Seeking Advice: Trying to wholesale my first deal but lost buyer

23 Replies

I'm still new and am starting to worry about my first house I have under contract.  I had planned to wholesale the property to another investor but he got two other accepted offers before I got this under contract and is now saying he does not have the cash for all three.  Now I'm starting to panic because I don't have a large list of cash buyers yet.  I just upgraded to pro so I can post on the marketplace but it's taking a while for my post to show up.  I'm also signed up for a couple meet ups later this month but they are after the closing date on this contract. 

The numbers seem to be ok but I'm not sure what to do now.  I'm 13 days away from the closing date that was in our original purchase agreement.  What should I do?  Drop the price? Try to back out of the contract?  I am lost right now, please help.  

(812) 989-3363

just cut a check and close on it.. then resell..  also keep in mind you can't legally sell property in IN that you don't own.. the second you advertise it by bed and bath etc your selling real estate without a license

see this thread this company just got a cease and desist

https://www.biggerpockets.com/forums/92/topics/523577-oceanpointe-investments-llc

straight from the AG's lips to this audience.. not that anyone is going ot chase you down.. but you should realize what is legal and what is not.

 

Contact everyone you can think of who might know cash buyers, including the guy who backed out. That means hard money lenders, general contractors, and other investors. Ask everyone if they know someone looking for a good deal. Hopefully you will find someone.

Buy he house that you are under contract to buy? If you told the seller you are assigning it, tell them you weren't able to find a buyer, and hopefully you just lose your EMD.

If you cannot find a cash buyer you can look for "we buy houses" signs around your area, these are typically wholesalers, you can enter a joint venture agreement and split the profits with another wholesaler, the wholesaler will try to find a buyer from his list of cash buyers. Go online to look for a joint venture agreement contract, I would negotiate the terms ( dont go 50-50 with the other wholesaler as you have done the hard part of finding the deal) I would offer him/her 20% of the profit.

You led a seller to believe YOU are a buyer. So, HONOR your word and buy it. 

John Thedford, Real Estate Agent in FL (#BK3098153)
239-200-5600

I’m trying to buy it.  That’s why I’ve been on here all day trying to find out how.  The buyer I had lined out fell through.  Just trying to see what to try next.  

(812) 989-3363
Originally posted by @Natalie Allen :

I’m trying to buy it.  That’s why I’ve been on here all day trying to find out how.  The buyer I had lined out fell through.  Just trying to see what to try next.  

 It doesn't sound like you are trying to buy it. It sounds like you are trying to broker it without a license. Playing middleman is NOT buying it. If you led the seller to believe you were a buyer with NO intention to closing that is called FRAUD BY INDUCEMENT. So if you can unlicensed broker the deal and walk away you screwed over the seller that TRUSTED you. I have no doubt you were misled by some FRAUD AND SCAMMER with BS escape clauses. That doesn't undo damage to sellers. You might consider coming clean with them and asking to simply tear up the contract if you have NO ABILITY NOR INTENTION to close. If they can prove you had no ability or intention of closing they could sue you for fraud.

John Thedford, Real Estate Agent in FL (#BK3098153)
239-200-5600

That makes sense.  I’m just not sure what to do.  Everything that I’ve been learning is just confusing me more.  Thanks for the advice and help.  I absolutely did not mean to mislead anyone or anything of that nature, just trying to get ahead.  MIght just need to step back and learn more before I try again.  

(812) 989-3363

John could you help me understand the difference between wholesaling a property and brokering it?  I wasn’t trying to broker it but I want to make sure I am understanding the difference. My purchase agreement lists our business name and/or assigns.  Does this not clarify enough my intentions for the house?  I’m sorry if these are dumb questions but I’d rather look stupid now rather than later.  

(812) 989-3363

What John Is saying is completely false, he probably is not familiar with the term wholesaling. What a wholesaler does is assigns the contract for a fee, a wholesaler does not act as a broker, he simply sells a piece of paper to another investor, this has been done for a long time, this practice is not new.

Bigger Pockets is an awesome forum with many real estate investors, there are many niches in real estate investing, there is a lot of information here and there are many people that are experts in their fields and offer great advice, unfortunately there are many that are not familiar with certain niches and comment as if they knew it all and what they end up doing is confusing new investors such as @Natalie Allen , if you are not familiar with a certain niche its better to not even give an answer. @Natalie Allen I am a real estate wholesaler in North Carolina if you need any help, feel free to PM me 

Originally posted by @Natalie Allen :

That makes sense.  I’m just not sure what to do.  Everything that I’ve been learning is just confusing me more.  Thanks for the advice and help.  I absolutely did not mean to mislead anyone or anything of that nature, just trying to get ahead.  MIght just need to step back and learn more before I try again.  

 Get a license. Stay legal. Have more opportunities.

John Thedford, Real Estate Agent in FL (#BK3098153)
239-200-5600
Originally posted by @Natalie Allen :

John could you help me understand the difference between wholesaling a property and brokering it?  I wasn’t trying to broker it but I want to make sure I am understanding the difference. My purchase agreement lists our business name and/or assigns.  Does this not clarify enough my intentions for the house?  I’m sorry if these are dumb questions but I’d rather look stupid now rather than later.  

