How to sty out of trouble as a wholesaler in Texas

Question

Hey BP members!I've talked to a few investors I know and there seems to be a need for quality wholesalers in my area. I live in Texas, and I want to make sure I do it legally. What kind of things get most wholesalers in trouble? Is there a good forum/guide/podcast etc. on the subject? Are there any laws in Texas I need to be aware of? The last thing I want to do in get a bad reputation on my first deal. Any help would be greatly appreciated!

John Hixon · Answer

@Brad Moody Well I am not a lawyer so I cannot speak as to the legal lines. All I do is write up a contract with the seller, I put down $3K-$5K earnest money and send it off to the title company I then call up my buyer he drops by looks at the house and we sign an assignment agreement and then I send that to the title company and that is it. A couple week later everyone closes and I get a check. If you have real concerns regarding this it would probably be best to speak with a real estate lawyer who is familiar with investing. I do not freely market the property because I really just have one serious buyer. I always let the seller know that I might be assigning the deal. I have an addendum that says I have the right to assign this contract, the seller signs it and I put it with the contract. That way there are no surprises and they know exactly what I am doing. I would always be upfront with both parties, no reason to not be. In my experience people do not car as long as they are getting the price they agreed to in the contract. So, as long as you are upfront and honest from the start then I do not fore see any issues. It is when you try and hide things and then the seller finds out that it could cause an issue. If I know from the start that a property is not going to work for me to buy and either turn into a rental or flip I tell the seller this. I say, "look, in order for me to buy this property I would need to get it for X amount due to the high cost of money and time. But, I work with a large investment group that has access to money and people I do not. I think the best option would be for me to work with them on this deal and I could offer to X amount" That way I am being 100% honest in that for me to buy the house I really would have to offer much lower then my buyer can buy the house at . So, the seller gets more money, I make some on an assignment and my buyer gets a house to flip or rent.

Jeff Filali · Answer

The biggest problem I have had with most wholesalers in Texas, is they make up fictitious inflated ARV's and Estimated Repairs trying to make their deals work. Investors aren't stupid, be honest with your numbers and you will do well. Either the numbers are right or they're not. But if you send out bad numbers, you will ruin your credibility and lose the potential for any future deals. Send us good deals, and we will buy. Send us bad deals, and you go to spam list. Good luck!!

John Hixon · Answer

@Brad Moody Welcome to BP.I am a wholesaler is Dallas and as you said there are not a lot of great wholesalers around. Most try to make a killing on one deal and never end up finding a buyer and then dump the contract at the last second due to a weasel clause they have in it and the homeowner is screwed. If you cannot afford the house you are writing a contract on then you do not need to be writing that contract. Also, put down real earnest money $3,000 +. I see this crap all the time were some wholesaler puts on $20 as earnest money on a $250,000 home. If your intent is to wholesale or assign the property then be upfront with the seller. Trust me, they don't care. I even have all of my sellers sign an addendum that I attach to the contract that states I will be assigning this deal. Try and find a serious cash buyer, it makes like so much easier. I have one buyer and he has bought all of my deals and will buy any and every deal I get. Unfortunately most so called "serious cash buyers" are worthless I tried dealing with a couple of them before I found my buyer and have from time to time called some since and they always want the property I have under contract for $10K-$20K less then what I have it under contract for. Sorry for my rant, to get back to your question. Just do not do something dumb, be honest with the sellers and get your contract and assignment form to the title company ASAP. Stay in contact with the sellers and let them know what is going on. Use the standard TREC contract and forms not some contract you found online. Well I guess that is it. Feel free to ask any questions you have. Best of luck.

Corey Grant · Answer

Flip Nerd is a podcast that is put on by a guy in Dallas. May find some good state level info in his shows and forums. Also Tom Kroll's pod cast Wholsaling Inc by Investor Grit had a great piece of advice on the topic of legality. It sounds like their general advice for step 1 is to contact a local real estate attorney and find out about the laws for your state. Then you can proceed with confiedence!

Shelby Junge · Answer

I feel the name "wholesaler" is frowned upon by most. There are plenty out there that give us a bad reputation. My opinion is treat people right, sellers, buyers, everyone. You treat them right and everything will fall into place. Your biggest challenge will be finding the off market deals and at the right price. If you find anything up near DFW hit me up, I will buy if numbers work. I'm a realtor here in TX, an investor, and wholesaler. It is a numbers game, nothing more than that. Good Luck @Brad Moody

Jay Hinrichs · Answer

Caveat Emptor to the tenth power when dealing with most Texas wholesalers is what I learned.

Brad Moody · Answer

@John Hixon that's a great way to disclose to the seller your intentions upfront.@VeinTwain Herron I understand the concerns. I had my real estate license in SC many years ago, and remember the serious comment it takes.

VeinTwain H. · Answer

I can't give legal advice but as others have said if you are going to wholesale be honest especially if you are working with an agent I only do business with 2 wholesalers because we have a mutual understanding of what the other wants. The biggest thing I will say is don't try lying to experience agents because once you get caught in a lie your reputation is ruined. I personally will never do business with someone who I catch in a lie because as a licensed agent I can loss my license for things that others view as white lies. For you first few deals I'd recommend you use the assignment method it is very simple and there is an assignment clause in standard forms once you get good you can start using the double close method. Good luck and make sure you never claim to be a Realtor or Real Estate Agent because that is illegal in Texas

Lauren Lockett · Answer

The biggest advice I'd give is to buy low, sell low. That's what I learned this weekend at a local meetup! I believe you'll have more success in passing on true deals to other investors when they know they are truly getting a good deal! And ditto the comments above! @Brad Moody

Brad Moody · Answer

Thanks @John Hixon! Those are some great suggestions. I guess I am worried about crossing a legal line between realtor and wholesaler. I've read things that say the line can be blurred. Can I freely market the contract when it's in place? Can I freely tell both parties my intentions? Can I advertise I am a wholesaler?