This often only works with large properties where you are raising north of $1mm in equity, otherwise the legal fees eat up too much of the overall deal to make it worthwhile for anyone.  

The title company might also know about any legal avenues to proceed with releasing funds.

hi, make sure the seller signs the agreement. make sure it’s legal whatever you are doing. do whatever the escrow company says. make sure you get paid! 

*I am not a CPA, tax professional or a lawyer*I cannot give legal advice, so all of my advice is illegal advice.As far as I know, section 469 of the tax code is what allows for the "STR loophole". 

What legal options do you have, if something goes wrong?

There are other ways to legally wholesale without a license as well.

Since I'm not an attorney and can't give legal advice, I did a little more digging and found the passage below.

Out of the 20 letters I've sent, I've had 1 guy get back to me and we were in discussions but weren't able to find a price that worked for the both of us.The issue is that I only have a few houses on my mailing list so far (just places I've walked or driven by that caught my attention), and blindly searching every street and address # to see which houses are actually legal multifamily will take forever and doesn't seem efficient.I know the data is publicly available, I just don't know how to aggregate it in a way that would be efficient and useful for blasting out marketing mailers.Are there any websites that can pull massive lists of all multifamily houses in my area?

Without proper permits, there’s a chance the city may request you to revert any non-compliant additions (like the extra bathroom) to align with code standards.When it comes to refinancing, banks tend to look closely at the property’s legal compliance.

I know in California it is legal and the state acknowledges it however it does restrict the finder to basically introducing the parties and they can not participate in negotiations, etc.