Im selling fsbo...sign option contract w/ wholesaler?

Question

I have a home listed on the MLS (no realtor) for $575k in AZ. It's been on the market for 4 mo. Today I got a phone call from a wholesaler that tells me he can have my house sold within a few weeks for above asking price...but that I would need to sign a 30-day option contract for him to find a cash buyer/investor. Obviously...seems too good to be true and sounds like a scam to me. He emailed me a very simple, one and a half page contract... I don't see anything in the contract that is troubling but what is the catch here? I told him if an investor was going to spend 600k on my house why wouldn't they just buy it from me directly and make an offer under list price to save money? Nothing really adds up and sounds like a scam but I do not know a whole lot about wholesaling.... Any advice is really appreciated!

the market has been a little bit slow through the winter but I expect it to pick up this spring hopefully

Bob B. · Answer

I would wager he doesn't have $5,000.  He's heard this his is the best way to make $ in realestate

@Matthew Paul

Alan Johnson · Answer

@Nathan Oster  If it truly is an option contract then you will receive "valuable consideration" from him up front.... This means no strings attached (refundable, paid at closing, applied to purchase price, etc).

How much is the consideration he is willing to pay you?

The consideration should at a minimum cover your carry costs over the option period (mortgage payment, property tax, utilities).  On a $575k property this is quite likely to be more than a few hundred dollars.

I've started a member blog on the subject of options contracts.  Feel free to send me a private message if you want to discuss further.

...And good luck!

Bob B. · Answer

@Nathan

@Nathan Oster What makes you think he can sell it for more when you can's sell it on MLS.  Wholesale means "discount".  Why not list it with a realtor and get it sold.  "Run Forest run"

Nathan Oster · Answer

@Nii Okai thanks for the info.. would it be possible to show you, maybe text you the contract he emailed me?  It's literally a page and a half.  You might be able to help me make sense of it.  Can I pm you?

Nii Okai · Answer

Hi Nathan, the wholesaler's offer is completely legit. In my opinion he only wants to make money legally on the deal and I see nothing wrong with that - In actual fact, he is a savvy investor. Let me explain.

FIrst of all, here are 2 facts to keep in mind

i. Only licensees can receive commissions from the sale of real estate

ii. An option gives you the right to purchase the property, but not an obligation to do so.

Now, if this wholesaler were to bring you a buyer - you could refuse to pay him a commission and there is nothing he can do about that. There is no way he can sue you to pay him.  End of story.

On the other hand, with the option contract, he becomes a principal in the deal - with an "equitable interest". He now has the ability to either sell his "equitable interest" to a third party or do a double closing to pay you off on the settlement day.

By doing this, he has solved the problem of not being paid and he makes a nice paycheck at the close of the deal.

Now on the issue of "option consideration" there is no hard and fast rule as to how much should be put down. Whatever the parties agree to, is okay. it could even be for $1.00.

If you really want to sell your property, look no further. You have a valid buyer - if after 30 days he cannot perform, the contract lapses and it is over. And in that case you keep the $100 that he gave you. But if he performs, you are the biggest winner - because you are selling your house for full price without paying any real estate commission.

You are the winner in this deal. Go for it.

Matthew Paul · Answer

Tell him , you want $5000 cash , or certified funds . Watch the reaction on his face ?

Alan Johnson · Answer

@Nathan Oster  Yes, I agree that it's time to get an attorney involved!

Nathan Oster · Answer

@Bob B. I don't think he can sell it for more than my asking price...or at all for that matter.  I have sold a home fsbo before with no issue so I thought I would give it a whirl on this house as well.  we started off getting quite a few showings at first but then the holidays came and it has been pretty slow since.  I may just hire a realtor to get it done not sure yet but I am skeptical as well.... It is already on the MLS with excellent pictures, write up and several other websites.  What more is a realtor really going to do?  There's a good chance it will sell this spring anyway.  Basically I was just trying to save two to 3% on my end but I am still offering a 2% commission to a buyer's agent as well.

@Alan Johnson I don't see anything in his contract about valuable consideration up front but he does have consideration of $100 to be paid during escrow at signing by him and that is it.  I will check out your member blog.....I definitely would never do anything without a real estate attorney reviewing this contract first.  This wholesaler claims that he already has a buyer lined up for my house it all just seems too fishy.

Brian Pulaski · Answer

Did he have an answer as to why he would be able to sell your house for more than asking when the MLS didn't get it sold? Why isn't he an agent if he is that good of a seller? Seems fishy and I would have that contract in front of my lawyer before I did anything.

Im selling fsbo...sign option contract w/ wholesaler?

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