Got property under a contract, but now i'm worried.
Rental Property Investor · Burlington, KY · Member since 2017 · 101 posts · 66 votes
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!
@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.
@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.
I love your enthusiasm Aaron!! A lot of people just kept on studying and never jumping in. I was like you, I did lots of research, read lots of books, and listen to podcast and than jumped head first. You can read and study as much as you can but what really helped me was the "Will" to get it done! I'm sure you want to achieve and close this deal you can find a way to do it. BP forum is a really helpful resource because I wasn't fortunate to find this when I did my first few deals :(
You are in good hands here on BP but don't forget take everyone advise with a grain of salt.
Cheers & G.L
I appreciate it, thank you very much. I am just starting to get discouraged because I feel as if I was dumb to get this property I found under contract. To me it's a very good deal. The ARV is $91,000 then the repairs are only $10,000-$15,000 the inside is almost completely remodeled it's absolutely stunning, and I got it under contract for $37,500. It is a Cash Buyers bread and butter. I have the deal, and I feel as if finding another buyer is going to be a piece of cake especially since I am getting the response rate I expected. It's just VERY DISCOURAGING getting told I am basically in a rut, and need to find a way to get out of it.
@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.
The current Buyer I am talking to knows that I got the property on a Wholesale deal, I made him well aware of it. However, the Seller doesn't know that I am a Wholesaler. Neither party knows how much I am making off of the deal because I was told to keep that part a secret if possible.
Now that I know that isn't possible, what do you suggest I do to get myself out of this "hole" I've dug? I don't want to do this unethically. I want to be as precise as possible when finishing this deal. Like I said, I don't have the financial funds to buy it myself, nor the credit. What do I do?
@Aaron Phillips I'm like you, just getting started in wholesaling. But I'm being as careful as I can in understanding the game. Advertising a property under contract on CL (at least in FL and a lot of other places) is a BIG LEGAL NO NO without a license. So I'm starting out with only targeting houses that I have the full intention and capacity (HELOC) of closing on. If I can find a good deal that makes sense for someone else to take then fine, I'll swing the better deal. My intention is to never ever misrepresent myself or what I am intending: This is part of a business and myself or an associate will purchase the house where we come to terms and it will be by the agreed upon closing date.
I'm too old to bother with the headache of ruining my reputation. No one in the REI space really knows my name yet, but I've worked hard throughout my life to make sure my name, and by association my family's name, is honorable. Your name is everything.
@Aaron Phillips I'm like you, just getting started in wholesaling. But I'm being as careful as I can in understanding the game. Advertising a property under contract on CL (at least in FL and a lot of other places) is a BIG LEGAL NO NO without a license. So I'm starting out with only targeting houses that I have the full intention and capacity (HELOC) of closing on. If I can find a good deal that makes sense for someone else to take then fine, I'll swing the better deal. My intention is to never ever misrepresent myself or what I am intending: This is part of a business and myself or an associate will purchase the house where we come to terms and it will be by the agreed upon closing date.
I'm too old to bother with the headache of ruining my reputation. No one in the REI space really knows my name yet, but I've worked hard throughout my life to make sure my name, and by association my family's name, is honorable. Your name is everything.
I really respect this. I want to be a man of my word, and in return make sure my name is never soiled. I myself am only 21 years old, and have no line of credit with home equity. I don't want people to misinterpret when I say I don't have the credit to buy the home, it's just my credit is too new to do anything big with it. I see now that yes, I dug myself a hole, but now I'm in the middle of trying to figure how to get myself out of it.
I am going to continue looking for another buyer, and I am going to be as up front and honest as possible to the Buyer and Seller that I am a wholesaler. I just don't know how I should proceed with this deal yet given I don't have the funds or resources to buy myself out of it right now.
@Aaron Phillips It sounds like the legitimate out here is to partner up with one of your cash buyers. At best they may split the deal with you in some way or just let you have a finders fee. At worst as long as they do close on it the seller is not getting screwed and you chalk it up to education. An annoying and embarrassing lesson, but those are the mistakes we learn best from! Coming at it from the perspective of "how can I help out this person" rather than "what can I get out of this" will get you far.
Good luck with it. Now go be excellent.
@Aaron Phillips It sounds like the legitimate out here is to partner up with one of your cash buyers. At best they may split the deal with you in some way or just let you have a finders fee. At worst as long as they do close on it the seller is not getting screwed and you chalk it up to education. An annoying and embarrassing lesson, but those are the mistakes we learn best from! Coming at it from the perspective of "how can I help out this person" rather than "what can I get out of this" will get you far.
