Lessons learned from wholesale deal turned into lawsuit

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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...