All Forum Posts by: John Chapman

@P.J. Bremner here's the link you requested.

https://www.biggerpockets.com/forums/311/topics/363982-lessons-learned-from-wholesale-deal-turned-into-lawsuit

@P.J. Bremner the problem I see with your model is when you say "if I have a lack of funding," I'll wholesale it.  I think @John Thedford and @Jay Hinrichs are absolutely correct.  As a wholesaler, if you say you are going to buy the home, then you need to have the funding lined up to buy it yourself.  Yes, you can assign it or double close it or whatever, but if those options fall through, then you (the "wholesaler") need to step up and close the deal as you've agreed.   That's the real problem with all these weasel clauses and silly games that many wholesalers play.

I just wrote a post about a wholesale deal that turned into litigation.  The whole thing could have been avoided if the wholesaler could have closed on the deal in his own name and resold it to me.

Hi @Erik Drentlaw, I think I've just hit some sort of mental roadblock and/or a point where I just need to do something new.   No, I have not replaced all of my income from RE, though I could drop down to a pretty low paying, low stress job right now if I wanted thanks to RE.  Probably not ready to go the passive investment route yet, though some of your ideas sound pretty cool.

@Jay Hinrichs you pretty much summed up the wholesale shops here in Dallas.  All of them are unscrupulous and sell junk.  Basically, it seems like they all operate under the "bigger fool" theory rather than finding actual deals.

The guy with whom I did business wasn't affiliated with them, which was the only reason I would even speak to him.  (If I see a large "wholesale" shop with a property, I won't even look at it.)

@Guy Gimenez, yeah I can't really argue with you.  I've used one page contracts before and never had a problem, but I definitely would not use one in a wholesale deal again.  Totally agree the wholesaler/original buyer should have had skin in the game by putting up earnest money.  I totally made mistakes, primarily because I was distracted with other stuff.  No excuse, though.

I forgot to share the punch line of the whole story.  After I was in litigation, I let the wholesaler know that he obviously was not going to receive a fee given how jacked up everything was.  He was actually shocked and asked that I pay him something.  Sigh.  Some people.

I think there's a real theme that's important for newer wholesalers who want to do double closings.  You need to (1) put up your own earnest money with the seller; and (2) you need to actually close the first transaction using your own transactional funding.  If you don't do that and play all those "no money down" games and use other people's funds you're just playing Russian Roulette.  Sure you'll get by most of time, but the one time it blows up it is really going to hurt.  

Yep, @Chance Housos, I completely agree.

@Logan Hand totally agree with you about the double closing.  You can do "flow through" double closings here in Texas but I agree it leaves a lot of room for error (as my experience shows).   Totally agree that it all comes down to managing the seller.

@John Thedford I completely agree with you.