The Latest Scam In Wholesale Real Estate (More Regulation) | Flipping Mastery Weekend Edition

Welcome to the Wholesale Hotline Podcast Weekend Edition (Flipping Mastery Edition), where Jerry teaches how to master the art of house flipping, wholesaling, and new construction development. Show notes -- in this episode we'll cover: Straightforward, step-by-step training on making six and seven figures from real estate deals. Insider tactics for finding motivated sellers, analyzing deals, and raising private money. Learn how to flip houses virtually from anywhere—even with zero experience. Whether you're a beginner or scaling up, Jerry gives you the blueprint to build real wealth through real estate. Please give us a rating and let us know how we are doing! ➖➖➖➖➖➖➖➖➖➖➖➖➖➖➖ ☎️ Welcome to Wholesale Hotline & Flipping Mastery Breakout! ☎️ Jerry Norton went from digging holes for minimum wage in his mid 20's to becoming a millionaire by the age of 30. Today he's the nation's leading expert on flipping houses and has taught thousands of people how to live their dream lifestyle through real estate. **NOTE: To Download any of Jerry's FREE training, tools, or resources… Click on the link provided and enter your email. The download is automatically emailed to you. If you don’t see it, check your junk/spam folder, in case your email provider put it there. If you still don't see it, contact our support at: [email protected] or 888) 958-3028. ➖➖➖➖➖➖➖➖➖➖➖➖➖➖➖ 💲 USE THIS LINK FOR DISCOUNTS AND FREEBIES TO USE IN YOUR BUSINESS: 💲 Make $10,000 Finding Deals:b https://flippingmastery.com/10kpod Get 100% funding for your deals! https://flippingmastery.com/fspod Mentoring Program: https://flippingmastery.com/ftpod FREE 8 Week Training Program: https://flippingmastery.com/8wpod Get Paid $8700 To Find Vacant Lots For Jerry: https://flippingmastery.com/lfpod FREE 30 Day Quickstart Kit https://flippingmastery.com/qkpod FREE Virtual Wholesaling Kit: https://flippingmastery.com/vfpod FREE On-Market Deal Finder Tool: https://flippingmastery.com/dcpod FREE Wholesaler Contracts: https://flippingmastery.com/wcpod FREE Comp Tool: https://flippingmastery.com/compod FREE Funding Kit: https://flippingmastery.com/fkpod FREE Agent Offer Sheet & Scripts: https://flippingmastery.com/aspod FREE Cash Buyer Scripts: https://flippingmastery.com/cbspod FREE Best Selling Wholesaling Ebook: https://flippingmastery.com/ebookpod FREE Best Selling Fix and Flip Ebook: https://flippingmastery.com/ebpod FREE Rehab Checklist: https://flippingmastery.com/rehabpod ➖➖➖➖➖➖➖➖➖➖➖➖➖➖➖ 🔌 PLUG IN & SUBSCRIBE 🔌 SUBSCRIBE: Jerry Norton and Flipping Mastery TV FACEBOOK: http://www. Facebook.com/flippingmastery INSTAGRAM: https://www.instagram.com/flippingmastery/ ➖➖➖➖➖➖➖➖➖➖➖➖➖➖➖ 🤝 #SQUADUP & GET MORE DEALS DONE in the Wholesale Hotline LIVE Facebook group: https://www.facebook.com/groups/759418414582645 🤝 ‼️‼️Pro tip: Make a post with your market & what you need help with‼️‼️

• 0:03Speaker 00

  Hey, it's Jerry Norton. Welcome to the Wholesale Hotline Podcast and the Flipping Mastery Breakout. We want to know how we're doing, so please leave a comment and give us a rating.

• 0:17Speaker 00

  The latest trend in wholesale real estate regulation is aiming to stop wholesalers from clouding title. Known as an affidavit and memorandum of agreement, or memo for short, it's been a longstanding practice for many wholesalers to file a memo, once under contract with a seller, as a way to prevent a seller from cutting the wholesaler out of the deal. Well, thanks to the bad actors in the industry who abused the use of memos, several states have passed laws regulating the practice of memos, and several other states currently have bills and legislation. Bottom line, filing memos may no longer be a viable tool for protecting wholesalers. I'll explain the blatant scam taking place with memos, and then share which states have laws and bills in place,

• 1:00Speaker 00

  when and how to properly file a memo, and finally, what you can do instead of filing a memo. I cover closely all these different laws and regulations that impact the wholesaling industry, and they also maintain a free report which has state-by-state breakdown of all the different regulations. Just go to wholesalerregulations.com to get that free download. Remember, laws apply where you transact, and it's your responsibility to understand and follow the laws where you do deals. A memorandum of contract is supposed to do one narrow thing: Give public notice that you had a valid short-term purchase and sale agreement for a specific property. It should only cloud title temporarily until the contract is either closed or terminated.

