Nottingham, MD · Member since 2014 · 109 posts · 37 votes
Hello BP friends,
I am looking into wholesaling and I am not sure on contract verbiage. Here is an example of my question.
I get a property under contract to buy and or assign with a 45 day term to close. I am unable to locate a buyer for whatever reason. Since the contract says " Keith and/or assigns to buy ....." am I legally obligated to buy the property? Do people have clauses that will allow them "out" of buying it? Can you do just an assignment only contract? Or must I still buy it? I do not have the funds to purchase it.
I do not want to lead my seller on that I will be buying it no matter what. I wont lie to make a deal, I'd rather be upfront about my intentions.
There are many ways to skin that cat but the bottom line is that you want to have and option to buy but not the obligation. Make sure your contract provides the seller will look ONLY to the assignee, if any, for performance under the contract or you may still be liable should the assignee fail or refuse to close as required.
Congrats on deciding to be upfront with the seller.
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
11y
To paraphrase @Rob Anderson but with a different slant:- "If you can't find your Buyers beforehand, don't try. If you want to sell houses for people, know who you are selling them to"! Cheers...
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
11y
@Nathan Paisley Yes, I assumed that to be implicit. Go find your Buyers Keith; find out what they want and what they will pay AND where they want the properties - THEN go get your deals! All right then...
If you can't buy don't try. If you want to sell houses for people become an agent
I agree. I have personal knowledge of several deals where the homeowners were led on by so called "wholesalers"..and then they simply walked away. Your are messing with people's lives. You are messing with something that may be the most important asset they have. You are messing with something many many people have an attachment to. WHY would any seller sign a contract with someone that has no ability to close the deal? I generally refuse to work with "wholesalers". How can you sell something you don't own? If you are willing to sign a contract be willing to close. IMO, anything else is unethical.
Real Estate Investor · Champaign, IL · Member since 2013 · 114 posts · 55 votes
11y
Tieing up a house you have no intent to buy, so you have time to sell it for more than asking price, and then dumping the house back on the OG owner if you fail IS NOT wholesaling.
Please understand my beef in this matter rest solely in INTENT TO PURCHASE. If you are a buy and hold investor that finds great deals all the time and during the purchase process you decide to make a quick 10k reassign the contract and move on, You are a successful wholesaler.
Nottingham, MD · Member since 2014 · 109 posts · 37 votes
11y
@Rob Anderson I understand what you are saying and your issues with unethical people in general and unethical wholesalers specifically. My response, without being argumentative, is that If I am completely honest and upfront with the seller from day 1 and they have no problem with my deal structure then there is no harm to anyone. When I asked my question it was with the intention of doing just that, FULL DISCLOSURE at all times with the seller. Me personally I would never want someone to say they would buy my house within XX days they on the last day come to me and say Sorry I was never going to buy it, I was just to lazy to find someone else to buy it, bye. Or even worse insult my intelligence by saying my partner did not think it was a good deal.
I agree with the previous posts, and it sounds like (from your replies) you do to - it's best not to sign a contract unless you are willing to close. That doesn't mean you shouldn't pursue wholesaling the deal, bringing in a partner or buying and marketing while you hold - just don;t leave the seller hanging unless they clearly know your intentions and that one possible outcome is they don't have a sale.
The "and/or assigns" wording doesn't give you a legal out. It gives you the right to assign. If you do assign the deal, then your protection is wrapped up in the subsequent assignment agreement. You'll look to it to keep you whole if the assignee walks the deal; i.e. against loss of earnest money or indemnity if the seller pursues legal recourse when the assignee doesn't close.
If you are looking for an 'out' - be very clear with the seller that you are in the business of helping people sell who are motivated enough to sell below 'retail' and you work hard to find buyers. But, if you can't find someone to whom you can assign the contract within X days - you can't buy their property and you will need to cancel the deal.
Two ways you can do this and I have included wording in my buy contracts allowing both - just not both for the same buy contract.
1 - @Guy Gimenez mentioned it, an option clause. For example, (being from TX Guy will recognize) the wording from the TREC contract, clause # 23 available here:
2. Cancellation clause - Here's and example of one I've used. When I've used the TREC contract above, I've included this in the Special Provisions section and ensured it is clear to the seller. "A.CANCELLATION: Buyer retains the right to cancel this agreement by delivering written notice of cancellation to Seller before Closing Date or the date when the deed is delivered to Buyer, whichever is earlier, and any earnest money will be refunded to Buyer."
In addition, I've ensured my right right to assign is clear to the seller. In addition to have "Karl James and / or assigns" in the buyer definition, I've also included this clause in the Special Provisions section: "B.ASSIGNMENT: Buyer has an unqualified right to assign its rights under this contract to a third party so long as the assignee agrees to be bound by all terms and conditions of this contract. No notice to Seller of assignment is necessary. Such an assignment will create a novation and release the original Buyer from this contract and substitute the assignee in the original Buyer’s place."
