first wholesale deal

Wholesaling
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first wholesale deal

Mark Russell
Fredericksburg, TX · Member since 2017 · 51 posts · 36 votes

I am interested in flipping and my mentor told me to go and find a deal and I did, but I have talked to 3 different hml sources and can't seem to get financed because I don't have any money to put down right now. I don't want to just throw this deal away so someone mentioned wholesaling. I have a potential cash buyer so I have a contract here that is not yet signed. I am concerned that my contingencies have to be pretty solid if my buyer can't come through to purchase. How do the contingencies look to you???

This contract is subject to partners approval

This contract is assignable

Buyers obligation to purchase is contingent upon buyers inspection and approval of condition of property

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Jason D.
Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes
8y

@John Thedford reading what @Mark Russell wrote, he did intend to purchase and attempted to get financing through HML. Calm down there big guy....

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  • Tim Hall
    Flipper/Rehabber · Tallahassee, FL · Member since 2014 · 462 posts · 237 votes
    8y
    There's 3 outs ok that's good.
    0Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    8y

    LIES! Did you learn this from some guru or the BP FRAUDS AND SCAMMERS? 
    FRAUD BY INDUCEMENT
    Signing contracts with NO ability or intention to close
    Using BS escape clauses.
    Typical...sad to say.

    2Reply
  • Jason D.
    Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes
    8y

    @John Thedford reading what @Mark Russell wrote, he did intend to purchase and attempted to get financing through HML. Calm down there big guy....

    7Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    8y

    Those are typical BS Escape Clauses used by the frauds to get out of contracts because they have no intention of purchasing the property in the first place

    1Reply
  • Mark Russell
    OP
    Fredericksburg, TX · Member since 2017 · 51 posts · 36 votes
    8y

    @John Thedford I just got off the phone with my cash buyer. I’m showing him the property in the morning. He’s very interested. I posted the question because I’m apprehensive about my 1st deal and what could happen if my buyer fell through. I have every intention of seeing this deal through while being fair to my seller and buyer. Since you don’t like those clauses and you say they are bs, what would you suggest I replace them with to protect myself in the event my buyer can’t come through?

    1Reply
  • Mark Russell
    OP
    Fredericksburg, TX · Member since 2017 · 51 posts · 36 votes
    8y

    @Jason D. 

    @John Thedford

    Here is the response my re attorney gave me but she left me still feeling a little apprehensive. What do you think??

    “Hi Mark,

    We generally advise our clients to have a separate assignment agreement with the assignee. We have one on our website, however we are in the middle of updating it to reflect the new changes in the laws effective Sept. 1.

    If you don't think you can find a buyer or are not sure if they will pull through, you could put something in to your underlying contract that says that the sale depends on financing/finding an appropriate cash buyer. That way if you cannot find one you may be able to pull out and say you don't have the financing. However, there is always the possibility that you can still get sued for breach of contract(not likely but always a possibility). I would try to find a cash buyer before you get the property under contract with the seller. Generally your buyer will be more understanding that the seller pulled out, rather than the other way around. “




    0Reply
  • Jason D.
    Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes
    8y
    @Mark Russell what you are doing is perfectly legal and the contingencies you are using should be acceptable. A financing contingency would be added protection for you but if you have a serious buyer, it shouldn't be a problem. As long as the buyer knows your intention to assign the contract, the state of Texas does not require you to have a real estate license.
    1Reply
  • Mark Russell
    OP
    Fredericksburg, TX · Member since 2017 · 51 posts · 36 votes
    8y

    @Jason D.

    Thanks my friend. That makes me feel better. I just want to make sure I’m keeping me and my family safe from litigation or financial ruin. Much appreciated 

    0Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    8y

    you are trying to broker without a license it sounds like you are trying to mislead the seller I believe if you told them you did not have the ability to purchase and you were simply acting as agent without a license I think they would tell you where to go and it would not be heaven. Those typical BS Escape Clauses like subject to my partner are the typical cons frauds and underhanded people use to deceive others. How would you feel if this crap was pulled on one of your loved family members I'm curious. If you see no problem with going into the transaction being a liar and a fraud all I can tell you is good luck in the business

    0Reply
  • Mark Russell
    OP
    Fredericksburg, TX · Member since 2017 · 51 posts · 36 votes
    8y

    @John Thedford

    I’m done hearing your bs. Take it somewhere else. 

