What happens when a contract expires before a wholesaler can sell it in the time frame?

Question

Hey guys,

I was planning on getting into wholesaling as a start by bird-dogging. I was just wondering what happens if I have a buyer ready to buy a house on contract but something goes wrong and I don't have a buyer before the contract expires? What exactly happens? What are some ways to prevent this from happening?

Bill Gulley · Answer

Not that simple. Depends on what you tell that seller. If you follow the WH guru junk, you tell an owner you are buying, then go beat the bushes, then do you deal. Well, misleading that owner, then having a contract that expires when they think you are buying puts you in default. You can get sued. If that seller did reasonable things like looked for another home, put money down on another property, stayed in motels searching, eating out, all because you told them in good faith you were buying......well, you weren't acting in good faith if you didn't have the ability to buy, so you may well get to pay all their expenses and costs incurred in their efforts while you kept them in the dark!

Now, if you're married and you get sued, don't know how that sits on the home front, but I've known a few that screwed up so bad in RE that they had to divorce trying to save what they could. Lose the house, the car, the wife, the kids and the dog, all because some wise guy told them they could do something in real estate. So, on that front, can't say, but there is also your reputation, you can trash that before you get started too.

Moral of WH, explain up front to an owner as to what you are doing, they are to be fully informed, use an option if you can, not a contract with mickey mouse exits as the con artists do it. Ask them, if I decide this property doesn't fit my investment needs, do you really care who buys it? They will say no. Then tell them you know others that may give them an agreed price and buy it, would you object to someone I know buying the property?  They don't care!!!!

Then, if your contract expires, it just expires, no false promise was ever made, no lies, no false implications, no conniving or fudging because you can't belly up to the owner and negotiate a deal they will agree to sell at, to anyone. Good luck :)

Bill Gulley · Answer

You  on Amazon and for less than $30 you can get a text book that agents use to study for their examinations, national or state. These texts are easy reading, can be dry as there is no fluff about how rich you'll be. Most have a quiz after each chapter, they are designed for self study. If you have a question about any of the material, just mention me or other trusted member and it will be answered I'm sure.

As to contract law, those texts will cover RE contract basics. I suggest you get a business law text book, Black's Law or a Prentice Hall publication and you will do fine with an older book as basic contract law has not really changed for decades.

On the internet, I suggest you Google "Predatory Lending" and "Predatory Practices" and begin reading from government sites, each state has different views but there are common threads of predatory issues investors need to understand.

I am actually working on this type of material for investors, not ready yet, but promise it will be completed, I'll blog about it (I'm not a blogger, I'll learn, LOL) Good luck :)

Natasha M. · Answer

@Stone Wilson

I fully agree with Bill Gulley about being upfront & honest.

It's easier if the house is already empty & if it is a for sale by owner and not on the MLS.

Then before the end of the contract, if you don't have a buyer, the seller may be willing to extend it. Just be sure it's already empty & not on MLS before you use that last resort. And never wait until the last hour to cancel.

Stone Wilson · Answer

Bill Gulley Do you have any recommended books on these topics such as the principles of RE and understanding contracts?

Stone Wilson · Answer

Bill Gulley thank you Bill for the response! Can you clear some things up for me please. What is WH short for and what would you consider WH guru junk? Is an 'option' a legal document?

David Rundle · Answer

I'd go get that fallen down house under contract immediately at an educated price.  I'd then find every investor in the area who's bought a house and talk to them about it to see if they wanted the assignment.  After talking to two or three investors you'll know if the price you had under contract was right or not.

If it's not, be honest with the owner and re-negotiate.

TAKE ACTION! TAKE ACTION! TAKE ACTION!

Bill Gulley · Answer

Sorry, but  step one is learn the principles of real estate, then start looking. Just because some dumpy old house hasn't fallen in yet doesn't mean you'll get a good deal, especially if it's next to an old gas station and there isn't any grass on the place! Learn the principles first, then begin. Good luck  :)

David Rundle · Answer

When a contract expires you can no longer execute that contract.

@Bill G. gave an example of you purchasing a primary residence and then that person having to get a motel and eat out every day.  You can avoid that scenario by not purchasing primary residences if you aren't willing to take that level of risk.  Simply start out by wholesaling a run-down vacant house and doing the owner a favor.

There's risk with everything you do in life, the more risk = the more reward.  If you don't wholesale the houses in your target neighborhood, someone else will.

You should know the basics of real estate before you jump in, but don't go into information overload trying to read 15 books before you do your first deal.  Your true education will come from applying what you know into action.  All you need to know how to do is the first step.  Perform the first step and then study/post on biggerpockets/find a local mentor on how to do step 2.

Step #1 for you would be to locate a target neighborhood and try to find distressed owners.  Go talk to people, knock on doors, send direct mail, put out bandit signs.  Take Action.  Inaction will get you what you currently have.  The only way to be successful is to take the first step.

If you want to take the lowest risk form, simply bird dog for a wholesaler in your area.

Bill Gulley · Answer

WH=Wholesale

Wholesale guru junk is what you'll be reading on internet sites about how to wholesale, including on BP.

Start by learning the basics, principles of real estate, understand contracting, the flow of what gets you to settlement, it is not marketing junk. After learning RE, then you can learn how to market RE. Good luck :)

Stone Wilson · Answer

@Derrick Strope

Thank you for clearing that up for me!

What happens when a contract expires before a wholesaler can sell it in the time frame?

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