Wholesaling a House Under Contract with Realtor

I had a lead come through but the seller already has it listed with a realtor. What are the issues with trying to go after a deal that’s already under contract with an agent? He’s definitely motivated but other than the realtor being in the sellers head not to take a low offer what other issue could I be up against? Anyone with experience with that?

What does it mean that, 'a lead came through." Came through where?

If the seller called you, and your offer is better than what the agent is bringing (if anything), the seller will ditch the agent.

Otherwise, you’re just negotiating with yourself, imagining that the seller isn’t fed up with the agent, and is going to consider any offer you make is a ‘low-ball’ offer …because some agent has told the seller ‘not to take’ a low-ball offer.

Just make your offer. You’re complicating this.

The issue with the agent is the listing terms. Most agency agreements have clauses that give the agents a right to a commission if the buyers come from any exposure the agents produces. This many include a holdover term that gives the agent a right to a commission if the buyer contracted with the seller anytime during the listing agreement was in effect.

However, if the seller is heading to default, or some catastrophe, as a result of ‘not’ selling the house in a timely manner; the agent has not brought in the buyer …most agents will walk without a commission.

Stiffing an agent of his commission, if he’s legitimately spent time and money marketing the seller’s house, and it’s just a matter of saving a few bucks …is about as dishonest as it gets.

That said, I often find sellers with listed houses, and if I can’t buy with the listing intact (which is always), I just inform the seller that I can only buy once the listing is expired or terminated, and if they’d like to close right away, I show them how to terminate the agency agreement immediately.

Or …you could secure an ‘option to buy’ the house, and exercise the option after the listing has expired.

You’d want to record that option, just in case the agent brings in a buyer with a better offer, and the seller tries to ‘snake’ you out of the deal …which reminds me to say, “All Sellers Are Liars.”

Not sure what it matters where it came through but the seller reached out through a squeeze page on my website. It’s been listed with a Realtor for a little over a month. How will the seller “ditch” the agent? I’m sure they signed some kind of agency agreement so they cant do that?

i’m thinking your last part about the option might be the best way in case the agent cant sell it. IMO they have it listed way too high at full retail when it needs a ton of work.

How are they able to just terminate the agency agreement?

It makes difference where the lead comes from, in the event you found the lead through the listing agent. That’s why. Otherwise, if the seller called you directly, then you didn’t find the deal through the efforts of the listing agent, and consequently you would have no liability to the agent.

Now, that doesn’t mean the seller doesn’t still have a moral obligation to pay a commission …unless there was a carve-out in the agreement that gave the seller the right to find his own buyer. Usually, this happens when the seller has a buyer in mind, and excludes that buyer from the listing obligation, etc.

Notwithstanding, again, if the seller is in trouble, and he can’t lower the price and still pay the agent’s commission, then most agents will walk without a fight. Since no agent is wanting to force a seller into a default, or worse.

Meantime, the seller just needs to notify the agent, in writing that the listing is canceled as of ‘x’ date.

Now, this may not technically meet the terms required to end the listing agreement, but at least it puts the agent on notice that his services are no longer wanted …or appreciated …or needed …and that the agent can either come and pick up his yard sign, or he can pull it out of the Safeway dumpster. It’s his choice."

Of course, I’m half-kidding about the yard sign, but I’ve actually seen this done, so it’s an option.

Very few agents are going to fight with a client over a lost commission on a ‘bread-and-butter’ house, much less on a failed escrow. However, on the high-dollar deals it’s a crap shoot what an agent will fight for…

For example, in Kansas City, MO about 1989, an agent had been working a $2M listing in Mission Hills, KS and found a buyer. Somehow, the seller decided to ditch the listing agent and sell to the buyer, using a ‘cheaper’ agent.

It turned into a mess.

Well, wouldn’t you know the original agent found the discount agent walking the front lawn of the $2M estate with the seller. An argument ensued on the front lawn, as the listing agent suffered an emotional and psychological meltdown …which got so ‘bad’ it made the papers.

The listing agent sued the seller and the ‘cheap’ agent for the lost commission and settled out of court.

So, there’s that.

You could acquire a contract and then do a double closing but the realtor will probably want to see that you can pay for the house.

I always ask them to contact me when the listing expires. I also make a not to myself to check with them when it expires.

If it’s a real good deal, I do ask them to ask their realtor to cancel the listing so I can buy it. 5 out of 10 times I get the deal if the seller is motivated enough.