What if a deal fall through?

Question

Ok for the experienced wholesalers out there what would happen if you create a purchase and sale agreement with a seller, but you are unable to find a buyer for that property.

On a lot of posts I see where the wholesaler finds a seller and creates a contract with them first and then go and finds a buyer. But what would happen if you can't find a buyer or if you find a buyer and the deal falls through at the closing table.

Are you forced into buying the home yourself or does the contract just end? And how owul you go about canceling a contract?

Steven Leigh · Answer

Account Closed nailed it. There are several ways to word the contingencies.

But the broader answer is, DON'T back out of your contracts unless it's just absolutely necessary. The way to do that is build a massive buyers list of very motivated buyers who are just dying for properties. People will tell you that if your wholesale deal is good, the buyers will find you. That's total BS! Build a huge buyers list before you even get your properties under contract, and you won't run into these problems.

Here's a good article on building a buyers list with a lot of good tips:

http://retipster.com/buyerslist1/

Having said that, if you find you can't find a buyer at the price, you can go back to the seller and tell them you have to back out of the contract because it needs too many repairs or you did more research and the price isn't going to work. In some cases they will ask if a lower price would work, and you can sign a new agreement with a reduced price. In other cases, they want to cancel it. In this case, I would have a realtor ready to recommend to them, as well as a property manager, so that at least you are offering them some solutions and not leaving them hanging.

Account Closed · Answer

The best way I have found to find buyers is to join a local REI. Also if you are not an agent, then have an agent pull up all the cash buyers in the neighborhood the property is in. Once you get the list of houses that were bought with cash, check the assessors website to find the owners names. Then do a search by that owners name and if they have more than 1 property, then they are definitely an investor. Then contact them about your deal in their neighborhood that they already own property.

Account Closed · Answer

I always put in my contracts "Contingent on my partners approval" in case I can't find a buyer on my wholesale properties.

Marc Yu · Answer

It's a standard clause, but just ensure that the sales contract is binding contingent on financing.

However, if you're wholesaling it and you use your own and/or verified cash funds, you're on the hook to buy it.  Get a buyer as quickly as you can.  This is another reason I don't do wholesaling. High Risk/Low Reward.