Backing out of a wholesale deal?

[Harlan Cox]

Hello BP community. I am new to wholesaling homes in the Maryland area so at the moment I am trying to make sure I have all the proper information in order to complete a deal successfully. If I put a house under contract only to find out that there is no one willing to purchase the home, how would I back out of the wholesale deal. Is there certain text that needs to be in my contract? Is there costs for backing out of a wholesale deal? I am not aware of the specific text that needs to be in my contract that will enable me to leave a deal at any time.

[Brian Tome]

@Harlan Cox

Welcome to BP!  You are in the right place to learn wholesaling.

Yours is a great question and the answer is yes.  You should put some "wiggle" language in your contract that allows you to back out if there is a serious problem or you are unable to find investors.  It could be as simple as a financing, inspection, or feasibility study contingency, or you could just limit any recovery for actions in breach to the value of your earnest money deposit, meaning you would surrender that deposit if you back out.

That being said, I would encourage you to position yourself to make the deal work before putting a house under contract.  Get your financing lined up in advance.  Have the money available whether it is your cash, a private lender, or a bank contact.  Then look for the devalued properties that you can add value to.  

While getting a property under contract and then shopping it around to wholesalers requires very little risk, it is also a sure fire way to develop a bad reputation.  If you waste investors' time by shopping them properties that are overpriced, they will not take you seriously and dismiss your future deals without consideration.  If you cause the property owner a delay and don't help them with the problem they are trying solve by entering into a contract with you, they will dislike you and probably give you a bad recommendation/review.

My advice is be careful and be patient.  Do your homework and find a property that will be a winner to start with.  That will make it much easier to get your second deal at the right price.

Good luck!