Wholesaling provisions in the Realtor Contract

[Charles Huang]

Hi all,

At our meetup last Saturday, I discussed the differences between the wholesaling provisions of the NVAR/GCAAR provisions and similar provisions found in some of the Bigger Pockets user uploaded contract.  

I just wanted to share the distinctions and the impacts it can have and would love to hear if people have had an experience working with a Realtor and then wholesaling that arrangement.

To understand wholesaling, it is good to be familiar with the contract term known as assignment. A legal definition of assignment is: "An assignment of a right is a manifestation of the assignor’s intention to transfer it by virtue of which the assignor’s right to performance by the obligor is extinguished in whole or in part and the as-signee acquires a right to such performance."  

Basically the act of wholesaling is assigning your rights in the sales contract to someone else for something of value.

Here is the distinction between what you can find in the sales contracts that Realtors may use and a sales contract you can find on Bigger Pockets.

GCAAR (§28) and NVAR (§32) Version 07/16 of the Sales Contract

“ASSIGNABILITY This Contract may not be assigned without the written consent of Buyer and Seller. If Buyer and Seller agree in writing to an assignment of this Contract, the original parties to this Contract remain obligated hereunder until Settlement.”

Compared to

BIGGER POCKETS Wholesale Purchase and Sale Contract

“ASSIGNABLE CONTRACT: BUYER MAY ASSIGN CONTRACT IF FINANCING CANNOT BE SECURED.”

The two things I would be cautious about in using the Realtors sales contract if one's intention is to wholesale only is: 1) the assignment/wholesaling of the buyer's right requires the seller's approval, and more importantly 2) the original parties, meaning the initial investor, remains liable until settlement. And if settlement doesn't occur, its easily arguable by the seller that the initial investor is liable to complete the settlement.

We'll be discussing more about wholesaling again at our next meetup, which can be found at: https://www.biggerpockets.com/forums/521/topics/41...