Question on the wholesaling process

33 Replies

I am just learning about wholesaling and I wanted to make sure that I understood the framework of the process. From my understanding, the various phases of a wholesale deal include the following:

  1. A call is received from home owner as a result of marketing efforts 
  2. Provide a range that we (wholesaler) would be willing to offer
  3. Review property and required renovations to determine selling price to market to buyers list
  4. Get contract signed by home owner
  5. Record contract with county
  6. Market property to established buyer list
  7. Once buyer is interested complete the assignment contact
  8. Receive deposit from buyer and put in escrow with title company
  9. Set closing date with title company for double close 

Did I miss anything related to the process?

Thank you

Jamie 

Hello Sir To My Knowledge Everything Looks Accurate. #5 and #9 Would Be Similar But A Great Way About Getting The Title Search Handled And Processed. Just My 2 cents Great Post!

I don't ever record the contract with the county.  Just from an ethical standpoint, I'm sure you contract has outs for you, you should let the seller out if they really want to.  Besides if they decide to hold the property instead of sell, I'm not sure there is much you could do to force them to sell.

Originally posted by @John Horner :

I don't ever record the contract with the county.  Just from an ethical standpoint, I'm sure you contract has outs for you, you should let the seller out if they really want to.  Besides if they decide to hold the property instead of sell, I'm not sure there is much you could do to force them to sell.

recording a contract is a very poor move.. and some counties wont do it.. also do check with state of FLA on marketing properties you don't own.. there are some rules there that need to be looked at.. 

If you cloud someones title on a scheme were you personally do not have the funds to close you could find yourself in a situation where you caused damage to the seller and your liable. 

also its prima facia evidence your selling real estate without a license..

Sorry NOT legal. Violation of FL laws and is brokering without a license. See 475. 

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

Hi everyone!!!
Just really quick!!

1.Check your local laws.
2.Network with other wholesalers in your area AND present THEM with your question
3. Don’t let anyone discourage you from ANYTHING
4. If Florida law does not allow assignment, do a double close. If no title company does a double close wholetail the property.
5. If none of this sounds appealing try wholesaling from a distance or working for one of the bigger wholesalers in your area to learn the ropes and add value

Originally posted by @Jorge De Jesus :

Hi everyone!!!
Just really quick!!

1.Check your local laws.
2.Network with other wholesalers in your area AND present THEM with your question
3. Don’t let anyone discourage you from ANYTHING
4. If Florida law does not allow assignment, do a double close. If no title company does a double close wholetail the property.
5. If none of this sounds appealing try wholesaling from a distance or working for one of the bigger wholesalers in your area to learn the ropes and add value

 Best not to take advice from people (especially unlicensed brokers) that either don't know or care about staying legal. FL law does not allow advertising of properties not owned unless licensed. Using contracts to circumvent licensing law is not legal. 475 is the statute. Florida specifically addressed this due to the number of victims of these types of operators.

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

Great advice @John Thedford !

Definitely agree! That’s why like to preface my input with CHECK YOUR LOCAL LAW!

And again great point on anyone trying to circumvent the law! No venture is worth the risk of incarceration or fines!

And advice from anyone unlicensed? Well... I’d tread lightly on that. Go back through threads, forums and podcasts and go call every unlicensed person out

Originally posted by @Jorge De Jesus :

Hi everyone!!!
Just really quick!!

1.Check your local laws.
2.Network with other wholesalers in your area AND present THEM with your question
3. Don’t let anyone discourage you from ANYTHING
4. If Florida law does not allow assignment, do a double close. If no title company does a double close wholetail the property.
5. If none of this sounds appealing try wholesaling from a distance or working for one of the bigger wholesalers in your area to learn the ropes and add value

Jorge all the biggest wholesalers in florida are licensed brokerages.. I have dealt with them for many years.. although to be frank most have shut down.. wholesaling in a tight market is a waste of time for most and not profitable for many

Thank you @Jay Hinrichs
That’s what I was looking for!

This is really great information! I certainly would not want to violate any law. I have read that recording of the contract was one of the steps. This is one of the reasons I created this thread is to validate before taking any action. @John Horner and @Jay Hinrichs thank you for calling that out. @Jorge De Jesus great advice! 

Good Morning:

It depends on the laws of your state, but typically you do not need to record the purchase agreement between the buyer and the seller.  Additionally, the assignment contract does not need to be recorded.

