Hi my question is, can i and a buddy do wholesaling together? I mean can i put properties that he is already going to buy under contract and then assign it to him say $5000-$10000 more. To make fast cash. And at closing when i get the difference just split that with him? And yes my buddy will be in on the deal. Thank you for any advice.
mohsin - I believe you already know the answer to your question… This is called fraud… :O)
Mohsin,
I disagree with j1dias. This is still a wholesale deal. This won’t be the first time a buyer told a wholesaler to write up a deal for them. Mike Collins (who has been a wholesaler for 20+ years) said he had buyers tell him to do the same thing.
If he splits the money with the buyer and the lender is not aware/approves it, it is fraud. Period. You can find any justification you want. If it smells like a duck, if it walks like a duck, and if it looks like a duck, it is fraud… :O)
j1dias,
You’re getting ahead of yourself. No details were ever given about a lender or the exit strategy. The partner may have their own funds or use private money from someone he knows. We don’t know who the end buyer is.
I am not advocating fraud of any kind. I just think you read too much into the original post.
DemosL - fair… I don’t have all the details… However if there is no lender and the buyer is using his own funds, why would he need to ask mohsin to be in the middle and then split the money between them? Why would he want to split his own money with someone else? :O)
So my assumptions - mohsin will find a house and put it under contract; he will pretend to find a buyer (his friend) and will assign the house for 5k or 10k more; a lender will pay for the house thinking that everything is ok; mohsin and his friend will split the 5k or 10k between then without the lender’s knowledge… This is no different than entering in a side agreement with a seller to sell a house for 5k or 10k more and splitting the money between the seller and the buyer… It is fraud and when discovered - big trouble… :O)
j1dias i dont know why you think you know whole lot. Why do i have to tell them it is my friend or what difference does it really make? When deals are done like this with someone who is just a random buyer(investor) people like you dont say nothing, but all of sudden i know the buyer now its a big problem. I think the other answers to this question were correct. Analyze the deal and then reply. Peace my brother!!!
mohsin - actually I know I don’t know a whole lot (and this is one of the reasons why I am here trying to learn…:O)
However I know a little bit about fraud… There is no problem if you know the buyer… The problem starts when you start splitting money under the table… Then it becomes serious stuff that you shouldn’t get involved with…
It seems that you are starting out (just like me)… I would suggest you do it right… Some shortcuts are not worth it…
But this is only my opinion… You can take it or leave it… I wish you luck!
Thank you for your concern. Good luck sorry for coming on to strong earlier.
:beer
I think J1dias is making a good point about the need to structure your deal so that you can avoid the label of fraud.
It can be done very simply.
The solution is to work closer with your title agent.
A question like this can be resolved by being up front and honest with your title agent, let them know exactly what you want to accomplish, and if they are experienced there will be a legal way that they can structure the deal, even something to the effect of creating an invoice for services paid for by the buyer.
You tend to get into the fraud issues when you hide what is going on.
As one of my advisers, a title agent with over 40 years of experience in one of the most competitive markets in the USA would say, “There is nothing wrong as long as it is disclosed.”
Some questions are hard to answer in general because some things do depend on the local market, as well as whether or not a lender is involved and what kind (hard money, FHA, conventional, etc). I can say that there is probably a better way to get what you want done. I would think that the flag happens because (after re-reading your post) it looks like there is a 3rd party lender “overfinancing” the transaction and the borrower (your friend) is collecting extra cash that he is not disclosing.
Good luck, I hope your deals work out for you.
:biggrin