Got property under a contract, but now i'm worried.

107 Replies

Okay, so I got a property under contract, the numbers are phenomenal, and I just got it under contract like not even 8 hours ago. I've been contacted by a cash buyer who wants to pay cash, and close quickly. However, they want to go see the house that I just got under contract for a wholesale deal. I don't want my cash buyer, and seller meeting one another. How do I go about resolving this issue? I want things to go as smooth as possible, but I feel that if the two meet they can swoop the deal from underneath me. Help! 

This exact issue came up on a BP podcast I listed. Too. The guest was a wholesaler of sorts but he said he always closed on the property first and then simply resold it. That way he never had this issue

@Caleb Heimsoth  
I don't have the capital to invest in the property myself to close on it, then resell it. Which is why I am Wholesaling, to build the capital to close on properties myself and choose to rent out, or sell for profit. 

@Aaron Phillips, maybe ask for your (refundable - but with strict non-swoop conditions) Assignment Fee UPFRONT? 

Seeing as they're (supposedly) cash buyers, why should that bother them? 

My biggest question though is: how will YOU close the sale, if they (or anyone else) DON'T Buy it? Cheers...

Seems odd that a cash buyer contacted you within hours.  How did they know you had it under contract?  

Maybe they were also trying to wholesale it and you just got there first, but I'd want an explanation before moving forward with them.  That just feels like a small red flag to me.

Of course the other issue you may be dealing with is that you have put a property under contract without the intent or ability to close on it.

I don't know how WV views that, but here in MA, the seller would have a case for fraud and the state could come after you for brokering real estate without a license - unless you're licensed and haven't mentioned it.

Medium clear sailing logo  1600x489Charlie MacPherson, Clear Sailing Realty | 781‑412‑4151 | http://www.ClearSailingRealty.com | MA Agent # 9532146

@Aaron Phillips

What were your plans?

Did you think someone would offer to buy the house without looking at it? 

I assume the seller doesn't know you're a w/s and have no money.

Maybe this cash buyer is another w/s?  Have you verified that they have cash?

Like others have said "honor your commitment to the seller and close" then sell it.

Good luck

Have you considered getting a hard money loan to purchase the property outright and then reselling to the cash buyer?

@Shaun Pruett Do you have any suggestions as to where I can find a hard money lender in the West Virginia area? I have never borrowed before, but I wouldn't be against buying the property then selling to the cash buyer. 

Originally posted by @Caleb Heimsoth :

This exact issue came up on a BP podcast I listed. Too. The guest was a wholesaler of sorts but he said he always closed on the property first and then simply resold it. That way he never had this issue

 Do you remember which podcast that was?

Medium logoJason Hirko MBA, Corridor Funding | [email protected] | (512) 560.7985 | http://www.corridorfunding.com

I'm in Los Angeles. Don't know about WV.

@Shaun Pruett
 In the event that I cannot wholesale it within the month I given on the contract, I will start to look for local Hard Money lenders. However, I have been recently contacted by 3 other cash buyers since the listing I put on Craigslist. I don't think I'll have an issue with selling it.

This has definitely been a learning experience though, and I think I will put wholesaling off until I get my RE Licenses. I was told from the beginning I am NOT required to have a RE Licenses, and I am NOT required to be a broker to wholesale, but with this deal so far it's steered me to believe it would be best that I did get a RE Licenses. I only got into wholesaling to build enough capital to become an investor to buy/fix/flip properties, and buy/fix/rent properties. 

It's a learning progress, and this deal already has me nervous because I don't have the funds to buy it myself, I was going in thinking since I found an amazing deal I could wholesale it, make my assignment fee, then move on. 

I would think if you have it under contract , you could have a clause whereby you can show the house to another potential buyer? Get keys and show yourself.

Originally posted by @Joe Pitrolo :

I would think if you have it under contract , you could have a clause whereby you can show the house to another potential buyer? Get keys and show yourself.

 Advertising or showing a property you do now own sounds like BROKERING. That may be illegal in your state to market or show it. That is one of the potentially illegal games often promoted. See my post titled SHTF....something to be learned there!

No company avatar mediumJohn Thedford, John Thedford | 239‑200‑5600 | http://www.capehomebuyers.com | FL Agent # BK3098153

FRAUD BY INDUCEMENT is making promises with no ability nor intention to close. Assigning a contract, if it does not close. may not relieve the OP of their PROMISE AND DUTY to close.

No company avatar mediumJohn Thedford, John Thedford | 239‑200‑5600 | http://www.capehomebuyers.com | FL Agent # BK3098153

@Aaron Phillips Getting your RE Licenses won't solve the issue you had here. You entered into a contract with only one way to fulfill your side of the deal; finding another buyer.