    11Reply
  • David Zheng
    Investor · Saint Louis, MO · Member since 2016 · 970 posts · 1k+ votes
    8y

    I think what John is saying is just that he doesn't appreciate when the wholesalers who are trying to make a quick buck through deception (pretending they'll buy it when they just want to flip it over) and covering their own butt with disregard to the time wasted for the seller.

    I think what you're doing is totally fine as long as the seller knows ahead of time that you fully intend on assigning the property to another buyer and that you have 0 intention of buying it yourself. If they want to take the risk it's on them. But again, make sure its all in writing.

    4Reply
  • Brian Pulaski
    Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes
    8y

    @Mark Russell have you been 100% honest with the seller, that you have not been able to come up with funds and plan to sell it someone else, while making a profit? If so, and tis is something they are good with, then seems like there is no deception. I would also be up front about the fact that if you do not find a cash buyer you will have to "back out" of the sale. Again there would be no deception involved, just a wholesale transaction. I would just make sure to be as transparent as possible with the seller.

    0Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    8y
    Originally posted by @Brian Pulaski:

    @Mark Russell have you been 100% honest with the seller, that you have not been able to come up with funds and plan to sell it someone else, while making a profit? If so, and tis is something they are good with, then seems like there is no deception. I would also be up front about the fact that if you do not find a cash buyer you will have to "back out" of the sale. Again there would be no deception involved, just a wholesale transaction. I would just make sure to be as transparent as possible with the seller.

     And now you know why they are referred to as unlicensed brokers. States are cracking down and TX just passed new laws regarding unlicensed brokers. As to the "BS" I posted, it appears the "buyers" methods come to mind. These unlicensed brokers, frauds, and scammers HATE the truth.

    0Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    8y
    Originally posted by @David Zheng:

    I think what John is saying is just that he doesn't appreciate when the wholesalers who are trying to make a quick buck through deception (pretending they'll buy it when they just want to flip it over) and covering their own butt with disregard to the time wasted for the seller.

    I think what you're doing is totally fine as long as the seller knows ahead of time that you fully intend on assigning the property to another buyer and that you have 0 intention of buying it yourself. If they want to take the risk it's on them. But again, make sure its all in writing.

     I have met several victims of these types of operators.these people are not harming me they are harming the public.

    0Reply
  • Cody Evans
    Wholesaler · Fairfield, CA · Member since 2017 · 472 posts · 145 votes
    8y

    @Mark Russell

    You should look for more cash buyers; I am getting my first buyers list together this week and it's exciting.  It is apparently very easy to do so. You already did the hard part by finding the deal so investors should be lining up to get their piece of it.

    Perhaps look at the for rent section on craigslist which gives you landlords and phone numbers. Not all will be cash buyers but it is a quick back up option.

    Also check public records: A house has two primary documents. The deed and the lien. On a cash sale there will be no lien from the loan. 

    Perhaps you already know this but hopefully at least one part can be of benefit to you!

    Good Luck

    3Reply
  • Guy Gimenez
    Investor · Corpus Christi, TX · Member since 2012 · 2k+ posts · 1k+ votes
    8y

    You don't know what you don't know. 

    One should never watch a video or podcast about flying a plane, jump in a real plane and then ask how to actually fly it...but this is the common method of learning real estate investing. 

    1.  Did you know that if your buyer walks the day of closing and you fail to close on the transaction, you can be held liable? 

    2.  Did you know if the buyer is at risk of losing their house to foreclosure and you fail to close because your end buyer bailed, forcing the seller into foreclosure because you were never capable of performing, you can be liable. A first year attorney can prove you contracted to buy a property for cash when in fact you did not have cash which caused the seller harm. 

    3.  Did you know there are specific laws regarding assigning contracts in Texas?  

    4.  All states have different regulations regarding assigning contracts so you better know Texas' laws before you jump in the plane. 

    If it's truly a good deal, why not partner with someone who CAN fund it instead of assuming the risk by jumping in the plane before you know how to operate it?  

    4Reply
  • Mark Russell
    OP
    Fredericksburg, TX · Member since 2017 · 51 posts · 36 votes
    8y

    Thanks all for the information. This post and all the responses have been super helpful. I found a buyer that is definitely interested but instead of wholesaling the deal we just agreed that he would pay me after closing and if he did not we would never do business again. He's a friend so I trust him to follow up and treat me right. I just didn't feel comfortable moving forward with wholesaling the contract until I understood texas law and the whole process better.

