Mt.Washington, KY · Member since 2014 · 12 posts · 3 votes
Hey BP I am beginning my journey into wholesaling and have a few houses that I want to put under contract, but I need some advice and I have a few questions before I do so.
1. For these wholesale deals the location will be Louisville Kentucky. Can someone suggest a great purchase agreement to use that is worded correctly and covers me in the event that I cannot find a buyer?
2. If I decide to wholesale in another area of the state or even Indiana, will I be able to use this same agreement? or does is depend on the state?
3. I have also heard there is another part of the agreement that makes sure another buyer cannot come in and backdoor your sale from you once under contract? Addendum I think?
Any help is appreciated and as always any more advice on top of it is welcome.
thanks!
Hey @Dave Knott congratulations!! If you have a few houses to put under contract you have accomplished the hardest part in this business, which is finding deals. Now to answer your questions I would recommend that you find a real estate agent in the area you are wholesaling and ask for an electronic copy of the contract they use. Why? Because 85% of all the real estate tractions in that area are being completed with that contract. All attorneys involved will be familiar with it and all cash buyers will have seen it before. This will build instant credibility and move the closing faster. Now many of these contracts have an other terms section in the contract and this is were you will put your out clause (i.e. Partner approval: Buyer’s obligation to close this transaction is contingent upon approval by Buyer’s partner of the condition of the property, as well as all terms and conditions of this contract.). As for another buyer coming in the back door I have not seen that type of protection explicitly stated in a contract or addendum. Hope this helps.
Hey @Dave Knott congratulations!! If you have a few houses to put under contract you have accomplished the hardest part in this business, which is finding deals. Now to answer your questions I would recommend that you find a real estate agent in the area you are wholesaling and ask for an electronic copy of the contract they use. Why? Because 85% of all the real estate tractions in that area are being completed with that contract. All attorneys involved will be familiar with it and all cash buyers will have seen it before. This will build instant credibility and move the closing faster. Now many of these contracts have an other terms section in the contract and this is were you will put your out clause (i.e. Partner approval: Buyer’s obligation to close this transaction is contingent upon approval by Buyer’s partner of the condition of the property, as well as all terms and conditions of this contract.). As for another buyer coming in the back door I have not seen that type of protection explicitly stated in a contract or addendum. Hope this helps.
I've been using this "statement" in contracts for years now and it works 90% of the time. "Sale is contingent on partners approval." Pretty much lets you out of anything! Best of luck to you.
The very act of getting a property under contract is preventing other buyers from buying the property. You can record a memorandum of contract at your register of deeds if you suspect the seller may still look for buyers even though they are legally obligated to sell it to you.
When I sell a property to an investor, I rarely use my attorney, because the contract is usually assigned to the investor. Some people prefer to use an attorney, but I feel it's a waste of money for me. But I've been doing this a long time. Ask around on BP for a good title company that others use in your area. My attorney works for the title company, so it makes things easy for me.
Remember to put your name on the contract as the buyer, then add "and/or assigns". Then you can assign it to whomever you want.
Jose has a good clause as well, about the condition of the property. However, if the property is in good condition and a seller wants to "push" it, they can take you to court if you back out and say the properties condition is not acceptable. The odds are low that that will happen, but I've seen it done.
Also, don't forget your fee for selling it. Make sure you have a signed and notarized copy for your fee, to be paid at close. The buyer or whoever is paying your fee, signs it after you assign him the contract. Don't trust people to pay you! PM me if you have questions. Good luck.
The few agents that I have reached out to have told me that the contract is copyrighted so I may have to find out another way to obtain one. I don't want to get anyone in trouble.
Also one of my potential wholesale houses has fell through as the seller asked for proof of funds before he would sign a contract. He has a friend that is a realtor and I'm sure that's what brought this on, so I told him to just have his friend list it and maybe we can do business another time. Can't win em all right?
Weasel clauses? Subject to partners approval? When people teach others to lie and deceive is it any wonder so many start out wrong? I bet you would be mad as hell if someone pulled this garbage on someone you love. A good agent will ask for POF and once they find out someone is a crook they won't deal with them.
Good luck! I am new to the whole sailing game and am focused on getting involved with my local REIA to meet with some investors. I have already learned a lot from the experience you are sharing. Keep up the hard work and thank you for posting!
@John Thedford I appreciate your opinion, are you saying that anybody who does wholesaling and doesn't actually have the money to buy the property themselves are crooks? If so, how exactly would one go about wholesaling with little or no money down? Isn't that the name of the game? I'm interested in your thoughts.
OK Dave--when you say "wholesaling" you are referring to assignment of contract and not flipping. Correct? The problem with assignment of contract by most operators is they tie up the property with no intention of closing, mislead the seller, use the standard BS escape clauses, and walk. In some states, Florida and now Oregon, one must be licensed to "wholesale". Expect other states to follow suit due to the number of sellers that are victimized. For someone that does not have the money (or all of it) it would be wise to get a backer to fund the deal. Family, friend, HML--anyone willing to help. Then you can write contracts that you intend to fulfill. There are thousands of people on this site alone that believe they can operate with no money and no backers. They are wrong. Few will succeed in making in money, and some will succeed in victimizing sellers. As you can see there are lots of people promoting dishonesty and that is part of the problem. Find a way to make deals work..that is the solution. If you own your own home free and clear, get a LOC or HELOC and then when you find the deal, you can do it. Got a 401K you can borrow against? These are just a couple of suggestions and I am sure there are very creative people with other ideas.
I respectfully disagree with what John said about the "weasel clauses." I can understand why he said that, but I'm not a typical wholesaler. Subject to partners approval is a clause I use for several reasons. The main reason is that if the property is selling for a good price, I don't want anyone else to tie it up before me. Is that selfish? Absolutely and I don't apologize for it. I'm here to make money. I don't put contracts on properties unless I'm 90% certain I have a buyer. I'm not like most of these wholesalers who will tie up anything and everything and hope to God they sell it. To me, that's dishonest. Also, homeowners add "weasel clauses" as well. Subject to satisfactory inspection, subject to financing etc. When I tie up a property, I ALWAYS tell the homeowner that I may not be the actual buyer. They're aware of that before they sign the contract. The last thing I want to do is lose my EMD, so I use that clause. You know as well as I do, that deals fall apart for millions of reasons. Subject to my partners approval is just a "catch all" and it works well. So you can call it a weasel clause all you want. I call it smart business. By the way, I've lost quite a few contracts because people don't want me assigning the contract. When I talk to them, guess what? Most of them tell me it's because they've already dealt with some unscrupulous wholesaler who didn't sell the property and they were upset and didn't know they weren't the buyer. At least I'm upfront with the sellers and I think they respect me for it.