Story about how my deal was stolen

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Story about how my deal was stolen

Account Closed
Real Estate Agent · Richardson, TX · Member since 2014 · 511 posts · 161 votes

I debated for several months whether or not to put this story up on BP... but I feel I would be doing a disservice to the BP community if I wouldn't, especially to all the wholesalers in the Oklahoma area. Several months ago, James Martz (Jemco Properties LLC) went around me to buy a duplex I had under contract .


Through marketing efforts and diligent research, I was able to get this duplex under contract in the OKC area. The seller was behind on taxes for several years and property needed some cosmetic work. My intention was to flip this duplex and put it on the market after a light cosmetic rehab. However, the inspection report revealed issues with roof and foundation issues, even though this property was built back in 2005. The margins now were a bit too tight to make it work as a flip. but the deal still made sense from a buy and hold perspective. I decided it would be a better idea to wholesale this deal since I'm not a buy and hold guy.


I initially put the property on the BP market place and had a ton of interest but decided it would be a better to put it on the MLS and let a realtor handle all the process. After getting authorization by the seller to get the property up on the MLS, my realtor started advertising the property and we received tons of showing requests from other investors. My plan was to double close the deal. We had a blind offer from Jemco Properties, owned by James Martz. A day later, my realtor told me this guy had changed his mind. No specific reason was given.

Then the fun part begins. I  tried calling the seller multiple times because we wanted to show the property to other investors but he wasn't returning my calls. At this point I figured I had made a huge mistake. I had put up an inspection report up on the MLS with bids from GCs and a scope of work. Anyone with this information could literally just walk directly to the seller and steal the deal from me. After making  several calls to the seller for several weeks, I decide to give up. I even changed my caller ID but the seller would quickly hang up the phone because he was avoiding me. It was clear that he had made a deal with someone else. 

The title company e-mailed me to let me know someone else was trying to close on this deal with the seller . Eventually the contract expired and there was nothing I could do about it. 

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Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
8y
So much of this doesn’t make sense to me. If you had a lot of interest on BP marketplace why post it on the mls? I’m not a wholesaler but I can only imagine the amount of additional headaches you’d have in that transaction. I’m a normal, 1 or no agent transaction, you’ve got the seller, the buyer, lender and title company. In your case you had all of that plus yourself and an agent. That is a lot of Moving parts for one deal
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  • Charlie MacPherson
    China, ME · Member since 2014 · 3k+ posts · 4k+ votes
    8y

    @Account Closed Sounds like you were wholesaling, which in many states is considered to be practicing real estate without a license - an illegal activity.  It's certainly not legal here in MA, but I don't know OK law on the topic.

    If that was all there were to it, I'd say that's a risk you take in wholesaling.  A contract binding parties to an illegal activity cannot be enforced. 

    https://www.legalmatch.com/law-library/article/ill...

    However, you got a Realtor involved so it gets more complicated.  

    It's probable that he has a listing contract with the seller. In my market - and I suspect in yours - listing contracts are absolutely required to list a property on MLS.

    There are different kinds of listing agreements. The key feature in this case is whether it was an exclusive or not.

    If it was a non-exclusive right to sell, the seller was within his rights to sell to any other party.

    But if it was an exclusive right to sell, the Realtor has a few tools available.

    He can sue the seller for damages and will most likely win.  

    He can sue the buyer for "interference with contractual relations".  There may be other torts as well.

    As for you, it depends on whether wholesaling is legal in OK or not.  If it is legal, and depending on the contract language, the seller may have violated your contract.  As you state your intent was to double-close - a universally legal way to wholesale - you may have some of the same remedies available.

    If your losses amount to enough that it's worth it to you, I'd talk with a local attorney.

    Let us know how this all works out.  Good luck!

    1Reply
  • Michael Plante
    Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes
    8y
    Did you have a written contract with the seller?
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  • Michael Plante
    Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes
    8y
    Charlie MacPherson OP is a licensed real estate agent
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  • Charlie MacPherson
    China, ME · Member since 2014 · 3k+ posts · 4k+ votes
    8y

