What agreement can I use with another wholesaler

Question

Recently I advertised a few wholesale deals and other wholesalers would call me.  The other wholesaler would be interested in wholesaling the property to their end buyer.  This would mean there would be two assignments of contracts.  I figured this would get somewhat complicated with two middlemen (myself and the other wholesaler).  To make a clean transaction, I always suggest that I deal with the wholesalers end buyer directly and pay the wholesaler his fee after the deal closes.  What type of agreement do I need with the other wholesaler and where would I find one online that I could use.  :D

Bill Gulley · Answer

Hi, if I had an option that was assignable, it's pretty simple, I assign it to the second wholesaler and he pays me for the option, now he holds it and he seels it to an end buyer, You can assign a contract more than one time. It depends how it was written.

as to securing your position, file a notice of option on the property to cloud title and it won't be sold until you release it.  Bill

Demos Loizides · Answer

Khalid - in your first thread, you were the first wholesaler. In your last thread, you're the second wholesaler. Then you asked about the option going to closing. Technically, an option isn't a contract to buy property. It's an option, but not an obligation. If you're the optionee on an option, you would have to exercise your option to purchase and create a contract. The contract would go to closing.

If you're the second wholesaler with an option to purchase property from the first wholesaler, it will usually be a non-exclusive or flex option. There probably isn't a whole lot you can do if the buyer goes behind your back to work out a deal with the first wholesaler. However, I think most investors don't want it to get out that they screwed over another investor. I believe and hope there's honor amongst us.

If you have an option to purchase agreement with the onwer of a property, try to get an exclusive option. This way, they have to sell you the property, but you don't have to buy it.

James Hiddle · Answer

Flex options are ideal for wholesaler to wholesaler deals.

Demos Loizides · Answer

If you're the 1st wholesaler, try to tie up the property with a regular option, not a flex option. The regular option locks up the seller to only selling to you, but you only have an option to buy. You don't have the obligation. If you run into resistence with the seller not wanting to tie up the property with you because you're not the end buyer, you can use a flex option, which will allow the seller to keep marketing their property. This allows you to market the property, but doesn't really lock up anything. Then, if you find a buyer, get the seller to either sign a regular option or get them to strike out the part of the agreement that allows them to cancel the agreement. Then have them initial and date it and send it to you, before you send a buyer to the property. You can also send a purchase and sale agreement.

Now, you'll have an assignable agreement.

Khalid Johnson · Answer

I think I understand. Basically a option just gives the seller the option to sell the property to another buyer if he chooses, and my end buyer can still legally go around me and deal directly with the seller. This scenerio is with me being the 1st wholesaler to the 2nd. Is this right?

Tommy R · Answer

Khalid,

Did you ever find an answer to this?

Tommy

Khalid Johnson · Answer

No, I'm still confused how a option protects your end buyer from stealing the deal from you. The option gives the seller the right to sell the property to someone else, so the seller could go behind me and make a deal with my buyer, cutting me out.

Khalid Johnson · Answer

So would the title company get a copy at closing? Also, let's say I have an option with a wholsaler on a piece of property I want to sell to my buyer, but my buyer goes behind me a buys the property from my wholesaler. Could I use my option and go after either the wholesaler or buyer legally.

Peter Giardini · Answer

Khalid,

The option specifies how the profits from the deal will be split.  It allows the second wholesaler to get a fee, sometimes up to 50% of the deal.

The option will specify the lenth of the option and actions the 2nd wholesaler agrees to take.

Hope this helps?

Khalid Johnson · Answer

I'm still confused. How does the option protect the other wholesaler legally from getting cut out the deal.

What agreement can I use with another wholesaler

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