Got property under a contract, but now i'm worried.
Rental Property Investor · Burlington, KY · Member since 2017 · 101 posts · 66 votes
Got property under a contract, but now i'm worried.
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Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes
9y@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.
107 Replies
- Wholesaler · Douglasville, GA · Member since 2014 · 72 posts · 63 votes9y
Way to go. You will get there. This is part of the process. Trust me... We all have gone through the same things you are dealing with. The good thing is that you want to do things the right way. That is very important, and speaks volumes about your character.
Good Luck.
- Investor · Pearland, TX · Member since 2013 · 66 posts · 37 votes9yI'm late to this thread but I would say double close on the property using a transactional lender. This way no one is saying you committed fraud and you are not required to tell anyone how much you made. Remember you are selling your contract not the house. Big difference that some people are not picking up. A lot of times if you are an investor it is not worth being an agent because agents have something called disclosure.
- Slidell, LA · Member since 2017 · 1 post · 0 votes9y
Could you tell the owners of the property that you are a real estate investor that sometimes brings on a partner to help you do the job and they would like to look at the house in private and inspect it? That ways they don't have to meet the owners.
- 9yMindy JensenPro MemberBiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
I'd like to clear up something that has been suggested three times so far, but no one has commented on it.
Clouding the title or placing any sort of lien against the property is bush-league. That is bad advice and no one should follow it.
YOU don't have any right to the property, other than having it under contract. This particular concept of Equitable Interest - having it under contract with no way to close - is being contested in the courts in several states because of people who "cloud title" just so no one comes in and steals the property from underneath them.
True Equitable Interest is when you DO intend to purchase the property and have the means to do so, either with cash or through a loan you can qualify for.
- Wholesaler · Douglasville, GA · Member since 2014 · 72 posts · 63 votes9y
Originally posted by @Mindy Jensen:
I'd like to clear up something that has been suggested three times so far, but no one has commented on it.
Clouding the title or placing any sort of lien against the property is bush-league. That is bad advice and no one should follow it.
YOU don't have any right to the property, other than having it under contract. This particular concept of Equitable Interest - having it under contract with no way to close - is being contested in the courts in several states because of people who "cloud title" just so no one comes in and steals the property from underneath them.
True Equitable Interest is when you DO intend to purchase the property and have the means to do so, either with cash or through a loan you can qualify for.
- Wholesaler · Douglasville, GA · Member since 2014 · 72 posts · 63 votes9y
Heck Yeah Mindy....
whoo.....hoooo
Way to keep us straight.
I love the BP team when they pop the hands of the kids reaching for the cookie jar, when the kids are using a 2 legged stool, on 4 phone books, with a homemade teeter totter of a tennis ball under a 2 by 4.
Way to keep us from falling and hurting ourselves...
........High 5's to Mindy.........
Thanks.....Luv U Guys...
LOL...
- Rental Property Investor · Burlington, KY · Member since 2017 · 101 posts · 66 votes9y
Originally posted by @Mindy Jensen:
I'd like to clear up something that has been suggested three times so far, but no one has commented on it.
Clouding the title or placing any sort of lien against the property is bush-league. That is bad advice and no one should follow it.
YOU don't have any right to the property, other than having it under contract. This particular concept of Equitable Interest - having it under contract with no way to close - is being contested in the courts in several states because of people who "cloud title" just so no one comes in and steals the property from underneath them.
True Equitable Interest is when you DO intend to purchase the property and have the means to do so, either with cash or through a loan you can qualify for.
I wasn't gong to go the court route. I feel as if that is unnecessary in this situation which is why I didn't comment on it. I have a plan in place to make sure I don't run into the same problem again. This has just been a "Live and Learn" situation, but thanks to everyone on BP that has provided me with excellent advice, I feel as if I have the necessary tools to get this property closed on now. There is no need for me to put a lien on the property because if the seller is a Motivated Seller, and the Cash Buyer wants to keep a relationship that is making him money then neither party will try undercutting me.