If you don't have a plan b and c than you leave yourself open to not honoring your word, which in this case is buy the home. Next time you do this you should have more than one plan, ie HML and have done your homework so a simple thing like a buyer wanting to walk through the home won't throw you into a tailspin.

@John Thedford

I was told I could close by assigning the contract to a Cash Buyer which is essentially what Wholesaling is. Getting a property under contract, then assigning it to a Cash Buyer that I am working with. The Cash Buyer has the funds to close on the property, I am just basically getting the 'finders fee' here. 

@Bill F.

You're correct. I should have studied up more on this before jumping into the waters. Do you have any suggestions for Plan B & C for future deals? I know Plan B can always be finding a HML.

Also, do you think as long as I find another buyer this deal can still go smoothly? I have been talking to a few other potential buyers. 

@Aaron Phillips I am not the right guy to give you wholesaling advice.  Its not my space so I won't pretend to know the ins and outs of it.

What I can say is that you need to think about the service you provide and to whom you provide it. Wholesalers should add value to the buyer through locating undervalued properties in areas with favorable rental characteristics. They save them time and money by answering big questions about rehab costs, negotiating with owners, figuring out ballpark what it should rent for ect ect. 

Looking at it through the lens of only getting deals under contract so you can get your part of the action is what causes this fear of being cut out . A wholesaler who adds value by saving the buyer time doesn't have that problem because that buyer would never dream of doing anything which would jeopardize the relationship; that relationship makes money.

 I get that wholesaling is a means to an end for you, but that's no excuse not to treat it like a job. 

Actionable advice: Ask the buyer to cut you a check for a finders fee, connect the buyer and seller, and tear up your contract. Then get out of the deal because the two months of reading you've done hasn't prepared you enough to see thing all the way though.

In Ohio/West Virginia, to Wholesale Properties is NOT Illegal. I just did some calling around to find the answer to that. You can 100% LEGALLY get a property under contract, then assign it to another buyer which is stated in the contract that was signed. The only thing that is illegal which will fall under FRAUD BY INDUCEMENT is if I claimed to be a licensed agent, which I never did and never will until I do eventually get my RE Licenses.

I agree that I made a few mistakes with this deal by not having a Plan B & C, but as of right now, Plan A is still in action and can still work out for me, I have until July 15th to close on the property. In the event that I can not find another buyer to assign the contract to then I will honor my word, and get a HML to fund it so I can close on it before the contract expires. As of right now, everything I am doing is LEGAL and nobody is being misled.

Coming into Wholesaling I've always wanted to everything ethically. I just don't come from a financial standing where I can buy the properties myself. That was the whole reason I did this is to build capital and there is a lot less risk in Wholesaling.  

Originally posted by @Bill F.:

@Aaron Phillips I am not the right guy to give you wholesaling advice.  Its not my space so I won't pretend to know the ins and outs of it.

What I can say is that you need to think about the service you provide and to whom you provide it. Wholesalers should add value to the buyer through locating undervalued properties in areas with favorable rental characteristics. They save them time and money by answering big questions about rehab costs, negotiating with owners, figuring out ballpark what it should rent for ect ect. 

Looking at it through the lens of only getting deals under contract so you can get your part of the action is what causes this fear of being cut out . A wholesaler who adds value by saving the buyer time doesn't have that problem because that buyer would never dream of doing anything which would jeopardize the relationship; that relationship makes money.

 I get that wholesaling is a means to an end for you, but that's no excuse not to treat it like a job. 

Actionable advice: Ask the buyer to cut you a check for a finders fee, connect the buyer and seller, and tear up your contract. Then get out of the deal because the two months of reading you've done hasn't prepared you enough to see thing all the way though.

You give great advice, especially since this isn't your area. So ultimately you suggest voiding the contract, and just connecting the buyer with the seller and making sure the buyer cuts me my "finders fee" first? Seems a lot more do-able. & You're correct, the buyer won't want to jeopardize a relationship that will make him money. 

@Aaron Phillips That's about the long and short of it. 

Level with the buyer and seller about the situation. I don't know if the buyer is an active investor, but its the most upfront thing to do and may give you the ability to establish a relationship with them.

Originally posted by @Bill F.:

@Aaron Phillips That's about the long and short of it. 

Level with the buyer and seller about the situation. I don't know if the buyer is an active investor, but its the most upfront thing to do and may give you the ability to establish a relationship with them.

 Do you have any suggestions on whats the best way to talk to the buyer and seller and let them know that I am a wholesaler and do plan on making an assignment fee off of the properties. Honesty is key, but I don't want to come off as rude. 

@Aaron Phillips Neither party knows you are wholesaling this deal? Being even more clear, the seller does not know you have no intention of buying the property and the buyer doesn't know you don't own the property? 

You've dug yourself this hole. Its time to climb on out, hat in hand.