I am a fairly new investor and I am wanting to add wholesaling to my arsenal. I just want to make sure I have the basics down.
If I am going to assign a contract to one of my investors, the way I am understanding it is that :
I get a contract with the seller, and sign it and/or assigns, with the agreed upon dollar amount.
I then get a contract with my investor for a different dollar amount (obviously higher).
I then give both contracts to my title company and set up a double close.
At closing I will recieve the difference in monies from the 2 different sales prices.
Is that correct? ? If so, does my buyer (the investor) assume all closing costs in my stead?
Does it need to be stipulated in either of the contracts? ?
Since he is the final buyer it is just understood that he pays closing costs?
Also, do I need to stipulate in one of the contracts exactly what I will be getting at closing (as the finders fee), or are the 2 contracts enough for the title company to understand what is happening and make the check out to me??
A quick example:
Joe Smith will sell me his house for 50g. So I make the contract and/or assigns for 50g.
My investor will buy it form me for 56g. Again, write a new contract with him for 56g.
Give both contracts to my title company.
At closing, I will not be responsible for any closing costs, and I will recieve a check for 6g. my basic understanding
Any answers, suggestion, advice would be greatly appreciated.
Most gurus teach not to write and or assigns as contracts are assignable unless stated otherwise in the contract. The and or assigns language may scare your seller.
Go ahead and get the first contract to the title company and open title as soon as possible. You want to know about any title problems asap.
With a double closing you will need to explain to the title agent what is happening. Some are real sharp and will catch on really fast and some will not.
Closing costs are negotiable and are not always the buyers or the sellers. You may get stuck with some of the extra costs associated with a double closing but the amount will be minimum. Make sure the title policy is only paid for once.
You have the basics down so go get a deal to do. Learning by doing is great too. Enjoy.
Contracts are assignable unless somewhere else in the contract it states that the contract may not be assigned. Most banks, HUD, VA and other REO companies have addendums to the standard contract and they put non assumption clauses in them.
On a lot of real estate contracts there is a line wth a check box that says [ ] This contract may be assigned [ ] This contract may not be assigned.
At least that is how it is here in Florida.
I have closed on some homes and the costs on the HUD are usually to either the buyer or the seller. What closing cost are referring to as far as “might not be either the buyers or the sellers”?
I can understand about the title costs and finding a good and knowledgable closing agent is key.
I guess what I am asking is there is a better way to conduct wholesaling business, as opposed to the two contracts… I know about the assignment sheet/contract; but seems to me that that type of transaction might not yeild the most profits as a wholesaler.
I’m not trying to be greedy, however, I do want to maximize revenue on these transactions.
As always, any suggestions, opinions, comments, and assistance will be greatly appreciated.
When assigning a contract. If I get a contract for 60K, repair cost 10K and ARV is 110K. I call investor an offer to sell the contract for 65K. Investor goes out an inspect and decides this is a good deal.
I write an assigment contract where the new buyer of this property hereby agrees to fulfill all of the same conditions and terms of the above-referenced contract, including but not limited to all settlement requirements as originally stated. He/she writes a check for 5k to me. I don’t even have to go to the closing.
What I meant was that some costs are almost automatically set up as the sellers or buyers but actually are negotiable. As an example most buyers assume that the seller will pay the Realtors and title policy but in fact all are negotiable. I have bought several where I paid all the expenses and of course negotiated those down to rock bottom even preparing my own notes and deeds when possible.
The same is true for the seller paying more closing costs that expected. In Killeen, Texas for example it common for the seller to pay a lot of the buyers points and closing costs. The town has a lot of Va buyers and it is just done that way.
Good Afternoon Alien,
It appears you are well on your way. One thing to consider is something I have run into several times. The double-closing can mess with your success if the lender wants the title seasoned. Generally 6 months to a year old (in the sellers name).
I don’t know how it works in other states, but in Indiana, I have been able to get around that by noting myself at the closing table as a “creditor” or “lein holder”. The amount of course is the amount I am owed between what I paid and am selling it for. You have to have a good title company that knows what you are doing, they will know how to handle this. I figure in the closing costs on my end, this makes it easier for me. But as always, talk it over with your attorney for you State.
I am aware of Title Seasoning. However, if I am wholesaling to an all cash buyer or an investor using hard money, then seasoning shouldn’t make a difference, should it??
I can understand if I am going retail where conventional loan methods of purchasing properties are being used; at that point seasoning may be an issue. I do like how name yourself as lienholder if the conventional lenders have a problem.
I was just wanting to clarify and make sure I am understanding you correctly.
Also, as a wholesaler, do you prefer using the double close (despite the seasoning issue) or do you prefer using an assignment contract and collecting your “fee” prior to closing for your buyer??
I’m sure contracts are easy enough to fax to all parties involved, but how do you stay “hands on” with the deal??
Do you actually, physically go to each and every property??
The reason I’m asking is because I live in FL but originally from IL. I want to invest in IL since I am fairly knowldgeable about the market, however, I do not want to go up and stay for a couple of months to put deals together, nor do I want to keep flying up there each and every week to check out all the properties that I would get calls on…
I know REO would buy sightunseen and just send the inspector and appraiser and banker etc to view the property for him. If the numbers work then do the deal. I like more hands on myself and get involved from day one. You may be able to set up a lock box for gaining access or get a friend or associate to show it for you. Easier of course to do deals in your back yard. I just did a deal 250 miles from home to rehab and I am out of town 5 days a week. Kind of hard on the family life but you do what you have to do to make it work.