wholesaling legally can be tricky. 


 Yeah you are %100 right. Anyone working in a business as complex as real estate should be consulting a lawyer anyway. So I will be speaking with one before I try to do anymore deals. 

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Doug Eric Gueirn
Replied Apr 5 2023, 14:22
Quote from @Marc Maitre:

It sounds like you're jumping in and not understanding what wholesaling is. You have equitable interest in a property you can assign to an end buyer. First, stop thinking you are lying to sellers because there is value to be added by wholesalers. If it makes you feel comfortable, first, I will go the bird-dog route to connect with actual investors and buyers and go out and find deals for them. That will get you to experience doing off-market research and lead generation. Secondly, you must ensure you get the property at a considerable discount and have clauses on your contract to opt out of the deal. I have rebuttals if the seller asks questions about whether you are buying the property. Please send me a DM


 It just makes me nervous when I sign a contract on the buyer line. I get that there is language that says we can assign the contract but I still get nervous thinking that I will be responsible for the purchase price of  the property. I just need to submit my contract to a lawyer to make %100 sure that I am not liable for the purchase price of the property. 

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Albert Bui
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Albert Bui
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Replied Apr 5 2023, 14:53
Quote from @Matthew Kwan:

Even if the contract is under a LLC as the buyer, but the underwriter would still request for an operating agreement to verify whoever the buyer is linked to it @Albert Bui @Carlos Valencia

From a lending POV and yes if its in a LLC what will happen is the underwriter will ask the end buyer 1 for the operating agreement but the end buyer 1 will also create an assignment agreement showing that the seller tied it up with him (buyer 1 is the original - the wholesaler), and the assignment agreement will show buyer 1 assigns it to buyer 2 for lets say 30Gs.

Conventional lending wise buyer 2 will need to pay for the assignment through escrow in case since conventional cannot finance the assignment fee in this configuration / loan structure.

Private money and non agency/non conventional products can finance assignment fee's or rearrange the assignment fee as a broker commission is one way around it such that conventional can "then," be allowed to finance the "assignment fee," but in this structure whats really happening is the assignment fee is being restructured into a broker commission which means the wholesaler buyer 1 better be RE licensed in the state of WA.

So do your due dilligence and structure accordingly.

@Matthew Kwan

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Bill F.
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Bill F.
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Replied Apr 5 2023, 16:31
Quote from @Marc Maitre:

It sounds like you're jumping in and not understanding what wholesaling is. You have equitable interest in a property you can assign to an end buyer. First, stop thinking you are lying to sellers because there is value to be added by wholesalers. If it makes you feel comfortable, first, I will go the bird-dog route to connect with actual investors and buyers and go out and find deals for them. That will get you to experience doing off-market research and lead generation. Secondly, you must ensure you get the property at a considerable discount and have clauses on your contract to opt out of the deal. I have rebuttals if the seller asks questions about whether you are buying the property. Please send me a DM


 Would you mind sharing some of your rebuttals to seller questions? Much appreciated

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Tom Gimer
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Replied Apr 5 2023, 19:43

The contract can also clearly state IN BOLD CAPS that the buyer is an investor whose goal is to make a short-term profit by assigning its contract rights privately or by public auction or otherwise.

Disclose.

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Ryan Kelly
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Ryan Kelly
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Replied Apr 5 2023, 20:10

@Doug Eric Gueirn anytime you execute a contract as a buyer, you ARE on the hook for the purchase unless you terminate or assign the contract. Know what you are getting into before tying up sellers in deals. It could end badly and get you into legal difficulties. I recommend consulting an attorney and get more education on the process.

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Doug Eric Gueirn
Replied Apr 5 2023, 20:53
Quote from @Ryan Kelly:

@Doug Eric Gueirn anytime you execute a contract as a buyer, you ARE on the hook for the purchase unless you terminate or assign the contract. Know what you are getting into before tying up sellers in deals. It could end badly and get you into legal difficulties. I recommend consulting an attorney and get more education on the process.


 %100

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Don Konipol
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Don Konipol
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Replied Apr 5 2023, 23:16
Quote from @Doug Eric Gueirn:

Can someone clear up for me where when I fill out these contracts, where it says "Buyer" I have to put in my LLC and name. I get nervous about this because I don't want to be sued for not having the money to buy the property. Also what makes me nervous is the fact that I don't tell them that I am not the buyer of their property but have to say that I have "Partners" when I really don't.

You’ve received some really good explanations and advice so far. I’d only ad that there are 50 state real estate commissions that regulate and administer real estate law in each state.  So how real estate is regulated, and applicable laws can differ widely.  

