Investors cutting wholesalers?

Question

I recently spoke to a supposed RE investor and our conversation went something like this
- Do you buy wholesales - can I assign a contract to you? 
- Why would I do that? If I like the propertly I'll buy it myself instead of paying you assigner's commission. 
- ...

After that I was thinking about this for a bit. While it is true that he would be able to talk to the seller and give them higher offer than me... On the other hand, that seems like a destructive way to do business. If I offered a deal to someone and they "stole" it from under me, I'd make sure that this guy never gets another deal from me or anyone else I know...

Any thoughts on this?

Is his or mine judgement clouded?

Dory Peters · Answer

Wow, Brian, that's enlightening!  I've heard of this before, but you're the first person to actually speak about it from personal experience.

Brian P. · Answer

Ivan

My response would have been you should  check with your lawyer, Ask him about a specific performance lawsuits against you and the owner, and also a separate lawsuit against you as a tort for interference.

if you want in now you can pay me now, or if you want to try the backdoor you can pay me a whole lot more later..I have never lost one of these cases.so I know what your chances of doing it successfully are.and you don't seem like the type that likes to throw money away. Like my grandfather used to say "don't get even, get even three times" works for me.

Greedy people don't like paying more. 
However I did add a clause in my contract with the seller to cover this issue.with the seller  and the seller doesn't like the possible cost of not playing fair, so the back door Charlies get chased away. I fine the seller three times the difference between my contract and any other contract they accept in breach of my contract or $___, whichever is more..It held up because the court held I was entitled to the benefit of my bargain.

In the area I invest I can sue in small claims for $7,500 and because my wife and I both sign the contract we can go for $15,000 without lawyers. I used small claims once on this issue and won. And the defendant said I would never get a dime out of him. Well I got every dime plus some.

I had several of his items sold at sheriffs sales to collect something on the judgement and I was also bidding and getting them at about 35cents on the dollar and selling them at 70cents or more on the dollar.That's where the extra dimes came in. I also drove his pickup for several years, great price. He did move to a different town, I hope he changed his ways.

Ivan Jouikov · Answer

Makes sense - thank you all!

Ryan Webber · Answer

Well, during your contract period you have a legal right to the property that can be enforced by a court of law.  There has been more than one occasion where I had to politely remind the seller of this fact.

I have used the cloud of title once.  Basically a cloud of title is a publicly recorded piece of paper saying that you have a contractual right to buy the property and you are putting a lien for $X against the property because of their default on that contract.

When a title agent or attorney pulls the title, they will find the cloud and for title insurance to be issued they will have to get you to sign off on it.  It doesn't really require much in effort or time to clear up.  They just have to get YOU to sign a release.  You put your contact information on it, and you get a call or a letter from a title agent or attorney when they try to sell it.

If they want to go around you, then they have to pay you for you to release it or take you to court to silence your claim.  If you have a valid contract that they defaulted on then they're going to have to pay you or sell you the property.

I'm not completely sure, but I remember my title agent telling me that if your contract was notarized then you can just publicly file the contract and, for at least the contract period, they won't be able to get clear title on it.  My problem was that I don't get my contracts notarized.

Point being, during the contract period you are fairly protected from someone going around you.  Now if an investor wants to wait for your contract to expire and then go around you, the Non-Circumvention, Non-Disclosure agreement (NCND) is the only way to have any protection against that.

I personally don't use NCND's because I'm going to buy the property whether I find a buyer or not, and I don't think I would even if I was planning on backing out if I didn't sell the property.  It seems to me that you had your chance and you didn't get it sold so now its free game, but that's just my opinion.  Enforcing a NCND would probably require going to court, and from my perspective that would probably do more harm then good for my business.

And of course I am NOT an attorney so you should check with a qualified attorney in your state about all of this. :D

NA Beauvais · Answer

I would just tell the Investor thanks for the honesty and move on.  You may not believe it but there are a lot of buyers willing to pay you for what you do. You may have to look for them a little harder than before but they are all over the place.

Corey Demuth · Answer

first, if you have your buyers list ready BEFORE you contract a property, you will have an advantage. because if you take an investor to the property early in your contract, he has to wait a month or two if he wants to go around you. and if he seems shady you can try to match another buyer before the 1st idiot can go around your back.

you are going to find people like this everywhere, its a result of the bottom-line thinking that is becoming so popular in america. everyone wants to cut out anyone who is perceived as a "middleman." but the important key is, is this person adding value? if not, then i agree, they should be cut out of the equation.

if you are a decent wholesaler, you are bringing deals to investors who may not have time to find their own property, or lack the drive/skills to find decent properties, or are afraid to set foot in the ghetto where some of these deals are located, etc.

if someone gave me that line, i would just write them off in my head because obviously he is close-minded. the question of whether you make an assignment fee is irrelevant; his only concern should be how much profit does he stand to make? pure and simple.

if you went to two different car dealerships and found the same car for the same price, then you found out that one of the salesmen was making a higher commission, should you care? you probably want to, kind of, because you are letting your emotions manipulate you, but what you SHOULD be thinking is that if the end price you pay is the same, it does not matter.

another way you may be adding value to the transaction is by negotiation; who knows, you may be getting a better price out of the seller. suppose the investor went to the seller and got the price down to 60. if you can get the price down to 50, even if you take a 7500 assignment you still made the investor more money.

in the future, however, i wouldn't blatantly dump it on them that you are a wholesaler. i would talk to them about a property, see if they are interested, and then when it eventually surfaces that you just have a contract on it, if he raises questions about that then just say "if you think it's a great deal what difference does it make whether it's wholesale?" if the numbers work, he shouldn't care. good investors are not quibbling over who made what cut, they are thinking about how can they possibly squeeze more deals out of each month and make more money.

if you start talking about a property with someone and they jump all over you about "are you a wholesaler" or "are you just going to assign this" i wouldn't waste your time with them, those people are too dense and it's not worth spinning your wheels trying to convince them to do business. they will be a pain in the ass every step of the way. focus on finding people who want you to make them more money.

good luck!

Douglas Christian · Answer

You do and if you ever tried that with me you would definitely know why there are seasoned investors or non seasoned investors.  See this is why everyone is leary of doing business with each other because of things like this happening.  It has never happened to me because I treat my clients and ea property as a business.

If it is a deal why would you not want to pay the individual who bought the deal to your door step.  Obviously you could not find it yourself or you would have already had it.

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Jim Wineinger · Answer

Douglas, are you speaking of the original post as I would think, or of using an NCND.

Personally I have not yet used one because I usually purchase the deals myself that are deals then resell to those that want to buy for themselves or as an investment.

I do not believe in "clouding" a title because that only causes problems and time money for those who need to clear those clouded titles.

Jim Wineinger · Answer

Or you have them sign an NCND before you give them any information that would identify the property or owner so that even if they go around you, you will still get paid in the end.

Ivan Jouikov · Answer

Cloud the title?