Good luck with it. Now go be excellent.
Perfect. Thank you so much Mike. It is a very embarrassing mistake indeed, but I have learned a lot from this. It will be back to studying, and learning other ways I can get into RE with Low Funds, and No Credit.
You might want to investigate FRAUD BY INDUCEMENT. Leading a seller to believe you intend to purchase, with none, and no ability to close IS FRAUD. Did you read the thread titled SHTF? That case is going through the courts now. If the buyer can prove you had NO intention of closing, and you led him to believe you would, IS fraud. If you lead them to believe you are an agent, that would be another form of fraud.
https://www.biggerpockets.com/forums/93/topics/438...
Allegedly, the "buyer" took several people through the property as "inspectors". I have seen the interrogatories filed by the sellers attorney. They are requiring, UNDER OATH, who these people were. They are also asking for bank statements to see if the "buyer" actually had funds to buy. They are also suing for FRAUD BY INDUCEMENT. The "buyer" never represented themselves as an agent. They allegedly represented they were BUYING the house. Did they have ABILITY AND INTENT? That will come out in court. In your case, you stated you don't have funds to close yet you represented you would BUY THEIR HOUSE. I note you stated you don't want to do anything unethical, but you represented you were a BUYER. That in itself IS unethical IMO.
@John Thedford
I am currently talking to the Seller now about the contract, and voiding it out. I have explained to him the situation, and how I was misled about wholesaling. He seems very understanding, and is willing to void out the current contract, but offered a 'Finders Fee' if I can bring a Cash Buyer to him. Which I think was very cool. It has been an extremely embarrassing situation, but lesson learned. I don't want my name soiled, and I want to continue this business with some integrity.
The guru garbage promoted on the net never mentions what CAN go wrong. Want to "wholesale". Get funds lined up, close, market and resell. 90% or more of these people representing themselves as "wholesalers" will never make any real money, and many are operating illegally. I see one BP member playing games. They changed their ad to state "we are not brokering this property" when in fact they are. Another one, an outright FRAUD, claimed in a thread he is a licensed agent. When I posted stating there was no record of him as an agent, he got pretty upset, blurted out the typical BS, then proceeded to change his name on his profile to reflect only the 1st initial of his last name and hid his profile. Perfect example of many of these operators..sad to say.
@John Thedford
What would you recommend me doing to getting the necessary funds to purchase a wholesale valued house? That is the biggest road block to me starting my Real Estate career. I do not come from money, and don't have $20k+ just laying around waiting to be invested into property. 90% of my money that I get from working is put towards my family. I have always had a passion to be in Real Estate, for not only enjoyment, but to provide a better life for my family. I don't have the credit score a bank is looking for when giving a home loan. What should I do to fix this problem?
EDIT: I know there is no easy way to get into this, it will be a hard and rocky road but any suggestions are welcome at this point.
@John Thedford
What would you recommend me doing to getting the necessary funds to purchase a wholesale valued house? That is the biggest road block to me starting my Real Estate career. I do not come from money, and don't have $20k+ just laying around waiting to be invested into property. 90% of my money that I get from working is put towards my family. I have always had a passion to be in Real Estate, for not only enjoyment, but to provide a better life for my family. I don't have the credit score a bank is looking for when giving a home loan. What should I do to fix this problem?
EDIT: I know there is no easy way to get into this, it will be a hard and rocky road but any suggestions are welcome at this point.
I would get a credit card - I only had maybe 2 years of credit history when I bought my primary house 7 months ago. You don't need 20% down to own a house, you can go the FHA route, or even pay PMI if it makes sense (for me it did). There are also programs through Fannie Mae/Freddie Mac, one is called HomeSteps and I forgot the other, but if you are owner occupying you can get in for 3.5% as well.
As far as the route it seems like you want to go, in Texas you can do all the classes required for your Real Estate License for like $200 online. I'm sure there is something similar in WV.
@Aaron Phillips it's not the hard really, just make sure you judge character of your cash buyer accurately. And when you show the house to him, go with him and tell the homeowners that this is one of your contractors. Make sure you tell the cash buyer what's going on too. This way the homeowners still have confidence in you. Who the hell would just let the cash buyer go to the seller directly?!