 In reality, if you cannot assign the contract, you don't sell the house. That is brokering. Now, is it LEGAL in your state? Maybe, maybe not. Technically, assignments are legal. But, there are actions you could take that ARE illegal. Many states define brokering as selling property for another. Some prohibit advertising properties you do not own. As an example, in FL, lots of people have gotten cease and desist orders from the state for advertising properties they do not own even though they had a contract on them. In reality, in many states this is skirting the law and basically brokering without a license. The unlicensed brokers, never to tell the truth, call themselves "wholesalers" because that sounds more respectable than "unlicensed brokers".  One poster stated that my statements are false and assigning is not a new activity. They are simply justifying their actions which may or may not be legal depending upon their state laws. I make my contracts assignable, but actually CLOSE and simply put the properties I purchase in different entities I control. No fraud or deception there. 

As to your intentions, if you hold yourself out to a seller as a buyer, and use BS escape clauses, that is FRAUD. Many unlicensed brokers typical M/O is FRAUD BY INDUCEMENT. If they cannot assign (SELL the property)---they use one of their escape clauses to walk away. So, like it or not, you ARE attempting to broker real estate---legally or not depending on your state laws AND your actions. Your best guidance would come from your state RE commission as to what is legal or not. 

Last, consider your actions. Would you want someone to pull a fast one on your mom, sister, best friend---LIE to them--promise to buy---and then walk away if they cannot assign? This IS what many of these FRAUDS AND SCAMMERS do.

John Thedford, Real Estate Agent in FL (#BK3098153)
239-200-5600

Natalie: read up near the top and check out Jay's post. There are legal and illegal ways to operate. WATCH OUT who you take advice from. There are always a lot of people that are breaking the laws offering free advice but the question is: do you want to stay legal and make money, or take some idiots advice and end up in trouble? Personally, I prefer to operate with caution in anything I do ...and now 24 years into the NFA business and 12 years in RE---not one complaint or legal issue. Life IS good.....................................

John Thedford, Real Estate Agent in FL (#BK3098153)
239-200-5600

@Natalie Allen Thank you for placing your post and generating some energetic interaction on this topic. You aren't the first or the last to raise the issue of assigning properties. From a big picture point of view, there are three separate issues:

1. Legality

2. Morality

3. Strategy

So, to the first point about it being legal...you'll have to check in your State. In NC, it's legal, but the previous AG who is now Governor felt it was anti-consumer, and the NC Real Estate Commission also did not take very kindly to assignments--I'm summarizing to add color commentary to the issue--you need to understand IN, assuming your property is local.

The second point is to consider what's right. If you've told someone you are going to buy their property, but you didn't let the seller know you were only going to buy their property if you found someone to assign it to, that doesn't seem like a very good long-term way of doing business. I know lots of people do it that way--I just like being able to put my head on the pillow at night knowing I felt good about how I did business. Your call. If you are going to assign properties, be upfront about it and communicate with the seller throughout the process.

In terms of strategy, why not just purchase the property? If you don't have the cash, take out a HML and then market the property.

There's a guy named Will Hull in Indy who may be able to help...PM me if you want his contact info.

@Natalie Allen

Something no one here has said that may be an option for you is to post the property on the BP marketplace. I am not going to advise on your past actions, information for a better experience next time is available here on BP, just validate before you act on it. In moving forward to try and solve the current problem as others have said contact everyone who may even be close to interested, post on the BP marketplace there are hundreds+ of people on this site that are looking for deals (myself included) as someone above said contact the We buy ugly houses people, or any other signs that advertise to purchase properties, contact hard money lenders to purchase yourself. 

Personally, I think the most important thing for your business image is to close the deal. (if it really is a good deal you should have no problem turning it around) Bad news spreads much faster than good.

Let me know if I can help with anything.

@Natalie Allen why not ask the local law makers if what you are doing is legal. From much of what I gather assignment is usually fine, however once you advertise the actual property is where things get questionable. If you don't own it, you usually cannot advertise to sell it. Again I would get with local authorities, tell them what you are doing and make certain it is legal. If you are worried about their response, then you might just have your answer!

As far as this situation. You put or assigns and assumed that was above board. That being the case, your seller should agree with you, correct? Assuming there was no misleading, you should be able to call them, explain that you weren't able to assign the deal and have to back out (if you can't buy it yourself or through the company). If they knew your intentions they shouldn't have an issue and should understand your situation. If they were misled, I imagine you will be out the EMD and hopefully nothing more.

Maybe the rules have changed on BP, but my understanding is that you can not post a property here that you don't own or have a listing agreement signed.  You could post that you have a contract for sale and be creative...

yes, I posted that I have the property under contract to purchase and I'm looking to assign the contract.  I'll check with the state and a RE attorney to make sure all of the words I'm using are legal. THANKS everyone for the advice, this has been so very helpful.  

(812) 989-3363

The last thing I want to do is back out of it.  I want a good reputation and this is a smaller town.  

(812) 989-3363

I had a realtor approach me with a client of hers that is interested in the house but will be going FHA, would it be a problem (assuming the timing would work for a double close) to have her close FHA instead of a cash buyer? I'm not sure if that is ok to do?

(812) 989-3363

In order for that realtor's buyer to get that FHA loan, you must be the owner for 90 days. On Day 91, the realtor can write a contract offer and the process can begin to get the buyer approved for the FHA loan. At that point, you're looking at another 4-6 weeks before it would actually close. So you'd have to plan on holding the property for 4-5 months. That would require that you get a hard money or private lender loan to close on it by 1/17.

Have you tried asking the seller for a 30 day extension? If they aren't readily amenable to that, you could offer a $25 per diem or perhaps a $500-$1000 additional non-refundable EMD. That would at least buy you more time to find a lender to get a loan for you.

This post has been removed.

Join the Largest Real Estate Investing Community

Basic membership is free, forever.