Can a buyer see your base contract when your wholesaling?

Question

Hey BPers, When you're wholesaling a contract, is your base contract price protected by the title company, or can the individual you're selling to see the amount you've agreed to pay? I'd like to know more about how to wholesale contracts.

Matt Motil · Answer

The buyer will get a copy of your contract with the seller upon assignment. The seller can be shielded from this by doing a one-sided or blind HUD-1 if this is allowed in your state.

Adrien C. · Answer

On my assignment contract, I have an area where the buyer initials that they have received a copy of the original contract. I spell out the contract price and the assignment fee in a very clear manner. The buyer doesn't know my assignment fee when I tell them the initial price (because that lets them know how much room they have to negotiate). Once we agree- they price is broken down and it shouldn't matter if the initial numbers worked for them. If i'm worried about my fee being too high, I'll close it myself and resell and they'll never know without digging into public records in 2 months. It's about relationships though and if you and the buyer have good rapport and a good relationship- the numbers shouldn't matter.

Kyle J. · Answer

In a typical wholesale where you are just assigning the contract to an end buyer, the end buyer is not only going to see the price you agreed to with the seller but they're also going to see the entire contract as well. They have to because you will be assigning that contract to them and they'll be held to all the terms/conditions in it. So a smart end buyer is going to want to review that contract before they agree to be bound by it and buy the property.

Kyle J. · Answer

KJ - since you're in Ohio, it may be worthwhile to read through these threads specifically about how wholesaling is treated there:

https://www.biggerpockets.com/forums/93/topics/95781-heads-up-ohio-wholesalers

https://www.biggerpockets.com/forums/93/topics/184743-getting-busted-in-ohio-for-wholesaling-and-praticing-re-without-a-license

Matt Motil · Answer

Blind HUD's are allowed in Ohio. You will never get away with keeping your original contract price from the end buyer. When you assign the contract to them as a wholesaler, you will be giving them a copy of the original contract. You should be more worried about the seller finding out what you've assigned the contract for instead of the buyer. The buyer will expect to pay some kind of fee for you finding and getting the property under contract. The seller will be the one that is mad when they find out you assigned if for a fat fee.

Also, keep in mind that while there are loads of wholesalers in Ohio, it is illegal and you need a real estate sales license to buy and sell property. Assigning property to a buyer is considered selling and you then have a fiduciary duty to the seller.

Tayler LaChapelle · Answer

I believe unless your doing a double closing, then all parties will be able to see. Some title companies say they are able to do double closing deals but they need to inform everyone involved, thus making your earnings in the deal not so much of a secret.

In all honesty I would advise you to tell your motivated seller that your partner or yourself will buy the property. Technically your not lying about having a partner because at closing they are your partner for the time being.

You could also be upfront with them and tell them that this is how you put food on the table, so you're going to make a profit off this deal. But remind them that they are getting the money you offered them.

If you ask the right questions you will find out that the seller just got divorced or it's a pre-forclosure or they just don't want anything to do with the property. Whatever the case may be find out how much will they need in order to feel happy again, you don't have to give them exactly what they ask but if your close that will be good enough for them.

Make sure you ask questions and find out if they are a motivated seller or not. You will be able to easily tell by their situation. Remember you just want that 5% of sellers. Most of the time if they are motivated they won't really care how much you make, they more care that they got the property off their hands!

Remember just be honest to the seller and make sure he/she is a MOTIVATED seller.

KJ Smith · Answer

Thanks everyone for all your expertise and willingness to share it. Really Great Forum!

KJ Smith · Answer

@Matt Motil Excellent advise Matt. I'm not concerned at all about the seller given the situation. I was more concerned about the buyer based on what @Roland Paicely cited. More Importantly, I Had No Idea This Was Illegal!!! I may just walk away given the information. Thaaaaank You!

Roland Paicely · Answer

Most buyers don't care.  They understand that you aren't working for free.  However, if you are wholesaling a house and the buyer will make $25,000 and you are making $20,000.  They may take issue with it.  I'm not saying that it's right or wrong or any of their business.  But that's reality.

Can a buyer see your base contract when your wholesaling?

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