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Replied Apr 6 2023, 14:11
Quote from @Bill F.:
Quote from @Marc Maitre:

It sounds like you're jumping in and not understanding what wholesaling is. You have equitable interest in a property you can assign to an end buyer. First, stop thinking you are lying to sellers because there is value to be added by wholesalers. If it makes you feel comfortable, first, I will go the bird-dog route to connect with actual investors and buyers and go out and find deals for them. That will get you to experience doing off-market research and lead generation. Secondly, you must ensure you get the property at a considerable discount and have clauses on your contract to opt out of the deal. I have rebuttals if the seller asks questions about whether you are buying the property. Please send me a DM


 Would you mind sharing some of your rebuttals to seller questions? Much appreciated

 I mean, there's a lot, but let's say the seller asks, "Are you the one buying my property, or are you wholesaling it" (sellers may know what wholesaling is at this point) Your answer to that can be as simple as "the goal is to purchase the deal for our portfolio, but were not exactly sure what we will do as far as an exit strategy, we could keep it ourselves flip it or rent or even sell it to a partner, but what we agree on doesn't change regardless of what I decide to do with it" leave it at that. Proceed to ask the next qualifying question i.e. "Can you tell me a little more about the condition of the home" etc

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Bill F.
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Bill F.
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Replied Apr 6 2023, 14:37
Quote from @Marc Maitre:
Quote from @Bill F.:
Quote from @Marc Maitre:

It sounds like you're jumping in and not understanding what wholesaling is. You have equitable interest in a property you can assign to an end buyer. First, stop thinking you are lying to sellers because there is value to be added by wholesalers. If it makes you feel comfortable, first, I will go the bird-dog route to connect with actual investors and buyers and go out and find deals for them. That will get you to experience doing off-market research and lead generation. Secondly, you must ensure you get the property at a considerable discount and have clauses on your contract to opt out of the deal. I have rebuttals if the seller asks questions about whether you are buying the property. Please send me a DM


 Would you mind sharing some of your rebuttals to seller questions? Much appreciated

 I mean, there's a lot, but let's say the seller asks, "Are you the one buying my property, or are you wholesaling it" (sellers may know what wholesaling is at this point) Your answer to that can be as simple as "the goal is to purchase the deal for our portfolio, but were not exactly sure what we will do as far as an exit strategy, we could keep it ourselves flip it or rent or even sell it to a partner, but what we agree on doesn't change regardless of what I decide to do with it" leave it at that. Proceed to ask the next qualifying question i.e. "Can you tell me a little more about the condition of the home" etc


 Interesting, thanks for the insight. Lets say the seller knows you are a wholesaler working with a list of buyers and has a concern about none of your buyers will have an interest in the property. They asks if you have the ability to close the deal personally? How do you handle that? 

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Don Konipol
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Don Konipol
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Replied Apr 6 2023, 15:40
Quote from @Marc Maitre:

It sounds like you're jumping in and not understanding what wholesaling is. You have equitable interest in a property you can assign to an end buyer. First, stop thinking you are lying to sellers because there is value to be added by wholesalers. If it makes you feel comfortable, first, I will go the bird-dog route to connect with actual investors and buyers and go out and find deals for them. That will get you to experience doing off-market research and lead generation. Secondly, you must ensure you get the property at a considerable discount and have clauses on your contract to opt out of the deal. I have rebuttals if the seller asks questions about whether you are buying the property. Please send me a DM

If you have no intention to purchase the property yourself, and or you don’t have the capital or borrowing capacity to purchase the property, and you either enter into a contract that states you will purchase the property, or say or imply you will do such, THEN YOU ARE LYING.  because “there is value to be added by wholesalers” has absolutely no bearing on whether you’re lying or not.  This attitude and practice  is exactly why real estate commissions are attempting to limit the practice.

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Lydia R.#4 Wholesaling Contributor
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Lydia R.#4 Wholesaling Contributor
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Replied Apr 6 2023, 21:41
Quote from @Doug Eric Gueirn:

Can someone clear up for me where when I fill out these contracts, where it says "Buyer" I have to put in my LLC and name. I get nervous about this because I don't want to be sued for not having the money to buy the property. Also what makes me nervous is the fact that I don't tell them that I am not the buyer of their property but have to say that I have "Partners" when I really don't.


The only way you get paid is if you put your LLC as the buyer and then assign your equitable interest in the contract. If you spend all your time worrying about all the things that could go wrong you will never get started. I got sued by an end buyer for making a $40,000 fee. I learned the hard way what a double closing is and when its appropriate. I also had a bulletproof assignment of contract agreement so the lawsuit never got off the ground. Real estate investing is not risk free. Wholesaling has a lower risk than other strategies but there is still a risk. You have to decide if you are willing to take those calculated risks or not. If not, then wholesaling is not for you. If so, then its time to stop worrying about what can go wrong and focus on what can go right. Ive been wholesaling for almost 8 years and I have never had an issue other than the buyer who tried to sue me. Dont put properties under contract that are not deals. Dont start marketing to sellers without having a strong vetted buyers list. Do not say you have partners, that is a very obvious indication that you are a wholesaler.

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Doug Eric Gueirn
Replied Apr 8 2023, 15:08
Quote from @Ryan Kelly:

@Doug Eric Gueirn anytime you execute a contract as a buyer, you ARE on the hook for the purchase unless you terminate or assign the contract. Know what you are getting into before tying up sellers in deals. It could end badly and get you into legal difficulties. I recommend consulting an attorney and get more education on the process.

 I found a contract that will protect me in this situation.