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
11y
@Keith Belzner , I am reminded of the Iron Maiden lyric "the road to Hell is full of good intentions". If for any reason you renegue on your Contract, you will have become that person that "says he will buy my house within XX days then on the last day come to me and say Sorry I was never going to buy it, I was just too lazy to find someone else to buy it, bye. Or even worse insult my intelligence by saying my partner did not think it was a good deal".
Nottingham, MD · Member since 2014 · 109 posts · 37 votes
11y
@ Nathan Paisley Thanks for the push.
I am still working on getting started. All the legal stuff and more learning so that I dont screw things up.
So here is my take on wholesaling: Find a buyer first BUT you cant find a buyer without a good deal SO go find a good deal BUT you cant until you have a way out ie BUYER so find a buyer but ....................
Without a lot of cash its a catch 22.
With that being said, I am not going to be held back from my plans.
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
11y
@Keith Belzner "So here is my take on wholesaling: Find a buyer first BUT you cant find a buyer without a good deal SO go find a good deal BUT you cant until you have a way out ie BUYER so find a buyer but ....................Without a lot of cash its a catch 22"
You just graduated Wholesaling 101. Congratulations! Now, onto Wholesaling 102...
Wholesaler · FL · Member since 2013 · 120 posts · 40 votes
11y
Keith Belzner don't let Negative Nancy's on the forum dissuade you from getting out there and mixing it up. Check out Sean Terry's podcast for all of the free info you'll need to get started. Also, there are great wholesaling groups on Facebook that will point you in the right direction regarding verbiage and agreements in your particular market.
Nottingham, MD · Member since 2014 · 109 posts · 37 votes
11y
@J Scott I am learning the numbers side of the deal now. I have 20+ years in construction so I have a pretty good knowledge of the repair costs. I am working on the purchase and value side of it now. I have practiced with the calculators here on BP and I have also put together my own detailed spreadsheet. When I run test numbers on both BP's and mine they come out very close, +or- 4% of the results. My plan is to post any deals that I come across on here until I know that my numbers are good. Like a lot of new people to real estate its getting over that fear of getting it wrong in the beginning. But "FORTUNE FAVORS THE BOLD" so here goes...
Real Estate Investor · fort lauderdale, FL · Member since 2011 · 6 posts · 10 votes
11y
Wholesalers are saturating the market down here in south florida and it disgusts me. I would say virtually all of the deals they offer on with "supposed" cash offers are bogus and never close. They use fake proof of funds to get the deal and lead the seller to believe they are real buyers, never disclosing who they are and what their real intentions are. These are not opinions, these are facts as I have recieved over 200 offers from wholesalers on my listed properties over the last year and they are ALL exactly the same. Fake cash, ridiculously low number, sight unseen, virtually no deposit, ridiculously long inspection period and they back out at the last minute. Anyone who says they are disclosing is a liar because virtually no homeowner would agree to a bs offer like that. I think wholesaling should be illegal no matter how they do it. If you dont have real cash to close a property and are not intending on buying it, but put properties under contract anyways, then you should go to jail for contract fraud in my opinion. I have seen multiple sellers (none of my clients because i dont work with wholesalers) think they are moving in a week and pack up their belongings and rent trucks and even setup their children in new schools only to find a wholesaler couldnt get his greedy 20k fee and now the sellers are screwed. Its unethical, its wrong, and it should have severe consequences. These moron gurus come to everyones town and throw these ridiculous courses to people on how to screw people by wholesaling. Do it the old fashioned way, like i do, find someone with money and actually buy the house.......if you cant do that.......then get a 9-5.
Nottingham, MD · Member since 2014 · 109 posts · 37 votes
11y
@Jonathan Woelfel As I stated I have no intention of telling someone what they want to hear and then walk away at the last minute. I was not raised that way, BE HONEST OR BE A LAIR, these are life's 2 choices. I know that there are two sides to the wholesaling argument, yours and then those who feel it is a way to run a business ethically and profitable.
" Do it the old fashioned way, like i do, find someone with money and actually buy the house.......if you cant do that.......then get a 9-5."
In fact since I first posted this I have been in contact with 2 potential investors. So my original question is still a valid one, I am always looking towards my future and what I need to do to get there. I will say that if I talk with a seller and they agree 100% with my terms then I will move forward with the deal.
Jonathan I am sorry that you feel that way but I believe that if you do a search here on BP you will find many people who wholesale are make a very good living from it.
write on the contract. "contract is subject to partners approval" or contract is subject to valuation approval"
hope this helps
Unless you actually have a partner (and "partner" is a legal term, with a legal definition) this gets you out of exactly jack and squat if you end up in court.
Real Estate Investor · fort lauderdale, FL · Member since 2011 · 6 posts · 10 votes
11y
You say you are being honest yet your post on here is about trying to get more "outs" !!!Which is a way of telling a seller as late in a deal as possible that you are not really buying their property, but were just wasting their time to make a selfish profit off of money you dont have. You are the same as the rest of them.