Shreveport, LA · Member since 2019 · 18 posts · 7 votes
Hey everyone. I've decided that I want to get into wholesaling until I can build up enough money to start buying and flipping. I'm doing my homework before I actually attempt to find sellers/buyers so that I know what to do and don't make myself look foolish and to make sure I don't get in any legal trouble. That being said, I have a question.
I understand that when you find a seller you have to fill out a Purchase & Sale Contract and within that contract is where you state when you'll have the home sold to a buyer. So what happens if you aren't able to sell the home within the alotted time frame?
Is there a way to "back-out" of the contract or are you just up a creek without a paddle?
That's my biggest fear because I don't have the funds to buy a house if that happens. Can someone educate me on this??
In my state, there is a place in the contract that you can write a "back-out" clause.
Any contract is customizable, and your attorney should be able to write up the perfect contract.
Usually, you would have a time frame to assign the contract, 15 or 30 days is the usual time allotted for assigning the contract, it's your choice.
In the clause, you can write that you are able to terminate the contract for any reason or no reason at any time before the closing date, and all earnest money be refunded, and all responsibilities between you and the seller be terminated.
If you have 30 days until closing and if you can't find a buyer, just terminate the contract before the 30 days is up.
BUT, please talk to your attorney! They will be the one to give you the most accurate information and write you the perfect contract.
In my state, there is a place in the contract that you can write a "back-out" clause.
Any contract is customizable, and your attorney should be able to write up the perfect contract.
Usually, you would have a time frame to assign the contract, 15 or 30 days is the usual time allotted for assigning the contract, it's your choice.
In the clause, you can write that you are able to terminate the contract for any reason or no reason at any time before the closing date, and all earnest money be refunded, and all responsibilities between you and the seller be terminated.
If you have 30 days until closing and if you can't find a buyer, just terminate the contract before the 30 days is up.
BUT, please talk to your attorney! They will be the one to give you the most accurate information and write you the perfect contract.
Investor · Georgetown, Tx. · Member since 2019 · 149 posts · 69 votes
7y
@Ryan Adams I'm getting ready to wholesale in Texas! I had the same question you did. ;)
Ask your attorney to write you up a contract. Or a cheaper way is to ask a fellow wholesaler in your state about which contract they use, and if you could use it too.
Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
7y
If you represent yourself as a buyer and you truly are not a buyer that is called fraud. That seems to be the norm method of operation for most unlicensed brokers. This is why I refer to them as frauds and scammers.
Shreveport, LA · Member since 2019 · 18 posts · 7 votes
7y
@John Thedford gotcha so the proper way to do it would be to let the seller know that you’re more or less a middle man, right? Or would it be fair to say that you’re an investor rather than a buyer?
If I got my real estate license would that negate the fraud if I wasn’t the buyer or would it be the same?
@John Thedford gotcha so the proper way to do it would be to let the seller know that you’re more or less a middle man, right? Or would it be fair to say that you’re an investor rather than a buyer?
If I got my real estate license would that negate the fraud if I wasn’t the buyer or would it be the same?
If you are a licensee and make it clear to the seller that if you cannot assign you will back out of the deal that does less harm to the seller. Leading them to believe their house is sold and then using BS escape clauses not only hurts the seller, but it requires dishonesty to operate in that manner.
Shreveport, LA · Member since 2019 · 18 posts · 7 votes
7y
@John Thedford I want to be ethical for sure and don't want to screw anyone over and face the reprocussions such as bad word of mouth.
Should I get my Real Estate Liscence or is that just a foramlity though? Because I've heard that you need one and that you don't, or does it just depend on what state you live in?
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
7y
@Ryan Adams You certainly do Not want to be backing out just a few days before closing....you’d end up with people moving out of their homes, renting a new house, etc. A typical contract provides 7-14 days inspection period, which is your “back out” clause, with the closing in 30-45 days. Making a seller believe you are actually buying their house, as opposed to hoping to find another buyer for a higher price or you’ll walk away, is a whole different ethical issue.
Check your state laws, as advertising a house you don’t own, looking to flip the contract, violates the licensing in most states.....some are cracking down more than others.
Shreveport, LA · Member since 2019 · 18 posts · 7 votes
7y
@Wayne Brooks No, no, no I don't want to come across sounding like if I don't find a buyer I'm gonna back out. I was posing a hypothetical, like what if I have a buyer but then they split and I'm left with a house that I promised to buy but can't because I don't have the money for it. Basically just wanted to cover my bases but I'd prefer to have a list of buyers already in my pocket so that this never becomes an issue.
When I do start I'm going to be as transparent as possible with the seller bur for now I'm just asking questions and getting answers.
As far as checking state laws, would I find that information on the state website or are there other places I can go where that information is easier to find?
Real Estate Broker · Watertown, NY · Member since 2016 · 1k+ posts · 1k+ votes
7y
@Ryan Adams - You really shouldn't lock someone into contract with you if you don't have the ability to fulfill the contract. It screws with their life and gives you a bad reputation.
Just keep this rule of thumb. Only agree to buy amazing deals. If you follow that simple rule, then you'll have zero issues passing it off to another investor for an assignment fee.
@Wayne Brooks No, no, no I don't want to come across sounding like if I don't find a buyer I'm gonna back out. I was posing a hypothetical, like what if I have a buyer but then they split and I'm left with a house that I promised to buy but can't because I don't have the money for it. Basically just wanted to cover my bases but I'd prefer to have a list of buyers already in my pocket so that this never becomes an issue.
When I do start I'm going to be as transparent as possible with the seller bur for now I'm just asking questions and getting answers.
As far as checking state laws, would I find that information on the state website or are there other places I can go where that information is easier to find?
legal advice is one category, but moral or long term business advice is another. Legally, you can terminate, but you won't make it long in the industry terminating deals.
Shreveport, LA · Member since 2019 · 18 posts · 7 votes
7y
@Michael Ablan I'll make sure to remember that, thank you!
@Ronald Rohde I gotcha, recently I've shifted to long term thinking and while this is about me making money I also want to be able to help people. My post was initially just to understand my options in the event of a worst case scenario however I want to make sure I have buyers first before I even start thinking about finding sellers. Thank you!
Investor · Corpus Christi, TX · Member since 2012 · 2k+ posts · 1k+ votes
7y
There are many options within the TREC form for a buyer to terminate without weasel clauses. That being said, if you plan to be in business next year you MUST be honest with a seller. Don't tell them you're a cash buyer unless you have cash to buy. Don't tell them you'll buy the house if you have no intention of buying. Be honest so you don't cause harm to the seller. All it takes is a few hundred dollars and an aggressive first year attorney to make your life a living hell if a seller is harmed and they can prove you had neither the ability or desire to perform under the contract. My advice is this. If you have to lie to a seller in order to get their business, what will change once you have it? You're just starting out so now is the time to determine where your legal, moral and ethical boundaries reside. Choose wisely. Finally, be careful where you get your information. You'll find plenty of advice on all aspects of investing on this site...often from folks who have no experience in the area of which they're giving advice. Believe none of what you hear and only half of what you see.
Shreveport, LA · Member since 2019 · 18 posts · 7 votes
7y
@Guy Gimenez woah. That just resonated with me so much. I don’t ever want to have to back out of a deal and eventually when I get enough built up I want to been able to have the option to buy properties that I think are a deal. Thank you for the advice!