Using Another Investors Buyers List

Bird Dogs, Wholesaling
1

I have properties in another area under contract. I used a standard Purchase & Sales Agreement.

I don’t have a buyers list in this other area as its a 2 hour drive and a city I normally don’t work in.

I have another investor that claims to have a very large buyers list and is willing to send my deals past his list and we split the assignment fee.

He is asking that I sign an option agreement from me to him so he has “equitable interest”.

I prefer using an assignment of contract and have never heard of doing it with an option.

Is using an option in this scenario better or should I stick with the assignment?

2

You do what YOU want.

An option does give him equitable interest, and is a great option when a licensed agent is attempting to flip property in another state without a local license …or simply creating an equitable interest for himself in the event he’s selling someone else’s property in another state.

An option makes the buyer a principal to the transaction. It also keeps you honest, because now, you can’t sell to ‘anyone’ without this other guy’s cooperation.

That is, unless there’s some agreement that excludes buyers YOU bring to the table.

Frankly, I would NOT do an option. Either the guy has a buyer, or he doesn’t. The best I would do would be to carve out any buyers he brings to the table, from buying from me in the future without him getting a referral fee.

However, I’m not putting myself in a position where he controls my deals with an option. Really? Forget that.

I’m supposing he wants to record the option, too, am I right?

That’d be pretty slick. Then not only does he make sure he controls your deal, but you must get his cooperation regardless of who the buyer happens to be.

What happens if he records his option, and then gets into a car accident, and turns into a vegetable? Just asking.

Well, you get to spend months and thousands of dollars removing his lien. And let’s say you only had a contract to buy, and now you can’t sell the house ‘at all.’

Now you’ve got an angry seller with a freshly-minted lien on his house, and you can’t perform.

What a mess. All because you gave some guy an option on your deal(s).

Again, that’s a very valuable approach if/when you’re buying/flipping houses, and wanting to create an equitable interest for yourself.

Getting an option, rather than a contract to buy, is just as powerful as if you had a sale contract you wanted to assign. In fact, it gives you the same power and control as if you opened escrow in a conventional sale, and then assigned the contract.

In this case, with this other guy… nah.

“Equitable interest” doesn’t require having an option. It could just be an agreement to refer “x” buyer to “x” property (or more than one “x”).

As long as YOU have an equitable interest, you can include this guy with a simple referral agreement.

If I were to guess, this guy is a little too sophisticated for anyone’s taste …or a flake.

3

Very good points you brought up.

By the way the guy does seem like one of the sophisticated types. He is one of those affiliates from one of the 800 programs out there.

We discussed up front that I don’t have a buyers list and he never came out and said he had any particular buyer in mind for it but he did say he felt strongly that one of the buyers on his list may be interested.

His option did state that I could end the agreement if I found a buyer prior to him.

I have heard several ways of doing this… JV agreement, assign your assignable contract but never an option so this has me concerned.

4

To make this thing simple, once the wholesaler has a buyer then come up with a simple one page JV agreement acknowledging that you guys intend to split the profits 50/50.

In a simple JV agreement you can still market the property on the end as well, where you don’t relinquish all control to the wholesaler you plan on JV’ing with.

Hope this helps :smile

5

I second mrflippahouse. That is exactly what I do on most of my deals since I do a lot of virtual wholesaling.

6

On the other side of the coin…

If someone asked me to market their property to my list and I do so, without having an interest in the property, and relying on a JV agreement once I produce a buyer…

wouldn’t that be acting as an agent without a license?

That was the reason the 1-800 investor mentioned an Option agreement so that there would be no issues with the “real estate commission”.

7

a flex option (non exclusive option) should solve those issues.