Wholesale deal make me nervous....

[Melba Chambers]

I only have one rental property as of now, so I'm still very new. I am ready to get my next property, however when it comes to buying from a wholesaler I am extremely nervous. I see so many wholesalers with "deals" but I can't convince myself to make an offer. I know only using MLS is going to limit my options but how can I get comfortable with wholesalers? I hear so many horrors story from people that have purchased that way. Any advice would be great!

[Tyler Combs]

You're smart to approach wholesale deals with caution, but there are great deals that can be found from wholesalers.  A few tips that can help protect you from the liability issues that arise from buying an assigned contract:

• Ask how the contract is being assigned.  Laws vary from state to state, but make sure the escrow company will be able to insure the transaction, and your lender will allow the assignment
• Ask if the seller knows the contract is being assigned. In our state, title companies require the seller(s) acknowledge the assignment.  Your liability exposure exponentially decreases the more transparency there is. Don't be afraid to ask for transparency across the board. Make sure you understand the promises made to the seller and make sure you can honor those promises.
• Require that you can see the unredacted original sale agreement. Use an NCND if needed to make wholesaler feel comfortable with giving you access to is ahead of time.  You, an experienced friend, and/or an attorney should review the sale agreement, any addendums and the assignment contract.
• Run your earnest money through escrow. Even if it's a reimbursement of the wholesaler's EM, deposit your EM with escrow and authorize release of the same amount back to the wholesaler.
• Don't pay the assignment fee until you've closed.  It doesn't matter what the story is, this my hard and fast rule that has saved me several times.
• Don't buy a property in an LLC without attorney oversight, and a judgement search.

Good luck!