    @Michael Plante @Account Closed My apologies - I completely missed the fact that you're a licensed agent.  If you're licensed in OK, that would probably change things.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    8y
    Well, that’s a risk of wholesaling.....your contract on the property expired without closing the deal. I’m guessing your mls allows a listing by a non owner, hence your reason for obtaining permission to place it on the mls, so the agent’s contract was with you, not the owner, so the owner had no liabilities to the agent.
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  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    8y
    So much of this doesn’t make sense to me. If you had a lot of interest on BP marketplace why post it on the mls? I’m not a wholesaler but I can only imagine the amount of additional headaches you’d have in that transaction. I’m a normal, 1 or no agent transaction, you’ve got the seller, the buyer, lender and title company. In your case you had all of that plus yourself and an agent. That is a lot of Moving parts for one deal
    2Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y
    Originally posted by @Wayne Brooks:

    Well, that’s a risk of wholesaling.....your contract on the property expired without closing the deal. I’m guessing your mls allows a listing by a non owner, hence your reason for obtaining permission to place it on the mls, so the agent’s contract was with you, not the owner, so the owner had no liabilities to the agent.

    this is why in our MLS system we have a field for bumpable.. a buyer can bump the first party if they don't go hard with the EM as non refundable.. and remove all contingencies.. I guess the question of this one was the EM at risk.. or was this true wholesaling where there were still weasel clauses to get out of the deal if he could not resell.

    Also its not that uncommon for someone to put in a back up offer.. we encourage those as agents.. if we think the first offer is not super solid.. NOw to be fair in our market this would be quite rare.. IE agents would not go for it and sellers would not.. no reason to.. 

    However I have placed back up offers many times usually I never get it but occasionally I will get a call hey first offer did not close your now in first position. And since my EM is already in we just start the time lines and my due diligence I wont do an inspection or pay to do anything until I get into first position.. 

    And for sure on much bigger scale when I have flipped plats to national builders you can bet they are just waiting for us to not close.. 

    and will swoop in.. its just part of the game.. win some lose some..  but I don't personally buy or go into contract and try to flip contracts we close on 100% of what we aim at then resell.. we would never try to market something like this ahead of time just for these reasons.. unless I guess your talking little money like trying to make 5 or 10k flip fee. 

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  • Account Closed
    OP
    Real Estate Agent · Richardson, TX · Member since 2014 · 511 posts · 161 votes
    8y

    @Charlie macpherson I'm licensed in Texas and Illinois but not in Oklahoma. I got permission from the seller but there was no listing agreement between agent and seller. The agreement was between me and the agent and he said this was legal as long as I double close. 

    I only created this thread  so people Don't risk losing their deals and deal with this guy. Even the buyer's agent probably doesn't know he closed the deal and I very much doubt the buyer's agent got compensated for bringing this deal to his attention. 

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  • Account Closed
    OP
    Real Estate Agent · Richardson, TX · Member since 2014 · 511 posts · 161 votes
    8y

    I was making 6k after paying realtor fees and paying my share of closing costs. In this case, it really wasn't worth it to close and then sell it since margins are thin. 

    I just won't put another deal on the MLS again while having equitable interest . Someone could easily check ownership and if it doesn't match the contract, they'll just go around me again.

    @caleb heimsoth I live in Dallas and being 3 hours away from the property complicates things . The seller was hard to reach at times and I didn't want to set appointments without me being there. So I figured, if people are willing to pay around 80 percent of ARV on the MLS and around 75-77 percent of ARV on BP, then I'm better off putting this deal on the MLS.

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  • Michael Lee
    Investor · Coppell, TX · Member since 2008 · 2k+ posts · 646 votes
    8y

    Hello Daniel!  Thank you for that post.   It reminded me that if there was any money involved there could be a crook there or an owner would just about do anything for money.  i am sorry that this happened to you and I hope this still gave a worthy couple of things that will help you in the future.  I see that you are in Richardson.  when I where I was 14 that was where I got my first job and the tickets I got on my motorcycle and I got paid a $1.50 per hour.got my license suspended when I turned 16.  T he worst thing was that my dad had bought me a brand new truck and had a customized 8 track sound system installed and it had to sit in his garage for 2 months. 

    My parents got divorced when I was in the 5th grade but he kept me in his life and tried to be a regular father that made sure I did certain things like going to and graduating from college.  I have got many things to say so bare with me.

    I would encourage you to close sooner and consider a Buy and Hold strategy along with wholesaling.  Buy and Hold deals don't really require any special talent and could eventually provide you with positive cash flow and give you an increase in value that could allow you to retire comfortably with all of your properties managed by a property management company doing the daily management and sending you some checks every month that you can survive on and, hopefully, doing whatever you want to do.  Hiring a good management company would take care of doing most of the necessary work everyday but you would have to manage them to verify they are doing what they ought to do.  Do not hire someone because they are cheaper.  You probably will get what you pay for and you can tell what kind of reporting they should give to you, especially financial reporting and how often.

