Jeff Watson is our guest for this episode and we’re talking about the legalities of wholesaling. Important stuff. As Jeff says, “Ignore at your peril.”
Jeff joins us from Conneaut, Ohio. He’s been investing in real estate since 1994, and he’s a lawyer specializing in keeping wholesalers out of orange jumpsuits.
In wholesaling, you get a property under contract at less than market value. Then you sell the contract to someone else for a little more than what you paid (usually $1k-$10k more).
When wholesaling, you must be a principal. You must be the buyer or seller. You cannot represent someone else. Otherwise it is considered brokering without a license in all 50 states. And that’s illegal.
You cannot show pictures of a house for sale if you don’t own it. If you only want to sell a contract, you must market the contract. Word of mouth advertising is the safest way to legally attract a buyer.
Listen and learn…
- Why being a licensed real estate agent is probably the best protection
- Why you must have intent and capacity to close on deals or you’re committing fraud
- Controlling the title company that is used and the closing date
- Slow down… close on property… clean it up… sell it on MLS
- Why it is that once you have title to the property, no one can undercut you
- Why you should always have an inspection clause with the right to rescind that includes a walk-through of the empty property a day or two before closing
- Building in the right to rescind if the condition of the property or the condition of the title is not what was represented
Mentioned in this episode:
- Joe’s podcasts on iTunes: Real Estate Investing Mastery Podcast
- Podcast Hotline: 636.255.8815
- Joe’s Coaching Program: Joe McCall Coaching
- Get Joe’s free Wholesaling 101 Mindmap
- Or text ‘Flip’ to 313131 to get the free Mindmap
- Jeff’s website: WatsonInvested
- Please review Joe’s podcasts on iTunes or wherever you listen
What are you thinking?
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Great podcast. It answered many questions but also brought up a few new ones. I think the most concerning thing was Jeff’s statement that a LO does not give you the right to market for a tenant buyer, only a tenant and separately a buyer for the option. The one “out” Jeff gave to that is if you have written permission from the seller to do so while being a licensed agent. Is this simply a clause in the A-B option contract while still maintaining my involvement as a principal and creating an agent/client relationship?
Sorry, that last line should say “and not creating an agent/client relationship.”
Still wish he would have dug in deeper on sandwich lease options. I don’t waste time wholesaling anymore
This podcast was amazing especially since I was looking to assign a contract soon. I learned a lot and it made perfect sense. I’m going to my first REIA meeting this week to learn and I’ve been watching many videos and reading bigger pocket forums. I believe this was the first podcast that I ever listened to and it was the perfect one right before I start trying to get a hold of of a bunch of vacant owners while build my buyers list.
I have two questions.
1. What was the author and book you guys were mentioning. I replayed 5 or 6 times to try to make out the name. It sounded like Donald Leonard pr Donald Linnard, I even tried Donald Miller. I google all these names with real estate and couldn’t find anything.
2. How many buyers should be on your buyers list.
I’m sure it’s as many as possible but I wanted to see if there was a suggested amount or a rule of thumb
Thanks, Sean. 1) I think the book is “Story Brand” by Donald Miller. 2) As many as you can get… Try to get at least 100.