ethics in wholesaling

[James Feeney]

Just got a call from some guy in California looking for people to work with him. I'm not sure what he was selling because the called ended abruptly. His topic of conversation was about how wholesalers lose out on deals when someone else swoops in and offers more after you have a signed contract.

He went on to say that the way he handles that is to file a lien against the property once the contract is signed. If the seller then signs another contract with someone else. the property is tied up, and he will then release the lien for the time and expenses he has incurred, or a fee, whichever is able to be worked out. He goes on to ask me if I understand so far.... My response is yes I understand, and he's telling me he has another two parts to this he has yet to explain, but that I don't sound very enthusiastic, and that he is looking for enthusiastic people to work with.

My next comment forced him to thank me for my time and then hang up on me. I said" if as a wholesaler I go into a negotiation looking to put the property under lien, and I do not disclose this to the seller, Am I not being unethical?" he argued the point for a minute and then hung up.

I am new to wholesaling, but I'm not getting into the business looking to be dishonest or hurtful to sellers who are already in a bad position. At this point in my endeavors for properties to flip I have three potential deals lined up, but no contracts, because I am vetting all deals with Buyers and getting a go ahead to pursue contract . I feel if its a deal for them, its a deal for me. this may not be the conventional way to wholesale, but its safer for me, and keeps me from getting a contract I cant flip when I have a small buyers list currently.

Any thoughts??

[JD Martin]

Originally posted by @James Feeney:

He went on to say that the way he handles that is to file a lien against the property once the contract is signed. If the seller then signs another contract with someone else. the property is tied up, and he will then release the lien for the time and expenses he has incurred, or a fee, whichever is able to be worked out. He goes on to ask me if I understand so far.... My response is yes I understand, and he's telling me he has another two parts to this he has yet to explain, but that I don't sound very enthusiastic, and that he is looking for enthusiastic people to work with.

Any thoughts??

 If what he is suggesting isn't illegal, it sure as hell should be. I am not aware of every single legitimate avenue for placing a lien on a property, in every state, but this one sounds new to me. Generally to file a lien you either have to have a financial interest in the property - i.e. you provided labor and/or materials for the improvement of said property - or you have to have the approval of a court for attachment of equity to satisfy some other debt. I don't see how he could legitimately file a legal mechanic's lien against the property, and I doubt he'd get a court to go the second way. Maybe the point is to create enough aggravation for the owner proving that it's bogus that they pay him to go away. 

I think you went the right direction.