Found a way to wholesale to retail conventional buyer...we just closed!

[Priscilla Z.]

I want to begin by saying that I do not recommend just ANYONE doing this, and my story is based in Florida and what we are able to do here....with that said, here's how our deal went down.

I was contacted by a seller who wanted to get rid of his house and not deal with Realtors, staging, showings, repairs, etc.  I went into contract with him just a little over what I would normally pay. I pitched it to my fellow investors, but numbers did not work for them and we did not want to purchase the house ourselves, our initial plan was an assignment.

As time passed we decided this house needed to be listed on the MLS to get a retail buyer. We spoke with the seller about having him list it to get exposure to retail buyers, and if a buyer showed up then our contract would still prevail, and we would just assign our contract over to the buyer, but we would deal with everything. He agreed and signed listing agreement.

Within a few hours of the house being listed we had our first showing and got an offer in the very next day, which we accepted.  Problem was the buyer was conventional, so now we needed to figure out how to go about this since we had never done this before.  We spoke with the Realtor that represents the buyer and lucky for us, he understands what we do.  After going back and forth with different people about what our best option was (submitting an invoice to be paid at closing, signing an option with seller and recording it, etc) we decided that the best and only sure way this deal could happen was if we recorded an "Affidavit and Notice of Interest in Real Property" (which states we have a contract on the property) and put the buyer and seller in contract directly.  We consulted with various underwriters and all said they would call for a release if this came up in a title search.  So, we had the buyer and seller go into contract.  At this point the seller knew what the sale price on the contract was.

During the title search our Affidavit came up, they asked us for a release, which we gave in exchange for...our wholesale fee.  Buyer was happy to get a deal, seller got what we agreed on, and now we know how to wholesale to a conventional buyer.

[Account Closed]

Originally posted by @Paul Z.:

@Account Closed the argument of whether wholesaling is legal or not legal will always be something of discussion. Kind of like what came first, the chicken or the egg. As @Account Closed stated I've always believed as well that as long as you have a secured interest in the property (i.e. a signed purchase contract AND a Earnest Money Deposit) then it is completely assignable as all contracts are unless stated otherwise in the contract (A HUD 5.0 says you cannot which is why I never use one in my transactions). The earnest money is what makes it a "secured interest" and I try to do it for the least amount possible (I've done it for $10 and/or $0).

@Priscilla Z. This deal was definitely a great read. I'm going to add it to my toolbox should I ever be put in a situation like yours. Great work!

I've never had any issue or problems with wholesaling or assignments or options or double closes, all of which I've done.  But some of the state RE bureau regs I've come across, first OH and then now FL, are going after what they perceive as brokering without a license by prohibiting activities that wholesalers typically do.  Marketing a property you don't own, contracting to buy or getting an option to buy without "significant" consideration, etc. If you read the FL code in the link it says that you ARE brokering even if you have an "equitable interest" (signed contract or option) but no significant consideration (real money) in the deal.  IMO, that's not something to ignore if you are in FL.

A lot of these threads on the legality of wholesaling continue to have a lot of people harping on what they want to be true and believe to be true without any investigation into codes and law that say otherwise.  It's my opinion that these RE bureau regs are in conflict with their own states' contract laws.  I think contract law would prevail in court.  But I'd hate to be sued by an Attorney General as a test case