Forums **Ask A Question** New Land Academy Member – Flipping Contract Question

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  • #23814
    Post count: 8

    Hi all – excited to officially be a new member here of Land Academy.

    We’ve been jumping into some pretty aggressive mailer campaigns right out of the gate and have a handful of deals ready to close.

    I’m hoping to get a better understanding of flipping contracts and whether there is anywhere to connect with investors looking to purchase? I know you’re not allowed to market and advertise real estate you do not own (without have a “significant” deposit etc… in place or ownership). But it feels like there are others out there flipping contracts and I’m curious if anyone can help shed some light on this, and whether private groups and investor forums count the same as “marketing” on zillow or Realtor etc…?

    I have a handful of really good opportunities, but if I could flip the contracts and take some cash out right away, to build up more funds in my war chest for bigger transactions… I would like to do that. But I’m not sure if that can be done or whether I just need to buy them, and then market them from there.

    Appreciate the thoughts and help.

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  • Kyle Bryant
    Post count: 71

    Flipping contracts is common, and it’s not considered “brokering real estate.” I have done that on a few deals as well–I pay “independent consideration” (like $50) for the exclusive option to purchase a property at a specified price for a particular period of time, say 60 days. Now I have an equitable interest in the property, so I go and market it for sale. If you find a buyer, then figure out a way to make the transaction work (by flipping the contract, or bridge funding, or whatever). If you don’t find a buyer, then don’t execute the option, and your only risk is the $50 plus marketing expenses. It’s a solid plan if you can figure it out.

    Shawn Swisher
    Post count: 76

    This question typically opens up a big can of worms in real estate forums but I’ll jump in anyway. In many states “flipping contracts” (or assigning contracts, or wholesaling) is in a somewhat muddy area of the real estate commission’s rules and regulations. Usually, it’s the advertising part that gets you into trouble. In most states, assigning a contract is legal but advertising a property for sale that you don’t own is considered brokering and therefore requires a real estate license. Typically “ownership” is considered as having legal title to the property, not just equitable title, so that is where wholesalers have potential trouble. Real estate commissions enforce the laws based on complaints so as long as you can avoid having a complaint filed against you, you’ll be ok. However, state commissions are beginning to crack down as wholesaling has become more popular. For example, Illinois just updated their real estate laws to make wholesaling illegal unless you hold a real estate license. On the other hand, Texas is much more friendly to wholesalers. As I understand it, as long as you disclose in your advertising that it is a contract assignment, you’re legal. I know lots of investors do assignments and have done it for years with no issues. The bottom line is it depends on where you’re wholesaling. You just have to learn your state’s laws and determine if the potential fines are worth the risk or not.

    "Buy land, they're not making it anymore." -Mark Twain
    Kevin Farrell
    Post count: 1772

    LSUSA – I do assignments with other investors. I find great deals that meet my partners criteria and bring the partner in on an assignment contract. I don’t advertise openly for the sale of these assignments. Works great.

    Kevin Farrell - Moderator
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    Post count: 52

    All of my deals have been through assignment, and I am working on getting one this week under contract to sell via assignment. Seller knows of my intention and once I get under contract will sell to an end buyer.

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