• 1:43Speaker 00

  A memo is technically only enforceable if it's set to close at a reasonable time period, under a year, and you, the wholesaler, have the real intent and capacity to perform either by closing or signing the contract. But unfortunately, wholesale scammers have been abusing the system. Here's what's happening: A wholesale scammer will intentionally over-contract with a seller. Then he'll file a memo and go dark and wait. After no contact with the wholesaler, the seller moves on to find a new buyer. Then he contracts with a legit wholesaler at a legit price, only to discover prior to closing that the previous scammer filed a memo and clouded title. So the legit wholesaler calls up the scammer to ask him to remove his memo.

• 2:29Speaker 00

  Now again, the wholesale scammer had no intention of ever buying or wholesaling the property. So the scammer holds the transaction hostage and won't remove the memo unless he's paid $5,000 or $10,000. And in an effort to perform and close on the deal, the legit wholesaler reluctantly agrees. This actually just happened to me in North Carolina on one of my deals. Now wholesalers aren't the first ones to come up with this scam. You want to know who originally started this predatory practice of clouding title as a scam? You guessed it, licensed real estate agents. Known as a right-to-list agreement, or sometimes called a homeowner benefit agreement, an agent records a long-term exclusive right against a property,

• 3:13Speaker 00

  sometimes for 20 to 40 years in some cases, clouding title and preventing sellers from selling. That means if the homeowner or their heirs later sell the property using a different listing agent, they could be forced to pay a penalty, often up to 3% of the home price. But wait a minute, Jerry, real estate agents are trained and licensed and adhere to strict rules. They're members of the Board of Realtors and they agree to follow a code of ethics. An agent always puts their client's best interest first. Apparently not. According to AARP, right now there are cases being challenged by attorney generals in 11 states. Recently, South Carolina, Connecticut, Hawaii, and Oklahoma

• 3:57Speaker 00

  passed laws prohibiting these unfair service agreements. And currently, over 30 states have laws making these types of agreements void, unenforceable, and in many cases, illegal to record. Why? Because they bind the property, not just the person, and effectively run with the land, clouding title in a deceptive way. Legislators call these agreements Unfair service agreements because the homeowner rarely understands the long-term consequences of signing them. Okay, so back to wholesaling. How is a memo that a wholesaler files different from an unfair service agreement used by agents? Well, it's different so long as it's tied to a specific contract with a defined closing date.

• 4:39Speaker 00

  It's short-term, only lasts until the closing deadline in the purchase agreement. And it's not giving the wholesaler a decades-long right to cloud title. Now, having said that, there is controversy, as you can imagine. If a wholesaler records a memorandum without real intent or the ability to close, some courts and title companies have considered that an abuse of clouding title, similar in effect to unfair service agreements. Now sellers sometimes claim that it's predatory because they didn't know that a memo could block them from selling to anyone else. And because of widespread abuse, several states are viewing memos from wholesalers in the same light as unfair service agreements.

• 5:20Speaker 00

  And we're starting to see and will continue to see overly broad restrictions that could catch wholesalers' memorandums if misused. For example, in the state of Alabama, the state explicitly recognizes wholesaling as a practice and condemns clouding title with memos. In 2024, South Carolina passed a law that prohibits recording any agreements that act as liens or encumbrances. In New Hampshire, the law states an agreement is unfair if performance cannot be completed within one year, and if it creates liens and encumbrances, or buying successors. Rhode Island just passed a law regarding unfair service agreements. And as of this recording, Texas, Oklahoma, Ohio, and Connecticut, and I'm sure there's other states that I'm not aware of,

• 6:03Speaker 00

  they all have proposed bills going through legislation regarding these unfair service agreements that may apply to wholesalers filing memos. So where does filing the memo overlap with unfair service agreements? It's an unfair service agreement if the use of the memo is just to block the seller from backing out, and if the wholesaler does not have the ability or real intent to perform. When might it be appropriate to file a memo? Well, one reason is if you release earnest money early before closing, which we do all the time. But even if you do file a memo, be aware of the risk. Regulators, courts, or even sellers attorneys could argue that the wholesaler's memorandum functions like an unfair service agreement