Nonetheless, I appreciate your comment because there has been newbies, like myself, reading this post for educational purposes and I strongly advise against going to put a lien on the property. If you have to take that route then you probably don't have a deal in the first place, and you are probably not working with a Motivated Seller. - 9yMindy JensenPro MemberBiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
@Aaron Phillips , I was commenting because no one else had mentioned that technique isn't cool. I wasn't suggesting you were going to do it. :)
This thread is precisely what BiggerPockets exists for. Information about the right way to do something. You had a question, and got not only the answers you were looking for, but also learned a tremendous amount about the concept of wholesaling. I hope you come back and ask more questions for your next deal! We'll be here to help!
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Mindy Jensen agreed... the risk of doing this could really get someone in hot water...
And not all recorders allow it anyway...
so much of this thread is why wholesaling as folks talk about is such a stain on the industry.
you see these folks talking about how to sneak the buyer in .. by basically lying to the seller.. LOL
I guess if that's what it takes lie and cheat to make money... Oh well.
- Rental Property Investor · Burlington, KY · Member since 2017 · 101 posts · 66 votes9y
Originally posted by @Mindy Jensen:
@Aaron Phillips , I was commenting because no one else had mentioned that technique isn't cool. I wasn't suggesting you were going to do it. :)
This thread is precisely what BiggerPockets exists for. Information about the right way to do something. You had a question, and got not only the answers you were looking for, but also learned a tremendous amount about the concept of wholesaling. I hope you come back and ask more questions for your next deal! We'll be here to help!
I plan on keeping this thread updated so everyone can see exactly how this deal pans out! I've learned so much about Wholesaling through this thread that I want to keep it updated so other New Wholesalers can refer to here when they need guidance on how to work through a deal, and close quickly. :)
- Investor · Brandon, FL · Member since 2017 · 178 posts · 67 votes9y
Your contract needs to be assignable in order to wholesale it correctly. If you are concealing that you are wholeselling and either party finds out, you are liable for fraud. Consult a lawyer. Good luck and I hope you learn from this.
- Denver, CO · Member since 2017 · 20 posts · 0 votes9y
In my training, they teach you to ask that your "partner" see the property... Your buyer knows you are wholesaling, so explain to him that all negotiations need to go through you, and not the seller. You're not lying, because you are partnering with him to buy the property.
Your accepted contract should keep you from losing the deal.
I would bet that if you got a bite that quickly, that you could find another buyer pretty quickly.
I am new to the game, so I would verify with an expert, but I think this will work.
- Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes9y
There has been some good info here and some bad info. Steer clear of any suggestions that may seem questionable. I agree 100% @Mindy Jensen about trying to cloud title. That can also lead to lawsuits. Why not either close on the property or get licensed. These are the two easiest ways to move forward. If you don't have cash, get funding first. It may not be as difficult as it sounds if people would devote time to doing things honestly instead of trying to find ways to cheat the system AND the sellers. I have posted hundreds of times when FRAUDS AND SCAMMERS suggest their garbage games but there is always a new thread with new FRAUDS AND SCAMMERS suggesting the same garbage. It never stops:)
- Rental Property Investor · Burlington, KY · Member since 2017 · 101 posts · 66 votes9y
Originally posted by @John Thedford:
There has been some good info here and some bad info. Steer clear of any suggestions that may seem questionable. I agree 100% @Mindy Jensen about trying to cloud title. That can also lead to lawsuits. Why not either close on the property or get licensed. These are the two easiest ways to move forward. If you don't have cash, get funding first. It may not be as difficult as it sounds if people would devote time to doing things honestly instead of trying to find ways to cheat the system AND the sellers. I have posted hundreds of times when FRAUDS AND SCAMMERS suggest their garbage games but there is always a new thread with new FRAUDS AND SCAMMERS suggesting the same garbage. It never stops:)
As I have appreciated all of the advice you gave on here, you seem kind of hostile when explaining your outtake on Wholesaling. A wholesaler doesn't need the funds to close on the property themselves as long as they let the Seller know ahead of time that there's a chance he/she will be assigning the property to another buyer then it isn't fraud.
Fraud is wrongful or criminal deception intended to result in financial or personal gain.
A scam is a dishonest scheme; a fraud.
As long as the Wholesaler is being 100% honest during the deal making process, nothing illegal is being committed. For example, for every deal I make in the future I am going to let;
A. The Seller know that I have multiple options that I'm going to do with this property 1. Buy, and Hold. 2. Buy, and Flip. 3. Assign the property to another Buyer.
B. The Buyer know that I am wholesaling the property, and chances are he/she will want to continue business in the future.
