Beginner Wholesaler Advice

3 Replies

Hi there,

I'm just about ready to complete my first wholesale deal and would like clarification on one thing.

I understand that you need to have a clause in your contract that allows you to find a cash buyer in a specified time period. My question is are all fees due once that contract is assigned or prior to?

Originally posted by @Jalissa Hayes :

Hi there,

I'm just about ready to complete my first wholesale deal and would like clarification on one thing.

I understand that you need to have a clause in your contract that allows you to find a cash buyer in a specified time period. My question is are all fees due once that contract is assigned or prior to?

This sounds illegal and sounds like you are BROKERING without a license unless you have one.

 

Originally posted by @Jalissa Hayes :

Hi there,

I'm just about ready to complete my first wholesale deal and would like clarification on one thing.

I understand that you need to have a clause in your contract that allows you to find a cash buyer in a specified time period. My question is are all fees due once that contract is assigned or prior to?

To answer your question, your fee would be paid at close of escrow and not before that (which is the proper way to execute it although I have seen wholesalers ask for and get paid at assignment signing). I would never pay a wholesaler for an assignment fee before the deal closed. What if the seller was unable to deliver clear title, or what if the seller died while in escrow and it would take a year or more to settle the estate before it could be sold by the heirs, or any other thing that could go wrong while in escrow. Now you have to hunt down the wholesaler who has your money and you have no deal. Not a good idea in any circumstance.

@John Thedford

Now, on to the legalities that John eluded to: In most states, assigning a contract and marketing that deal and or contract to others without holding a real estate license is brokering without a license and in many states, is a misdemeanor punishable by jail, fines, restitution, or all of the above. Assigning a contract, contrary to misguided popular belief, is NOT the only way to perform a wholesale deal. Without a license, you need to have the ability to close on the deal, then market and resell it or you need to have a buyer in place ahead of time, and then lock up the contract using one of several vesting options (entity, trust, etc) with you being a principle of that entity and or trust as well as your buyer. Otherwise, negotiating a price with a seller without being a principle then marketing and reselling to another buyer violates licensing laws (in most states).

Originally posted by @Will Barnard :
Originally posted by @Jalissa Hayes:

Hi there,

I'm just about ready to complete my first wholesale deal and would like clarification on one thing.

I believe the clause stating they are bringing an end buyer is CLEARLY brokering. Where DO these people get these ideas?

I understand that you need to have a clause in your contract that allows you to find a cash buyer in a specified time period. My question is are all fees due once that contract is assigned or prior to?

 To answer your question, your fee would be paid at close of escrow and not before that (which is the proper way to execute it although I have seen wholesalers ask for and get paid at assignment signing). I would never pay a wholesaler for an assignment fee before the deal closed. What if the seller was unable to deliver clear title, or what if the seller died while in escrow and it would take a year or more to settle the estate before it could be sold by the heirs, or any other thing that could go wrong while in escrow. Now you have to hunt down the wholesaler who has your money and you have no deal. Not a good idea in any circumstance.

@John Thedford

Now, on to the legalities that John eluded to: In most states, assigning a contract and marketing that deal and or contract to others without holding a real estate license is brokering without a license and in many states, is a misdemeanor punishable by jail, fines, restitution, or all of the above. Assigning a contract, contrary to misguided popular belief, is NOT the only way to perform a wholesale deal. Without a license, you need to have the ability to close on the deal, then market and resell it or you need to have a buyer in place ahead of time, and then lock up the contract using one of several vesting options (entity, trust, etc) with you being a principle of that entity and or trust as well as your buyer. Otherwise, negotiating a price with a seller without being a principle then marketing and reselling to another buyer violates licensing laws (in most states).

 

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