    Being a real estate Agent should help you but you should keep currently educating yourself so you can get current information to help you stay on top of things.  The required continuation of what your license will not be enough.  You should be going on your local real estate clubs and events and networking wherever you go and hanging out with successful people and let them talk and be a good listener.  The more you let them talk, the more you should learn. I grew up in Lake Highlands and got away with more because my Dad did not live with us.  You did not mention how old you are but I assumed you were fairly young.

    Just to give a little bit about me and why you should listen to me.  I graduated from college with honors in business that emphasized real estate.  When I graduated from college you could go directly to being a real estate broker and being a graduate  from college gave me all of the credit I needed to take that test.  I had that license for about 30 years.  I soon found out I would not be able to do that and got  into construction management.  I did that for about 30 years but never did real estate full time. I am now 61 years old and a few years ago I had an unexpected brain annuerism and a stroke.  I'm still bedridden and cannot walk or work for the last few years but it has given me the time to learn about real estate investment full time and I have learned much that has enabled me to help many others, mostly Newbies, at BiggerPockets.  I have told you enough for now but if you think I can help you in anyway, please contact me through BP.  I am on their website just about everyday.  Good luck to you!

    2Reply
  • Patrick Ellis
    Contractor · Dallas, TX · Member since 2016 · 97 posts · 38 votes
    8y

    Daniel, if you truly had this deal under contract with the seller, why wouldn't you just look to sue for specific performance. You can also file a lien on the property as an interested party, putting cloud on title so they can't close.

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  • Account Closed
    OP
    Real Estate Agent · Richardson, TX · Member since 2014 · 511 posts · 161 votes
    8y

    @Patrick Ellis Yeah, I'm quite aware I could have clouded the title or sue for specific performance. But forcing someone to close or sell  me their property it's just not my style. My loss on this deal was the cost per lead, my time, the inspection report, etc. Now, if I'd be losing several thousands of dollars out of my pocket in this deal, then I'd really consider clouding title or suing for specific performance. 

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  • Patrick Ellis
    Contractor · Dallas, TX · Member since 2016 · 97 posts · 38 votes
    8y

    I hear ya. Seemed like you were pretty upset over the whole thing. Enough so that you chose to blast this guy openly for nabbing your deal.

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  • Account Closed
    Rental Property Investor · Friendswood, TX · Member since 2010 · 663 posts · 508 votes
    8y

    I didn't read the replies, crap happens, you will be ripped off, cheated, stolen from.  Move past it, get the next deal close, make some money. 

    People who do these shenanigans aren't going to be around for the long haul. Find deals with better spreads, close them yourself and skip this whole process . 


    Good luck . 

    1Reply
  • Ron Daugherty
    Flipper · Oklahoma City, OK · Member since 2015 · 61 posts · 51 votes
    8y

    Daniel,  sorry to hear about that.  I think I was one of the people that asked you about the property.  It's too bad this happened, sounds like you learned from it.   Checking County records, doesn't look like Jemco is all that active in the county.  

    Personally, I don't have time for marketing so I don't have a problem with a wholesaler making money on a deal they refer to me.  Within reason, I did cut ties with one that tried to make what I thought was an excessive fee.  Doesn't sound like you were doing that on this one though.  

    I would have clouded the title to send a message to the buyer.  You were probably too nice on that end.  

    But, lesson learned and you'll know what not to do going forward.

    1Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    8y
    I love how people jump to “cloud the title”.....the Wholesaler’s contract expired because he didn’t close. He no longer has a valid contract, the owner did not breach the contract, he had no rights to cloud the title.
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  • Account Closed
    OP
    Real Estate Agent · Richardson, TX · Member since 2014 · 511 posts · 161 votes
    8y

    @Wayne Brooks I think they meant to say that I should have clouded title while I was under contract (ie filing a notice of contract with the county). Wouldn't I be on my right to do this knowing the seller is violating the terms the contract? 

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    8y

    Easy solution is to close on the property then to market it.  If you dont...this will absolutely happen to you again in the future.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    8y

    @Account Closed Yes, normally a memorandum of contract would be filed when you execute your contract.  But, so what?  Once your contract expires because you didn't/couldn't close, you no longer have a contract.  You'd have to release/remove your memorandum filing since you no longer have a contract, and the seller did not breach it.  If you don't release the "cloud" the owner can own your a?? for damages.

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