Further, check the rules on double closing in your state.  You may be required to use your own financing to fund the first closing and then the end buyer brings the financing needs to purchase from you in the second closing.

Best,

Johnetta

@JorgeDeJesus

I am a real estate attorney based in Chicago, IL.  My company does not provide transactional funding.  

O I’m not soliciting! Just presenting a viable option for closing and immediately reselling? Perhaps even look into purchasing the property, light rehab and selling to investors if you purchase at a deep enough discount?

Closing and then reselling is 100% legal. Most of these guys call themselves "flipper" but some call themselves "wholesalers". It is the marketing of properties that are not owned that requires a license. Look at this like this: if you assign a contract, you ARE bringing an end buyer, which means representing the owner. If you cannot assign, you cannot sell the property. This is why advertising properties, unless you own them, is a brokerage activity.

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

@John Thedford what would you say then to equitable interest or is that not legal or usable anymore?

Originally posted by @Jorge De Jesus :

@John Thedford what would you say then to equitable interest or is that not legal or usable anymore?

Equitable interest is NOT ownership. 

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

This type of conversation is exactly why I have not taken action with wholesaling due to the ambiguity of the process. It seems there are always two extremes in perspective related to this model. Now a novice question here so please be kind, what aspect of wholesaling is unethical or illegal? Is it the interpretation of the law as brokering a deal ( which I agree should only be done by a legal and licensed entity and understandably varies by location), is it the approach that wholesalers may take interpreted as predatory or is it something else? It seems that in many areas you can find wholesalers so are they all illegal? Again I am asking these questions without judgment but to understand the feasibility of using this strategy as a way to build cash to being the BRRR process for buy and hold strategy.

We would go back to checking your local laws. You canNOT broker a deal or represent a seller.

Safest model for your area?
Transactional funding or find a partner to lend you at x interest and resell asap if you buy right

Originally posted by @Jamie Rost :

This type of conversation is exactly why I have not taken action with wholesaling due to the ambiguity of the process. It seems there are always two extremes in perspective related to this model. Now a novice question here so please be kind, what aspect of wholesaling is unethical or illegal? Is it the interpretation of the law as brokering a deal ( which I agree should only be done by a legal and licensed entity and understandably varies by location), is it the approach that wholesalers may take interpreted as predatory or is it something else? It seems that in many areas you can find wholesalers so are they all illegal? Again I am asking these questions without judgment but to understand the feasibility of using this strategy as a way to build cash to being the BRRR process for buy and hold strategy.

 Florida law defines brokerage activities as:
A BAR SALE
Advertising
Buying
Appraising
Renting
Selling
Auctioning
Leasing
Exchaning
FOR ANOTHER. So, advertising properties you do not own, or bringing an end buyer ARE brokerage activities. This guy claims he was "misled"and that "asking questions" has caused problems? I am not sure how asking questions is illegal, but offering properties without a license comes to mind. No different than telling a bank teller "this is a holdup give me all your money". Even though they may not get away with the cash, that statement is certain to get them in trouble. 


https://www.biggerpockets.com/forums/21/topics/547...

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

@JorgeDeJesus

I am a real estate attorney based in Chicago, IL.  My company does not provide transactional funding.  

My state has taken the stance that transactional funding is a red flag to selling real estate without a license.

IE they had to advertise the real estate to get a buyer and that using tran funding is a clear market that they had no intention to close on thier own and its part of their scheme to circumvent the RE brokerage laws.

I finally got feed up with the is it OK is it not.. and got in touch with our state regulator.. and advertising any property you don't own in our state is simply not legal.. etc.. but then again they only go after folks if a complaint is filed.. they are well aware of this activity.. So it really boils down to enforcement or lack thereof.

One of my bird dogs though got turned in for having a sign in a yard for a home he did not own.. the neighbor knew he did not own it.. neighbor probably wanted to buy it.. he turned the guy in.. after examination it was determined this was his business model and scheme and big fine and big lawyer fees later cease and desist and now he runs everything to me as I can close and we simply JV and never market anything until I have closed and own it.. even though I am an inactive broker..

@Jay 

@Jay Hinrichs

I'm personally going to go more the JV route if that is a sign of the times. And I suppose it won't hurt to go back and get my license.

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