Wholesaling a property listed with a Broker?

Question

I have been presented with an opportunity to wholesale my first home in TX.  The property in owned free and clear, but the home owners have already listed the property with a Broker and have signed the "Texas Association of Realtors Residential Real Estate Listing Agreement Exclusive Right To Sell" contract with the Broker and I have no experience with putting the house under contract using the Realtor's contract (TREC 1-4 Family Residential Contract) and adding the clauses that will protect me as the wholesaler.  The home owners are in a very stressful situation and would like to sell this property quickly!  What revisions should I add to the contract as a wholesaler?

Wayne Brooks · Answer

The first, and most important, problem is that you'd need to find a real buyer, through just your efforts, that would be willing to pay more than all the potential buyers, of all the agents in that area, and everyone else looking at it online.  Think about the odds of that for moment.

Secondly, you'd need a listing agent asleep at the wheel that's going to let you tie the property up hoping to find that buyer mentioned above, and not realize that you have neither the ability nor the intention to actually buy the property yourself.

Monica G. · Answer

Thank you Lyall, Fred & Nicole for your GREAT advice and for sharing your valuable knowledge and experience with me regarding my post!  Even as a beginner, I understood from what I had already studied that there was in fact a way to make this happen; I just wasn't sure where to start.  And as I stated in another post on this topic, the home owners, nor myself, are in no way trying to do anything that would not be in line with the rules and regulations; that's just not my style or way of doing business.  The home owners are willing to pay the Broker their 6%; they just want the house sold so that they can move on with their lives.   My goal is to do whatever is in the best interest of the home owners, always.  I will definitely follow your advice and seek out assistance from other professionals in the Texarkana area that can help me with this.  Again, I truly appreciate your assistance.

With kind regards,

Monica

PS:  Fred, I also grew up in Texarkana and attended Pine Street MS and Texas Senior High!  Nice to meet a fellow Tiger!!  Be blessed with success!

Fred Heller · Answer

Texarkana! Just about a mile from Louisiana. I grew up there. Spring Lake Park Elementary, Pine Street Junior High School, and Texas High!

Anyway I was actually approached by a wholesaler on a listing I have. She presented it as a "cash offer" with the buyer paying commission and closing costs. Honestly having the buyer pay the closing costs and commission might have made it worthwhile for my seller if the offer wasn't ridiculously low.

A couple of things bugged me about that. Her pitch was all about how this would be a wonderful deal for me, because I would get the full commission. As an agent, it's not about me. It's about getting the best deal for my client.

Then when the seller rejected the offer, she asked me what was the lowest the seller would accept. I can't tell her her that. I represent the seller and can't assist the buyer with her negotiating strategy. She asked for comps. Again, can't do that, for the same reason.

But the thing that really got to me was when I said to her, "I assume you're a wholesaler." I knew she was a wholesaler, but she hemmed and hawed and finally said "we're investors." She was going to chew her tongue off before admitting to me that she was a wholesaler, and that really bugged me.

Good luck with your deal!

Nicole Garner · Answer

I'm not an attorney, nor am I giving legal advice.  BUT, as a licensed agent in Texas, the language in the promulgated forms issued by TREC are not supposed to be amended.  While you can write in special terms in certain areas, I would strongly encourage you to get the assistance of a real estate professional or attorney to make sure that you're protected.

The only impact that the exclusivity agreement has on the arrangement is that the property owners will still owe the listing broker commission, regardless of if the transaction is initiated by the broker or seller.

Best advice... get the assistance from a professional that is experienced.  You don't want to leave yourself unprotected.

John Thedford · Answer

Agreed 100% @Wayne Brooks. Just inquired on a property listed on Craigslist. Turns out the "owner" has it under contract through an agent. He is in a BIG hurry to assign. I doubt the agent knows what is going on. The guy stated he is a "wholesaler". He stated his "buyer" is not moving fast enough. I see a deal that will probably fall apart. More games from "buyers" with no intention of buying!

Gregg Petty · Answer

hi, Monica. I am going to be out of the country for the next couple of weeks. Headed to Costa Rica. Maybe I'll find some property! LOL. I wish. I will probably be unavailable by phone, but will be checking my email as well as bigger pockets stuff as it comes up.   I added you as a colleague on here feel free to email me

Monica G. · Answer

Nice to meet you Dr. Petty.  I just tried to give you a call, but your office is closed today.  When is the best time to call?  Thank you, Monica

Gregg Petty · Answer

Hey I buy several properties in Texarkana each month.  I have a clinic there and travel back and forth to Frisco each week.  If you hear of any deals coming out of there I'm buying!  :)

Lyall Storandt · Answer

Hey @Monica G., I've seen it done many ways.

As others above have, I will also state that this is not legal advice nor am I advising you as a licensed agent.

That said, what you decide to tell the listing agent is entirely up to you. If you're not using a buyer's agent to represent you as the "buyer," you might consider enlisting the help of one. You might be able to find someone to do this in return for a flat fee paid from the buyer's agent commission at closing, the remainder of the buyer's agent commission being paid to you or the end buyer in the form of a commission rebate.

As for your original question, I've seen it done many ways, but the simplest and most popular way is to add "and / or assigns" after your or the buyer's name on the original contract with the seller.

If there's an existing relationship with the seller, i.e. you're already in contact with them and / or they know your intent for the property (wholesaling) you're in a pretty strong position. The listing agent must act in the best interest of their client (the seller), but the decision as to what to do with the property ultimately lies with the seller.

Be as upfront and honest as possible with the seller. Contract the property using the correct form(s) at a price that leaves you room to make your assignment fee. You'll obviously need an assignment form that will convey your interest in the property to the end buyer. You'll also want to make sure your end buyer has the financial wherewithal to actually close on the property. It's imperative that you take responsibility for the property closing, whether you actually intend on closing yourself or not.

You protect yourself with the "and / or assigns" and by negotiating and paying for an option period during which you may terminate the contract at any time and for any reason. (You should be putting up earnest money with the title company as well.)

Highly recommend you seek the assistance of a local agent / attorney / title company / wholesaler to help walk you through the entire process in-person. You'll need an investor-friendly agent, who may even have a buyer for you. An investor-friendly real estate attorney who will actually be familiar with what you're trying to do. An investor-friendly title company who will actually close an assignment (some don't). And, an experienced wholesaler would likely be willing to hold your hand through the entire process in exchange for half of the assignment fee. (Better to have half of something than all of nothing.)

Best of luck!

P.S. - Commissions are typically paid from the seller's proceeds at closing and are dictated by the listing agreement. Typically not your concern as a wholesaler...

Monica G. · Answer

Greetings Justin,  The property is in Texarkana, TX.  Houston is also one of my target markets so I will definitely add you to my REI contacts!  Thank you for connecting, Monica

Wholesaling a property listed with a Broker?

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