Real estate wholesalers: how to protect yourself

INDIANAPOLIS — A real estate expert warns Hoosiers that they are receiving unsolicited calls and texts from people looking to buy a home in central Indiana.

Todd Cook, Keller Williams’ licensed real estate agent, says more and more people are getting such offers, even if their home isn’t for sale. People texting and otherwise often refer to themselves as “acquisition specialists,” promising quick deals to save homeowners money.

“You don’t have to pay a commission to a real estate agent, you don’t have to pay all these different things to force them to sign an offer,” Cook said. “The real concern here is that people will be misled and get caught in things they don’t realize they’re doing under the guise of saving money on commissions.”

While wholesale real estate is not illegal, Cook says it can be deceptive and the current housing market has made wholesalers more aggressive in reaching out to homeowners.

Wholesalers often persuade homeowners to enter into purchase agreements, usually at below market prices. But the wholesaler has no intention of actually buying the house. During the period outlined in the contract, the wholesaler is looking for others to buy the home at a price higher than what they agreed to pay the homeowner.

“The majority of these people think they sold their homes at that point,” Cook said. “Actually, this person is looking for a third party to buy it.”

Such agreements often give the wholesaler the right to transfer the transaction to a third party. Homeowners who think they can save realtor fees (perhaps about 6%) later learn that wholesalers charge tens of thousands of dollars in “transfer fees.”

“What they don’t realize is that this person is charging a $25,000, $30,000, or $40,000 allocation fee,” Cook warned. “Check the difference between what they’re offering you and the fair market value of your property. In most conditions, you’ll find him well over 6% in total.”

Additionally, due diligence clauses in contracts may give wholesalers the right to back out of the deal at the last minute if they can’t find a buyer to buy your home at or above the price the wholesaler offered, Cook said. People who think they’ve sold their home often find their homes for sale on Craigslist and other websites.

“Imagine having everything in a U-Haul, or having everything in a Pod ready to move.” about it.”

Contracts often give the wholesaler access to your home for the duration of the contract.

“It’s really about showing potential buyers your property,” Cook said.

The Best Ways To Protect Yourself In Wholesale Trading

If you’re interested or curious enough to listen to an offer, Cook says there are specific ways to protect yourself from bad deals. Ignore it and then call the number back.

“If you get a call back and it’s a VOIP number or Google Voice and they ask you to give your name before you can speak to someone, all of these should be red flags. A legitimate company. Because they don’t,” says Cook. “If you are dealing with a legitimate real estate professional, they are proving that they are real estate professionals. They are required by licensing laws. , we plan to identify which brokerage firm we use.”

Once you have them online, start researching the information. “Ask about specific questions about who they are, where their offices are, and what they plan to do with your property,” Cook suggested. Please check if you can answer

Then, according to Cook, start asking about the nature of the purchase agreement. “Ask them if they’re trying to transfer this contract,” Cook said. “If so, what transfer costs are you going to charge me? They’ll quickly lose interest in selling.”

Another litmus test is to have a lawyer or real estate professional take a look at the contract. “If someone you are dealing with or dealing with hints that they don’t want a real estate agent or lawyer involved in reviewing the contract, that’s a big red flag,” he said. .

Lawyers or realtors will be aware of terms such as “assignment of contract” or a catch-all due diligence period that gives the wholesaler an irrevocable right to terminate the transaction.

“These are the kinds of things realtors are trying to stand up to, or lawyers are trying to push back,” Cook said.

Finally, if you’re curious about what’s on offer, Cook says it’s fine to send the provided information. “Never, 100%, he will not sign anything until it has been reviewed by an expert,” Cook warns.

Cook offers to review such contracts free of charge, and says many other real estate professionals in central Indiana will do the same. If the offer looks good, he says don’t bother with it. However, if it looks like someone is trying to take advantage of you, be warned.

If you would like Cook to review a contract that you believe is from a real estate wholesaler, you can contact us by email [email protected].

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