I am a new wholeseller. I am trying to do as much research as I can before I jump into it. Are there any general actions wholesellers should take to protect themselves from lawsuits?
You can always setup some sought of entity to wholesale properties through. But as a newbie unless your worth anything I would focus more on getting your first couple of deals done before you do anything.
Just make sure that your contract has one or two contingencies that allow you to get out of the contract. The seller can’t do much of anything if their signature is on the contract. The most common is the inspection contingency. My contract simply states that the contract is contingent upon buyer’s approval of inspections. I don’t have to give a reason why the inspection didn’t meet my approval, it just didn’t. The best way to protect yourself and the most cleanest way to wholesale a property is if you can is to try and get an OPTION to purchase, this way you don’t have to use any contingencies and you aren’t legally bound to buy the property until you exercise the option
Yes, Never sign a contract if the seller or a member of his immediate family is an attorney!
Right now I have a property under contract. This property was suppose to be a simple tenant occupied wholesale deal. Got it under contract, but I protected myself. I couldn’t get it under an option thought. One of my contingencies is that the lease and tenant payment history must meet my approval. The owner told me when I was originally talking to her that the tenants were on time payers. I just found out today when I called the property management company in order for them to email the lease and lead certification that the tenants are behind on their november and has yet to pay their december rent. It makes it hard to wholesale a property to a buyer when stating that it is an instant cash flow property when the cash isn’t exactly instantly flowing.lol So tomorrow I’m going to call the owner and tell her that since the property management company still works for them until closing, they will have to evict those tenants and the closing will have to be delayed. I’m still interested in wholesaling the property. If the tenants damage the property before they are evicted, I can renegotiate a steeper price for any possible damage and I’m not on the hook to close. If she says no t the extension, I can just exercise my lease not acceptable by buyer clause and say adios!
I remember the time a Superior Court Judge sold me a property and read my 12 page agreement; as he was signing he said " I cant believe people sign this thing"I replied “Your Honor you put in jail the people I buy from”… He chuckled and signed… I made 75k on him.
People are people, the trick is to find their “RAT” ( the reason they’re selling) once you do its fairly easy to control the situation. As for out clauses… Heck its 12 pages for a reason.
12 PAGE CONTRACT?!!! :shocked :shocked :shocked
12 pages of CYA and some other stuff too.
Never give your contract to the home owner to “look over”.
Always use more than one contingency.
Use a closing attorney instead of a title company “in-case there are liens and other legal issues”.
Explain that you are buying the house subject to inspection and give yourself a 7 day inspection clause in the contract.
Really as long as you explain everything to the homeowner you shouldn’t have anything to worry about.
Most of the time, I use a one page contract. I don’t mind them looking it over. It just shows I have nothing to hide. As long as I’m my junking up my contract with contingencies, there is no reason why they would object, I do give them 24 hours though to sign it though. When I can, I will set down with them and explain it to them. If you build trust with the seller, they should have no reason to be on guard when you present the contract in the first place.