All Forum Posts by: Denisha Choice

@Rohit Singh

Thank you just remember to always consult with RE attorney to make sure your contract is valid and legal in the state your doing business in.

Be kind and smile!

@Matthew Kreitzer

Thank you Matthew, I have said that as well.

@Christopher Brainard

In my research I have never come across any amount which would be illegal to offer on a contract.  Might not be moral but illegal, I don't know. Please send me that if you can.  Also I agree with everything else you have stated and that is why I suggested those things shouldn't be done because they raise red flags, but that doesn't mean someone will not operate in this fashion anyway.  I believe a business should be run with all honesty and transparency.  If you're not trying to do anything underhanded then you shouldn't run into any problems with the law.  Who needs that?

Understand I don't profess to be an expert on anything that I have stated, I did say that this is what I researched and this info did come from a RE atty because I will not post anything I have gotten from the internet to be true.

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@Wayne Brooks

I did also suggest that investors make sure the validity of their contract is still legal when they plan to do a wholesaling deal.  It is also good practice to talk with a RE atty so as to stay out of any grey areas, but thank you for that code of law.

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Thank you to both @Justin Hoggatt and @Raul Ocampo.

@Adrien Schebott ok I'll answer that. You said:

Is paying $10 enough to give you equitable interest?

Does not having the ability to close make the contract non-enforceable since you can't hold up your end of the contract.

Assuming those two questions don't matter - does an equitable interest give one a right to market the property (like a RE agent does) before taking title? This is what gets wholesalers into trouble.

From what I have learned as long as the seller agrees to the contract and signs off on it yes it does, but I think your question is really hitting at that very low amount to gain that interest.  At the end of the day the investor is looking to achieve maximum profits with minimal risk..., that is where that $10 comes into play.  This is also the reason that some wholesalers get into trouble.  This type of practice raises a red flag with the state because It clearly shows that you have no "intent and capacity to perform".  This means that you clearly have no intention on purchasing this property if you couldn't find a cash buyer and if you can't find one then you're going to cancel the contract and leave the homeowner high and dry. It's this practice that gets wholesaling frowned upon.   In my opinion, we as investors should always treat people with respect firstly... you wouldn't want someone giving you $10 for the purchase of your home so don't insult someone else with that amount.  I would never do this especially if you want the seller to take you seriously and more so if you have to deal with a real estate agent for the seller.  I've learned that good practice is a fair amount dependent upon the price of the property, but nothing lower than  $500.  If this scares you then you can always include a contingency clause with respect to that deposit, BUT you should always be wholesaling a property that you do in intend to purchase just in case you can't find a cash buyer.  We shouldn't be wholesaling properties all willy nilly, if the numbers make sense to wholesale it  then it is because it makes sense to flip/rent it.  That is your exit strategy, investors should always have one that is good for them and the homeowner.

As to marketing the property,  I would stay clear of that because you are blurring the lines of investor vs. realtor.  Also in a situation that only involves a seller, you give an unscrupulous investor the opportunity to try and take the property out from under you when they approach the seller with a bigger deposit than you gave.  Best practice is not to advertise a property you don't OWN.  Its better to just advertise all the benefits that a cash buyer would be looking for and then leave your number.  If it's a good deal then the cash buyer will call you and then you may disclose all other details to him over the phone call.  You need to build up your cash buyer's list anyway; this is the perfect way to capture a lead I think.

Be kind and Smile!

I have read and listened to many videos that express how either you want to start your business being a birddog/wholesaler because it can bring you quick profits to it telling me that this practice is illegal and shouldn't be done at all.  This confusion is very rampant and I had to research this for myself because I am very interested in wholesaling.

First I want to clarify the differences of them both and then you will see why people mistakenly interchange those words.  We all know that wholesaling is the practice of taking a property under contract and then assigning it to another owner without actually owning that property.  The big difference: Birddogging skips the whole contract process.  It is literally someone finding a property and bringing it to another and getting a payment/commission at closing from that person.  In this aspect your ARE operating as a real estate agent and it is ILLEGAL.  Birddogging is very much illegal.

Wholesaling is not.  In fact if you take a look at the standard forms for purchase and agreement for your state or any state that you want to do wholesaling in, you will find a numbered line that says Assignments/Assignability.  This is the clause that allows you to wholesale that property or not.  For example in Florida, their contract Residential Contract for Sale and Purchase consists of 13 pages, but you will see clause 7 under Assignability what the State of Florida allows you to do.  Florida gives the buyer 3 options of assigning that property.  The buyer has to make sure to check off either of the 3 options... option 1 says the buyer may assign and thereby be released from any further liability under this contract or option 2 may assign but not be released from liability under this contract and third option may not assign this contract.  Of course the investor being the buyer would not check option 3.  Another example would be California's Residential Purchase Agreement and Joint Escrow Instruction which consists of 10 pages.  Under clause 26 Assignment, this state allows you to assign the property ONLY if you get the permission of the seller and then you have to file another form along with the contract that insures the seller gave you the permission to do so.  Just be sure to check the validity of any contract because each state is different and laws change all the time so be sure to use an updated contract when doing your deals.  The state of Ohio is a whole other issue when it comes to wholesaling.  They prefer that you be licensed just so there are no blurred lines of acting in the capacity of a realtor, but that does not mean you can't wholesale in Ohio.

The bottom line is Wholesaling is legal because by signing that contract you the buyer has gained "equitable interest" in the property and have now become the "principal".  This means you have the ability to direct the title in the future although you do not own the property but if you are not able to find that cash buyer to assign the property, then you have full right to purchase that property yourself.  States are doing their due diligence in protecting homeowners from people who have no intention of every owning that property so if you only want to wholesale then it is suggested that you become a licensed agent.  Since there are many different ways to make a profit in this industry why would you only focus on wholesaling when you clearly make so much more doing flips.  Also I plan on becoming an agent in the future because when I get a handle on flipping, I can keep that commission instead of paying that realtor I would need to hire to sell that flip, so it makes sense in the long run.  I mean we are in this industry to make money.

Hope this was helpful.... be kind and smile!

I really like your idea and to make as much as you did is great.   Good luck with your future ventures. 

Hi @James Stokes

First let me tell you the impact your story had on me. My breathing intensified and my heart raced and my eyes bulged out of my face. You sir and your family are really blessed and the energy and fortitude you have is phenomenal. Congratulations! The property you have found sounds very impressive and I can only hope to have the same success. Since you have just started your journey, I'm curious to know how you structured your business. Did you set up an LLC at all? I am anxious to get started but was wondering is it necessary to get an LLC right now? I do know the benefits of them when I do have multiple properties under my belt.
 

Good job! Also I suggest you get familiar with the calculators provided on this site in order to make sure your numbers are right for this deal. Good Luck