All Forum Posts by: Dan Mahoney

I have come across four kinds of wholesalers in Atlanta:

1) They have a contract with a property owner to buy a property, they plan to close the transaction as agreed with the seller, and they will immediately resell to you (at a higher price) in a double closing.

2) They have a contract with a property owner to buy a property and will assign the contract to you for a fee.

3) They have a contract with another wholesaler assigning a contract with a property owner and will re-assign the contract to you for a fee.  Sometimes the contract has been assigned several times and "marked up" with each assignment.  Usually this happens because the original deal wasn't that good, which means the marked up deal is awful.

4) They are marketing properties that others have (or claim to have) under contract.  Sometimes these individuals are part of a "network" where there are 50 guys marketing the same four overpriced houses.  

Version #1 is legit.  #2 works if the wholesaler is prepared to close on the contract if they don't find another buyer.  Do not be #3 or #4.  Not only are these guys shady, but they don't make any money because they rarely if ever actually close a deal.  

I am not a lawyer but here is my amateur understanding of Georgia law:  You need a license to sell real estate on behalf of a third party (i.e., as an agent).  You do not need a license to sell a property you own (i.e., "for sale by owner."). Wholesaling without a license may be acceptable if you are acting as a principal, which requires entering the contract with the intent and ability to close (i.e., version #1 and possibly version #2 above).

Good luck and be careful out there.  Lots of scammers in Atlanta.

Unless your net worth is above, say, $5 million, you would probably be adding needless cost and complexity to your affairs by pursuing bulletproof asset protection with an attorney.  Put a mortgage or two on each property to pull out equity and get a $5 million personal umbrella policy.  If you are a little more paranoid, you can move the properties (and your non real estate investments) into LLCs or trusts.  All this assumes you're operating above board in everything you do.

Mahesh, that seems high.  However, you do need to keep in mind that some of the closing costs are fixed (e.g., appraisal, title search, attorney's fees) so closing cost can actually be quite high as a percentage of a $75k loan (while the appraisal fee is a rounding error as a percentage of a $750k loan).  So, while $7-8k feels high, I wouldn't be surprised by $4-5k per mortgage.