Wholesaling can be 100% Legally as long as you aren't out here trying to deceive your Buyer or Seller.
Thank you once again for your advice and input though. :)
Good luck! - 9yMindy JensenPro MemberBiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
@Aaron Phillips , you will see, as you go through the forums, that John is in fact very unsupportive of the concept of wholesaling. He's in Florida, where they are taking a very hard stance on the contract assignment idea. (Ohio is also cracking down.)
If you are honest with your sellers, and your posts have shown this to be your intent, you will have much more success.
The "guru's" pitch this idea as though it is a wonderful way to jump into real estate with no money and make heaps and loads of money doing this. They promote deceptive practices, and are not there to help you if you get into a bind.
In fact, it is one of the more difficult ways to get into real estate.
- Rental Property Investor · Burlington, KY · Member since 2017 · 101 posts · 66 votes9y
Originally posted by @Mindy Jensen:
@Aaron Phillips , you will see, as you go through the forums, that John is in fact very unsupportive of the concept of wholesaling. He's in Florida, where they are taking a very hard stance on the contract assignment idea. (Ohio is also cracking down.)
If you are honest with your sellers, and your posts have shown this to be your intent, you will have much more success.
The "guru's" pitch this idea as though it is a wonderful way to jump into real estate with no money and make heaps and loads of money doing this. They promote deceptive practices, and are not there to help you if you get into a bind.
In fact, it is one of the more difficult ways to get into real estate.
I have noticed that myself. I can find information on the plus sides to wholesaling all day long, but seldom find the CON's to it, and how to get yourself out of a bind in the event that you do get caught up.
It's unfortunate you say Ohio is cracking down because I was going to be looking into Wholesaling back home in Cincinnati. :( I will have to look into what they're saying legally about it.
I can definitely see why people start wholesaling, but my opinion is if you truly want to be in Real Estate, you better always have a Plan B. Wholesaling is Plan A. for me, Plan B. is investing into property, fixing it up, and renting it out.
The Wholesaler Mogul Cody Sperber is who turned me on to Wholesaling, and intrigued me when he said you can build you capital by wholesaling with little to no risk. He talks very highly of wholesaling, and all the income you can make from it but never once did I watch a video of his where he explains what to do in the event you get yourself into a legal bind, or how to be 100% forward with Seller and Buyer. I respect the success he has found for himself doing this though. - Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes9y
The easy way to avoid getting into a bind is having capitol available BEFORE signing a contract. Signing a contract with no ability to perform may be construed as fraud. Laws are different in every state. A seller can indeed sue for fraud if they find out you had no ability to close and led them to believe their house is sold. The can sue for FRAUD BY INDUCEMENT. Very few people talk about that but if you read the thread I posted the "buyers" ARE being sued not only for FRAUD BY INDUCEMENT, but also suing stating the "buyer" is brokering real estate. The "buyer" in the suit mentioned has already been in trouble with the state once, and now the seller has filed a complaint which the state has deemed "legally sufficient". If they find this to be the case in the current suit, the "buyer" can be charged with a 3rd degree felony. WHY mess around? Get funding and be prepared to close. If the deal is that good, close, advertise, and resell. No fraud there, and the seller got what they wanted: their property sold. In FL, using contracts to circumvent licensing has been addressed. You cannot ADVERTISE the property in FL by using contracts to broker. Your state may be different.
- Seminole, FL · Member since 2017 · 86 posts · 39 votes9y
Originally posted by @John Thedford:
There has been some good info here and some bad info. Steer clear of any suggestions that may seem questionable. I agree 100% @Mindy Jensen about trying to cloud title. That can also lead...
@Mindy Jensen Is there any chance of getting a "Down vote" for the forums? I may be new but I'm not blind to some of the bad advice being bantered around. Down-voting is a pretty standard part of rating in the tech community (and for good reason). Just a thought.
- Professional · Beverly Hills, CA · Member since 2017 · 88 posts · 35 votes9y
Sounds like you missed that detail when you got excited?
You should specifically include in the contract that the Seller will provide access on request and absent themselves from the property when you wish to show it to persons with him you are negotiating tenancies. partnering, investment and other arrangements.