Honesty though man, you should find the cash buyer that is ACTUALLY flipping houses and structure something with him. Since you wrote that you want to eventually be flipping these, you should partner with him. Take a percentage of the profit and offer to help with renovations. You bring the deal and help the guy out with the Reno. It's a win win. Even if you aren't skilled, you can do cleaning and landscaping or something! Then you will learn how to do a transaction start to finish and things won't get messy with your sellers. You may even make More on the % of the deal than your assignment!
@Kevin Coggins
There is a Real Estate Licensing course I am looking to get into here in West Virginia that will cost me $550 Online. It's a 90 hour crediting class that I can complete in 22 days called Spruce.
@Kevin Coggins
There is a Real Estate Licensing course I am looking to get into here in West Virginia that will cost me $550 Online. It's a 90 hour crediting class that I can complete in 22 days called Spruce.
That really isn't bad at all. I considered doing the RE classes, but my wife had been out of work after our daughter was born so I gave her that option and she's finishing up now. Gives you some flexibility to also do your side hustle, whether you're flipping or whatever you end up doing.
I don't know your situation, but if you're single, I would try and research personal finance and various ways to save more. I was pretty frugal to begin with, but I started doing that and cut out things like cable tv and various ways for what little I had starting out to go further. Could afford to live in nicer apartments, just chose the cheaper ones so I was saving about 50% of my take home pay (maybe not 50%, but some crazy amount looking back on it).
@Kevin Coggins
There is a Real Estate Licensing course I am looking to get into here in West Virginia that will cost me $550 Online. It's a 90 hour crediting class that I can complete in 22 days called Spruce.
I may be a bit late to the thread, but you have a number of option that would be perfectly legal, one would be to partner with someone who has the cash, potentially cheaper then a hard no way loan and a lot faster and easier to get.
If you want to call me in tomorrow after 10:30 I'll a walk you through a couple options that might work for you.
We wholesale multiple houses every month and double close in most. It's all perfectly legal. What gets you in trouble is not having the money to close when you sign a contract.
I suspect 10 minute conversation I can help you find what you need to make the deal happen perfectly legally. I commend you for jumping in, there is nothing like screwing up to learn the ropes. It's been said if we never push ourselves past our limits we never know where the limits are.
If you still need help sorting it out tomorrow, welcome to call, number is in the profile. I have nothing to sell you, and not looking to partner.
I admire your your willingness to jump in try and figure it out.
@Dell Schlabach
I would love to have a conversation with you actually. I don't get offered that often. You are about 2 hours away from me, so I'm not quite sure how partnering would even work. However, any advice would be perfect. Unfortunately, I did already VOID this particular contract out, but I'm sure you have plenty of suggestions for me for future references.
record a memorandum at thee courrt house clouding the title and they will have a problem buying or selling the property without dealing with you first
@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.
I love your enthusiasm Aaron!! A lot of people just kept on studying and never jumping in. I was like you, I did lots of research, read lots of books, and listen to podcast and than jumped head first. You can read and study as much as you can but what really helped me was the "Will" to get it done! I'm sure you want to achieve and close this deal you can find a way to do it. BP forum is a really helpful resource because I wasn't fortunate to find this when I did my first few deals :(
You are in good hands here on BP but don't forget take everyone advise with a grain of salt.
Cheers & G.L
I appreciate it, thank you very much. I am just starting to get discouraged because I feel as if I was dumb to get this property I found under contract. To me it's a very good deal. The ARV is $91,000 then the repairs are only $10,000-$15,000 the inside is almost completely remodeled it's absolutely stunning, and I got it under contract for $37,500. It is a Cash Buyers bread and butter. I have the deal, and I feel as if finding another buyer is going to be a piece of cake especially since I am getting the response rate I expected. It's just VERY DISCOURAGING getting told I am basically in a rut, and need to find a way to get out of it.
I've had a lot of failures in the REI venture and if I can only give you one tip I would recommend: to have GOOD DOCUMENTATION especially when you are under contract. I believe you had mentioned that you had spoke to the seller regards voiding the contract, I would definitely noted this down for instance: date, time, phone, who you talked to, what was the message about. For me, I had voice recording apps and depending on your state law you have to notified the other person when record the conversation (I feel that when you told them "this is a recorded conversation" they will take it very serious and more than likely not to flake/ change their mind). Hope that helps and don't be discourage, hold your head high and think positively. Not a lot of people can do what you did on your first attempt.
Cheers!
Don't know if I'm too late but here is my advice. Go to the court house and file a affidavit and memorandum of option to purchase. This will be a lien on the property showing your equitable interest. After that find you a good closing attorney and double close. Use your attorney not any one else's. It's not uncommon for a buyer to want to see the property but trust is key.