Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes
7y
"When you get a property under contract, you are committing to buy the property."
Not true at all. We are mainly flippers, but because we get too many leads in, obviously we can not buy all the houses we get under contract. So in fact we do it the other way around. We tell them flat out that we have no intention of buying the house ourselves, and that we are going to wholesale it. We then add to this by telling them that we still may buy the house if we are able to, but count on us wholesaling it. 9 out of 10 times, the seller prefers us wholesaling it.
No drama 100% honest and full transparency.
Most wholesalers (if not all) are dishonest deceptive and manipulative. We always flat out tell the seller we will wholesale the house. And again they always rather us wholesale it than anything else. Its all about how you pitch it to them!
You can check on meetup . com or Facebook events to find real estate meet ups. Just approach people and introduce yourself then give them value so tell them your new but your willing to cold call for them, Drive for dollars, do follow ups for them to learn the game.
"If I put in my contract that I can cancel the contract at any time for any reason what so ever, I am covered." -------------------------- Wrong. If you put into your contract that you can cancel for any reason whatsoever, without loss of anything on your part, then the contract is a sham contract because there is no reciprocal obligation, no reciprocal consideration. Sham contracts are not contracts, which means you run the risk of assigning a "contract" to a third party while the seller sells to a fourth party, and defends his action on the grounds that you never entered into a contract to purchase. Then you just bought a whole lot of trouble with your assignee.
You might be able to limit your liability to your deposit, but that's an obligation. It also means that the contract wasn't "cancelled." Words have meaning. People rely -- right, wrong, or indifferent -- on what posters post and the words they use. You made the whole contract-with-assignability seem trite. It's not. Cavalier attitudes get people in trouble
I know, I am a lawyer, with over 30 years experience, and I've had to dig people out of transactions such as you describe. Get paid very well for it, too.
Your approach to such transactions shows that you're playing with fire. That's not a nice thing to do when a newbie asks for advice.
" so what’s the ideal way to come out it so that I don’t get into legal troubles? "
-----------------------------
First, see a lawyer BEFORE you do anything. Tell him your plan and approach (strategy and tactics) and ask him what pitfalls you have to be wary of. Laws vary by state, and there are situations and exceptions to every law/rule/guide you can come with. That means you start with the lawyer.
Second, I DO like Noorden's practice of telling the seller that he might assign the contract. Transparency is best. Just accept the fact that if you can't assign and you don't buy, you have lost your earnest money. Don't whine about it.
Third, see a lawyer BEFORE . . .
Fourth, accept the golden rule -- if you think you won't be bound to buy as a general matter should you feel like it -- and draft a contract accordingly -- then don't whine when the seller feels that he's not bound to sell as a general matter should he feel like it. 'Cuz I got dollars to doughnuts that a judge will let the seller say "here's your earnest money, I'm selling to someone else" even if you assigned your so-called "contract" to a third party.
Fifth, see a lawyer BEFORE . . .
And when all is said and done, see another lawyer for a second opinion.
Investor and Commercial Real Estate Agent · New York City, NY · Member since 2013 · 109 posts · 67 votes
7y
Here is a simple way to get started wholesaling or assigning deals without making a major commitment to buy the property; and you can back out at anytime with no legal repercussions and only risk anywhere from $10 to $100 or even $1,000 in certain cases. I used this myself with success when I was getting started. It is "THE OPTION CONTRACT".
When I find a property where I know I will be flipping it to another investor, I will tell the owner that I am very interested in his property. I let him know that I have a number of investor partners who I would like to show this deal to and select one who would partner with me. We will buy it as-is and close quickly but before I can speak to them I would like to agree on the price and if you would be willing to give me an option to buy it at that price within the next 10 days (or 20, 30 days).
An option contract gives you the right to buy an asset (house) but not the obligation to buy it until you exercise your option. At that point your option contract gets replaced by Purchase and Sale contract. I usually pay anywhere from $10 to $100 on average for my option consideration. The longer the option the more consideration I will give. Consideration is not a down payment or deposit and it is not refundable.
Once I have a signed option contract on hand, I then contact my investors who may be interested in the deal. I tell them that I have a contract on the property (I don't tell them that it is an option contract) and proceed to show them the deal. If the property is vacant, I even do a walk thru with my investors. If I cannot unload my contract then I will simply let it expire and lose the option consideration. I do call the seller though and explain to him that unfortunately I will not be able to exercise my option.
This technique is a good way for someone new to get out there and speak to sellers, negotiate with them and make offers. You don't need good credit, hard money or private money lined up beforehand. You just need to begin marketing and meet with sellers.
Real Estate Broker · Granby, CT · Member since 2015 · 694 posts · 317 votes
7y
@John Clark and that John, is exactly why anyone who is wholesaling needs to align with a local attorney that understands all the laws and nuances of their given state. One of the greatest flaws in wholesaling is that it is not "one-size fits all." Some states it can be (borderline - using that term to avoid the people out here who will ask me to site which states its' illegal in...) illegal to practice real estate without a license. Deception is rampant in wholesaling, yet most of it is glorified here on BP (I know this statement is not going to earn me any friends). The folks who ARE doing this correctly and honestly are the ones who will make more money, build more credibility, and ultimately help me people. If you can make wholesaling about helping people first, and earning money second, then it all falls into place...
If I had my way, wholesalers WOULD be required to purchase the property if they can't assign. This, in effect, would weed out the bad apples and the ones who don't have the experience and knowledge to understand how to make offers, seal up a deal and close. AND it would give more integrity to the field... my $.02
I started of house hacking and buying a single family in Detroit. After I began to wholesale by going to meet ups to meet other wholesalers then started to learn and start doing marketing.