INVESTORS’ CORNER: The Wholesale Trail

For the past few years, one of my main passions has been to educate and elevate the “wholesaling real estate” industry. It’s gratifying to see that more and more individuals are understanding the distinction between marketing contracts and marketing properties. Fundamental knowledge like that is not only important for regulatory and legal compliance while engaging in wholesaling, but it is critical to be a good representative of the overall real estate industry.

        I occasionally run across something new in a conversation with a client who is a wholesaler that makes me realize just how much misinformation is still out there in this area. A recent phone call with a very bright and hard-working wholesaler brought that to light. We were discussing the complications in a deal that were caused when the assignee of a contract filed an Affidavit of Notice of Contract with his local county recorder’s office to better secure his deal.

        The young wholesaler to whom I was speaking spoke as if this was a “lien” filed by the assignee/buyer. When I heard him us that terminology, I stopped him mid-sentence and explained to him the important distinction that I want to share with you as well. An Affidavit of Notice is an exception to the title, not a lien on the title. A lien represents a sum of money owed, and the house or real estate is being encumbered to secure payment of that money that is claimed to be owed. Taxes are a lien, unpaid sewer assessments and judgments for money damages can become liens, and mortgages and deeds of trust are various forms of liens.

         An exception is just that, an exception in which someone says you have good, clear title except for ______________. In this case with the young wholesaler, the exception is the affidavit filed by the would-be purchaser purportedly as evidence of his intent and capacity to perform under the terms of the contract that had been assigned to him. Exceptions are things that often must be resolved or cleared for marketable and insurable title to be transferred, but what it takes to clear them is not necessarily a sum of money.

Attorney Jeffrey S. Watson, Esquire is council to the National Association of Real Estate Investors and an advisor to the Metrolina Real Estate Investors Association, www.metrolinareia.org, which provides education, networking, and mentoring to investors in the greater Charlotte area. You may contact Jeff at [email protected]