Co-Wholesaling: A Disaster!

By on Jun 6, 2017 in Real Estate Investing | 5 comments

            I have been working on a problematic file on my desk relative to an investor who thought he was buying a property from a wholesaler. It turns out that two guys went together to “co-wholesale” to my client a property they did not own. They assigned the contract to my client. Unfortunately, the assignment was flawed because the underlying contract was defective for two reasons. For one thing, it was defective because the seller was not the owner of record, and it was also defective because it failed to comply with fundamental requirements of the State of Ohio relative to residential property disclosure statements.

            In Ohio and in many other states, if the disclosure statements do not accompany the initial Purchase and Sales Agreement, they have to be supplemented. Up until that time, the contract is entirely voidable and unenforceable at the buyer’s option.

            One of the other annoying things in the whole mess was watching how the second wholesaler tried to send a Purchase and Sales Agreement for my client to buy the property from them at an even higher amount than the other wholesaler was trying to sell it to my client.

            What made my blood boil was seeing the multiple messages between my client and the wholesalers indicating that the Purchase and Sales Agreement had been sent to a local title company so that title and escrow could begin, yet the title company has no record of it, nor is there any record in that particular county’s Probate Court of any type of probate proceeding being initiated whereby the alleged seller could have title, either as a fiduciary or as an heir, to sell the property.

            In this one transaction, there are so many things that were done wrong by these “investor-wholesalers.” I will break it all down in my next several posts so that people can learn what I always talk about. If you are going to do wholesaling, learn to do it right!


  1. I totally agree, I had looked at co wholesaling, but never found a buyer to sell the property to. I then heard that co wholesaling was illegal, but can not remember why. I just decided if I could not buy directly from the seller, I would not buy. Thank you for your information and expertise.

    Mary Stead

    June 6, 2017

  2. Hi Jeff- Regarding the disclosures- Here in FL, I believe one does not have to provide disclosures IF the contract is written on an AS IS basis, ie the one most often used to buy and sell junk properties. That does not mean it is ever OK for the seller to commit fraud (deliberately try to deceive the buyer)- but that is one instance where at least the lack of a seller’s disclosure may not impact the contract.
    Looking forward to more comments on this interesting situation. Wondering whether it is possible to give us some indication of why the buyer sought your services- trying to sue the wholesaler? That story could be instructive too!

    margaret smith

    June 6, 2017

  3. Hi Jeff,

    I had purchased Brian Meara course years back about legally short selling with release of interest. Do you happen to have a course on legally wholesaling in the state of California?

    James Fite

    June 6, 2017

    • Wholesale Reformation is that course

      Jeff Watson

      June 9, 2017

  4. I think marketing other people’s properties without a license is a waste of time and
    crossing the line. For one thing, in South Florida most wholesalers have the same buyers on their lists and if the properties are listed on the MLS then the buyers are going to go directly to the listing agent anyhow.

    Kristine Zelazo

    June 6, 2017

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