Wholesaling on the right side of the Law? - NJ

2 Replies

Hi, thank you for clicking my post! I'm new to wholesaling and have yet to make my first deal out of fear that I'll make a legal mistake. I'm hoping to connect with a wholesaler in the NJ/Tristate area who may be willing to answer a couple questions I have about the legal component of the business. Some things I'm looking to answer:

- How exactly does a contract assignment wholesale deal work?

- Do you have any recommendations for a good real estate lawyer to consult?

- What are some rookie mistakes to avoid when drafting my initial contracts?

Any help would be greatly appreciated, and I'd be glad to buy you lunch!

What is your funding situation? Do you have capital? Generally, to your first question, you are writing a contract to buy the house in question with a provision that you can assign your rights to the contract to someone else who will close the deal. Most wholesale contracts provide an out if you can't sell it to someone else, but that's part of the main problem with why people hate wholesalers. You then market the property with permission to end buyers for more than what you have it Under Contract for, but in NJ if you aren't doing a double close you will need to disclose your contract price so they will know how much your spread is. If you are good at finding properties and getting good deals and your numbers are correct, no one will care, but most wholesalers, especially new ones, suck at all of that.

Rookie mistake #1 is not explaining to the seller that you are assigning the contract and don't have the money to buy it. Most wholesaler lie about their capital to get it Under Contract or have a "partner" with funding. No NJ RE attorney will give you a ton of info on wholesaling as many choose to avoid it for disclosure reasons.

Originally posted by @Jonathan Greene :

What is your funding situation? Do you have capital? Generally, to your first question, you are writing a contract to buy the house in question with a provision that you can assign your rights to the contract to someone else who will close the deal. Most wholesale contracts provide an out if you can't sell it to someone else, but that's part of the main problem with why people hate wholesalers. You then market the property with permission to end buyers for more than what you have it Under Contract for, but in NJ if you aren't doing a double close you will need to disclose your contract price so they will know how much your spread is. If you are good at finding properties and getting good deals and your numbers are correct, no one will care, but most wholesalers, especially new ones, suck at all of that.

Rookie mistake #1 is not explaining to the seller that you are assigning the contract and don't have the money to buy it. Most wholesaler lie about their capital to get it Under Contract or have a "partner" with funding. No NJ RE attorney will give you a ton of info on wholesaling as many choose to avoid it for disclosure reasons.

 Much appreciated Jon! Thank you for your input. For reference, I do not have a lot of capital and am looking to wholesaling as an opportunity to both bring in extra income to support a later real estate investment and to learn more about my market/real estate as a whole.