    2Reply
  • Mark Russell
    OP
    Fredericksburg, TX · Member since 2017 · 51 posts · 36 votes
    8y

    @Account Closed

    That’s what I need to see is what the law says. Thanks that helps a lot. 

    0Reply
  • Sam Shueh
    Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
    8y

    You can try it see some homes which do not sell.

    0Reply
  • Rocky Griffin
    Flipper/Rehabber · Edmond, OK · Member since 2016 · 209 posts · 107 votes
    8y
    My suggestion is to have funds available to close the deal even if you are unable to find a buyer. I understand this is not always possible but it is the only way to protect yourself, and will prevent you from being accused of shady practices. This does not mean that your are forced to then purchase the property as typical contingencies would still allow you to back out of the deal. I encourage to to be upfront with the seller and be sure the contract to purchase also mentions your intention of assigning your rights to another buyer.
    0Reply
  • Jason D.
    Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes
    8y
    @Mark Russell here is an article that explains what is and is not allowed.... http://silblawfirm.com/real-estate-law/the-legality-of-wholesaling-real-estate-in-texas/
    0Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    8y

    Florida got wise. Here is 475.43. I have seen many FRAUDS AND SCAMMERS get a cease and desist for using contracts to broker. Hopefully, TX and other states will follow suit. The OP original post exposed their true intentions of entering into a contract through FRAUD AND DECEIT to broker. Funny thing is: most of these FRAUDS AND SCAMMERS WONT DEAL WITH THEIR OWN KIND LOL..

    The 2017 Florida Statutes

    Title XXXII
    REGULATION OF PROFESSIONS AND OCCUPATIONS    		Chapter 475
    REAL ESTATE BROKERS, SALES ASSOCIATES, SCHOOLS, AND APPRAISERS    		View Entire Chapter
    475.43 Presumptions.—In all criminal cases, contempt cases, and other cases filed pursuant to this chapter, if a party has sold, leased, or let real estate, the title to which was not in the party when it was offered for sale, lease, or letting, or such party has maintained an office bearing signs that real estate is for sale, lease, or rental thereat, or has advertised real estate for sale, lease, or rental, generally, or describing property, the title to which was not in such party at the time, it shall be a presumption that such party was acting or attempting to act as a real estate broker, and the burden of proof shall be upon him or her to show that he or she was not acting or attempting to act as a broker or sales associate. All contracts, options, or other devices not based upon a substantial consideration, or that are otherwise employed to permit an unlicensed person to sell, lease, or let real estate, the beneficial title to which has not, in good faith, passed to such party for a substantial consideration, are hereby declared void and ineffective in all cases, suits, or proceedings had or taken under this chapter; however, this section shall not apply to irrevocable gifts, to unconditional contracts to purchase, or to options based upon a substantial consideration actually paid and not subject to any agreements to return or right of return reserved. History.—s. 3, ch. 22861, 1945; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 27, 42, 43, ch. 79-239; ss. 2, 3, ch. 81-318; ss. 28, 30, ch. 88-20; s. 10, ch. 91-89; s. 4, ch. 91-429; s. 15, ch. 93-261; s. 376, ch. 97-103; s. 41, ch. 2003-164.
    0Reply
  • Mark Russell
    OP
    Fredericksburg, TX · Member since 2017 · 51 posts · 36 votes
    8y

    In no way did I try to fraud or deceive the seller. I never even wholesaled the deal for crying out loud. I introduced the cash buyer to the seller and they signed a contract without me having anything to do with it. I’m nowhere in the contract. The cash buyer is a friend so he agreed to pay me a kick back after closing on the house as a thank you for finding him the deal. If that is scamming or deceitful I don’t see how. 

    As a matter of fact I am in process of learning Texas law and understanding the ethics of wholesaling, and how to wholesale the right way before I even attempt it. 

    0Reply
  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    8y

    Well your not going to like this either.  Taking a kickback is not legal either.  It is the same as receiving a commission which you are required to have a license to do. I would step back and educate yourself further   Just my 2 cents 

    2Reply
  • Mark Russell
    OP
    Fredericksburg, TX · Member since 2017 · 51 posts · 36 votes
    8y

    @Greg H. 

    Thanks for letting me know. I’m already checking into Texas law about this

    0Reply
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