I’m in the process of trying to close a deal that I’m in need of some assistance to ensure I don’t get screwed in the end.
The deal…The seller is selling the property for 5.5mil. There are four people in my group who have assisted in locating a buyer, One of the individuals has direct contact with the seller. The seller has stated he has no need for a “broker” to promote his property, but doesn’t mind us locating a buyer and placing our fee on top of the 5.5 the seller wants to net.
The first problem…We’ve located a buyer who’s willing to pay 8.5 for the property and they would like to close on this deal this week(sounds like a great problem, huh?). But they would like to meet the seller. At first we were fine with this request because we plan to have both parties, the buyer and seller sign a TRANSACTIONAL FACILITATION CONSULTING AGREEMENT with provisions for NON-DISCLOSURE & NON-CIRCUMVENTION. Thinking this would protect our financial interest we proceeded with setting up the deal. But we’ve recently realized if the buyer meets the seller and indeed circumvents our wholesaling group, the only recourse we would have is to try to enforce our binding agreements via the courts. But we don’t have enough resources to drag this out in court indefinitely, and ultimately the buyer and seller would have closed the deal for a lower price and our gains would have been lost.
The second problem…
Even though the seller knows we’ve marked up the price and is okay with it, they don’t want to have the financial responsibility for anything over 5.5mil. They only solution we can come up with is a dual closing where the closing atty. holds the difference in escrow and then disperses the funds…taking us back to the initial problem of the buyer wanting to meet the seller…
What other options do I have to close this deal and overcome this issues??? Is the buyer meeting the seller a deal breaker??
I am not an attorney and you’ll probably want to check with one.
My understanding of real estate law and contract law would indicate that unless one of your group has a real estate license, the agreements you have created are not binding as they lack one of the primary elements required for enforcement. That element is legality. It is not legal for any person to pay another for the service you have described unless that person has a real estate license and any agreement for that would be unenforceable.
If however, there is real estate license amongst your group, you would need to go through the broker with whom that license is hung in order to secure your commission. The broker will have ways of protecting his or her commission as that is standard course of business.
Lastly, the ‘dual’ closing you describe may be illegal in the state you are operating. Again, you’ll want to check all this with an attorney.
Do you have this property under contract?
If so, make sure the contract is assignable - and just assign it to the end buyer for the selling price plus your markup. That should avoid the double closing issue.
Make sure you have a specific performance/breech of contract section in your contract that specifies how much you pay the seller if your group defaults and how much HE pays YOU if he defaults. Some have a standard $5K amount. Since this is a mega-$$ property and you could be left holding the bag, put in an addendum that makes it more on his end if he backs out.
Get the end buyer to put up a substantial deposit with the title company YOU have chosen to do closing (investor friendly). I have an investor who has no problem putting tens of thousands down on a property to show he is serious about closing (and he always has closed).
There are thousands of investors who are not real estate agents who have non-circumvent agreements, birddog agreements, etc., so I’m not sure about the prior post about agreements not being binding unless one of you is an agent. And as far as paying someone for the deal you described, isn’t this what creative real estate investing is all about? Maybe I"m confused.