Call them up, ask when it would be convenient and arrive a bit early before your buyer - give the Seller funds or a voucher for the nearest coffee shop - and tell them not to come back for an hour
- Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes9y
Originally posted by @Mike Snyder:
Originally posted by @John Thedford:
There has been some good info here and some bad info. Steer clear of any suggestions that may seem questionable. I agree 100% @Mindy Jensen about trying to cloud title. That can also lead...
@Mindy Jensen Is there any chance of getting a "Down vote" for the forums? I may be new but I'm not blind to some of the bad advice being bantered around. Down-voting is a pretty standard part of rating in the tech community (and for good reason). Just a thought.
If a post is patently wrong, or you wish to vent about it, just write WHY you believe/know differently, in a new post that "quotes" the post in question. (By itself, a down-vote would NOT help other readers understand the reasoning). Cheers...
- Seminole, FL · Member since 2017 · 86 posts · 39 votes9y
True @Brent Coombs. Just coming from the perspective of a StackOverflow type of rating system. Ratings play a little more in user reputation with that system.
- Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes9y
Originally posted by @Mike Snyder:
True @Brent Coombs. Just coming from the perspective of a StackOverflow type of rating system. Ratings play a little more in user reputation with that system.
BP is likely using the k.i.s.s. system. Everyone is free to post; it's NOT a competition; great advice will/should naturally win out in the end - not determined by "who's beating who?" of a StackOverflow rating system (which itself can be abused)...
- Flipper/Rehabber · Portland, OR · Member since 2014 · 119 posts · 121 votes9y
@Aaron Phillips Most buyers who purchase a lot of houses would will make the decision to purchase if provided with a thorough video walk-through of the house so you could always do that.
- Rental Property Investor · Burlington, KY · Member since 2017 · 101 posts · 66 votes9y
Originally posted by @Omid A.:
@Aaron Phillips Most buyers who purchase a lot of houses would will make the decision to purchase if provided with a thorough video walk-through of the house so you could always do that.
It's funny you mention this, I was just talking to a local REI about that. If I should start a YouTube channel specifically for homes that I get under contract. Do a room by room walk-through with a GoPro or something? I have prior video editing experience so I could actually make it look semi-professional as well.
Very good suggestion. - Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes9y
Originally posted by @Aaron Phillips:
Originally posted by @John Thedford:
There has been some good info here and some bad info. Steer clear of any suggestions that may seem questionable. I agree 100% @Mindy Jensen about trying to cloud title. That can also lead to lawsuits. Why not either close on the property or get licensed. These are the two easiest ways to move forward. If you don't have cash, get funding first. It may not be as difficult as it sounds if people would devote time to doing things honestly instead of trying to find ways to cheat the system AND the sellers. I have posted hundreds of times when FRAUDS AND SCAMMERS suggest their garbage games but there is always a new thread with new FRAUDS AND SCAMMERS suggesting the same garbage. It never stops:)
As I have appreciated all of the advice you gave on here, you seem kind of hostile when explaining your outtake on Wholesaling. A wholesaler doesn't need the funds to close on the property themselves as long as they let the Seller know ahead of time that there's a chance he/she will be assigning the property to another buyer then it isn't fraud.
Fraud is wrongful or criminal deception intended to result in financial or personal gain.
A scam is a dishonest scheme; a fraud.
As long as the Wholesaler is being 100% honest during the deal making process, nothing illegal is being committed. For example, for every deal I make in the future I am going to let;
A. The Seller know that I have multiple options that I'm going to do with this property 1. Buy, and Hold. 2. Buy, and Flip. 3. Assign the property to another Buyer.
B. The Buyer know that I am wholesaling the property, and chances are he/she will want to continue business in the future.
Wholesaling can be 100% Legally as long as you aren't out here trying to deceive your Buyer or Seller.
Thank you once again for your advice and input though. :)
Good luck!Question: what do you tell a seller about NOT closing? Do you tell them that if you are not successful you will simply walk away? How much time are you tying up their house? What are you using for escape clauses? If you tell them you will walk if you have no success and they want to deal with you then you should get a AAA+++ for marketing. If you fail to tell them you may walk, and are tying up their house for weeks and relying on weasel clauses, that is another story. Most of these unlicensed brokers do exactly that. What is exactly what "wholesaling" is: unlicensed brokering. Now, if you purchase and then resell, a better term is "flipping".
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