Lessons learned from wholesale deal turned into lawsuit

[Account Closed]

Originally Posted by  John ChapmanPOSTER  Investor Dallas, TX

"This is a kind embarrassing/bizarre story, but I figured I'd share it since everyone and there brother is getting into wholesaling. Basically, I was approached about buying a buy-and-hold home from a wholesaler in a decent area. I wasn't super excited but didn't have anything else going on. Long story short, we agreed to do a double close instead of an assignment" . . .

He accused the wholesaler of breaching the contract . . .

"I had enough, had the wholesaler assign me his claim, and sued the seller in state court. I'm a litigator so I did it myself. In the end, the seller settled with me and sold me the home, but this was only after I aggressively litigated the case. (Attorney fees would have easily been $15,000 if I had paid someone else to do it.)"

Here's what I took away from the lesson:

• Wholesaling sure seems like a lot of work to avoid licensing requirements. 
• All of this likely could have been avoided if I could have simply directly paid the wholesaler a referral fee, but I couldn't do that because he didn't have a license.
• Even if a wholesaler fully discloses that he is reselling the home or assigning the contract for a fee, there is going to be a certain percentage of sellers who are going to freak out and be pissed. This blows up deals and leaves the wholesaler in a bad place.
• The chances of a wholesale deal blowing up are higher simply by virtue of the fact that there are additional parties involved.
• Wholesaling should only be done by sophisticated and experienced investors who are selling to other sophisticated and experienced investors. There's just too much that can go wrong.

ps://www.biggerpockets.com/forums/311/topics/363982-lesso...

[Jay Hinrichs]

Quote from @Jerryll Noorden:

Let me be the voice of the other side of the coin. You often hear about the bad wholesalers and the deals gone wrong.

Like plane crashes, you never hear about planes that safely landed. If you only keep a look out for when planes crash you will be terrified to fly in a plane.

Yes be aware and learn from the bad apples out there, but also be aware that bad occurrences don't make wholesaling bad. Like a feller aboive me said. know what you are doing before you actually do it.

I have a solid track record of sellers inviting me for dinners after the deal went through, as we helped them get out of a pickle no real estate agent could fix. Plenty of times. Now imagine if EVERYONE started sharing their wholesale deals gone right. It would bring wholesaling in an entirely different light.

@Account Closed

Jerryll  now I am going to take the other other side of the coin.. As Broker for Ahem 49 years :) I submit there is no deal that you can do that I cannot and same with many  experienced agents.

And I submit there are deals I can do that you simply could not because U and the vast majority of wholesalers simply dont have the depth and breadth of experience as I do or many pro's on this site have..

Wholesalers over promise and under deliver all the time. And while some are pretty sharp thats not the norm far from it.. I mean I close a lot of deals with wholesalers on them and most of the time they are just flaying away and if it was not for me bringing the deals back to center they would never close.

so thats my side of the coin.