Part 2, Co-Wholesaling: A Disaster!
In my last post, I began telling you about a problematic file on my desk relative to an investor who had a contract assigned to him by two individuals who were “co-wholesaling.” After the deal went sideways, he contacted me and retained my services.
Upon reviewing the paperwork sent to me, another problem quickly appeared. The contract that was purportedly assigned to the investor, now my client, was defective because the seller listed on the contract was not the owner of record. Many times I have seen transactions put together wherein the seller of a contract is not yet the owner of record, but they are fully disclosing the fact that they will become the owner of record and what is necessary for that to happen. That is all fine and good!
That was not the case in this instance. Instead, the individual who was identified and signing as the seller failed to indicate that he would be applying in the future to the local Probate Court for the authority to sell the property. Apparently, neither this seller nor the wholesalers who put the property under contract with him had a clue that the seller needed to wait until he was appointed the fiduciary of the estate to sign the contract.
It is very important in any such wholesale transaction to make sure the person identified as the seller is currently the owner of record or will clearly become the owner of record and acquire the legal right to sell the property, such as in a fiduciary capacity.
Had this investor contacted me for representation prior to engaging in the transaction, the first thing I would have done was to check to see if an estate had been opened for the now-deceased owner of this property. Not finding such an estate would have told me that it was premature for my client to pay to have that contract assigned to his entity.
All the things that were done wrong in this transaction reinforce what I’ve said before: If you are going to do wholesaling, learn to do it right! More on this co-wholesaling disaster in my next post.