• 6:46Speaker 00

  because it encumbers title and blocks the seller from selling. So even if you have good intentions, the risk is that it could be viewed in bad faith. Recording memos could be challenged as unenforceable. It could expose you to misdemeanor charges, and it could open you up to liability for damages and attorney fees. Now, I like to draw a line in the sand and remove the gray area. If you're watching this and you're a wholesaler who files memos with no earnest money, no intent to buy or assign, or you leave your memo in place after the contract has expired, you are predatory and you are a scammer. And because of abuse from you, some real estate boards and attorney generals are already grouping wholesaling practices together with predatory agreements and legislative discussions.

• 7:30Speaker 00

  Now, when I hear about things like this, it infuriates me because wholesaling is the greatest industry and opportunity on the planet. These scammers need exposed. It's time we self-police our own industry. If you know of any shady wholesalers who are scamming sellers with memos, send me the details and proof so we can blacklist them from the wholesale real estate industry. Now, if you're a legit wholesaler and feel the need to file a memo, here's what you should do to be extra careful. Make sure that your purchase agreement is clean, short-term, and avoids elements that could transform it into a service agreement. You need clarity in your memorandum. Don't overstate rights, obligations, or expectations in your recorded memo. Keep it limited to the equitable interest you hold under the purchase and sale contract.

• 8:13Speaker 00

  Be sure to avoid long durations or binding successor clauses. Don't try to lock in future obligations beyond the deal's timeframe. And for the love of God, ensure your documents include exit or release clauses if the deal doesn't go through. And don't file unless you're ready for a legal challenge. If someone claims your memo functions like an unfair service agreement, you might be asked to defend it in court. Or risk damages and penalties. So let me read a clause in my wholesale contracts regarding filing a memo. Clause 25 reads, seller shall not enter into any agreement to sell the property with any other party. To protect the buyer's equitable interest in the property, seller acknowledges that buyer

• 8:54Speaker 00

  may elect to execute and record an affidavit and memorandum of this agreement in the official records of the county for the purpose of providing notice of the rights of buyer to purchase the property. Should seller participate in another agreement which would interfere with this agreement, seller will be responsible for any and all costs and losses to buyer. If buyer is unable to perform under the terms of this agreement, the affidavit and memorandum is null and void and unenforceable. By the way, I'll give you my wholesaler contracts for free. To get the free download, just go to wholesalercontracts.com. And I'll also give you my affidavit and memorandum of agreement for free. I'll put the download link to that in the description below.

• 9:38Speaker 00

  Now for the legit wholesalers, if you choose not to file a memo, or if you're unable to due to regulation, what should you do to protect yourself? Now, first of all, if getting cut out of deals is a regular thing that happens to you, you need to do a much better job communicating and managing your sellers and buyers. A seller does not backdoor a wholesaler he knows, likes, and trusts. Sellers won't backdoor you if you communicate properly and follow up often. The only reason why they would be tempted to cut you out is because of a lack of confidence in you or your ability to perform. I once had a cash buyer who did a walkthrough at the property and he approached the seller and he attempted to cut me out of the deal. Now, the seller immediately told me, why?

• 10:22Speaker 00

  He trusted me and he had confidence in me and he knew instantly that the buyer was untrustworthy if he was willing to do that. You have to remember, a distressed seller is a stressed seller. These are problem properties and problematic situations. They're counting on you to come through and perform. Be 100% transparent about what you're doing. Explain the next steps, then have regular follow-up communication. If they don't hear from you, they get very anxious. This is why I recommend a good transaction coordinator or TC who can communicate well and often with all parties in the transaction. Now, I'll put a link in the description below of a good TC service that I recommend using. Bottom line is this, manage sellers effectively and you shouldn't need to file a memorandum.

• 11:09Speaker 00

  Thanks for listening to this podcast. To get more free tips, check out my YouTube channel. Just search Flipping Mastery TV on YouTube where I have over a thousand videos teaching you how to make more money with real estate. On my channel, I also give away free stuff like my Quick Start Kit with everything you need to flip your first house in the next 30 days. Or my deal finding software called Data Cruncher, which finds discounted houses in any zip code in a matter of seconds. You can get those for free at myquickstartkit.com and mydatacrusher.com.