Hi,
there seems to be so many ways to close a deal on a house. Can someone explain the difference the following and what type of forms used for each?
assigning the contract
wholesale/flipping
subject to
which of these require you actually having to sign your name on the mortgage? I thought neither of these would, but I’ve been hearing differently.
Howdy dn58650:
When assigning you just get it under contract and assign which is also flipping the contract which is also wholesaling but here you may want to sign two contracts and may want to have a double closing instead as the fees are generally higher. I did try to do a $8000 assignment but it fell thru. Neither of these will you usually own the property. You could actually close and own a wholesale deal where you would have to get financing. My dad was involved in over 100 houses in Houston where they bought them all at a wholesale price and closed on them and then resold that at retail to homeowners. To me that is true wholesale but it is used loosely in REI.
Sub2 is where you buy the property and agree to make payments to the seller or directly to the bank. You will generally sign a promise of some sort to make payments but not the actual mortgage that is recorded against the property.
Hope I have not confused you more
LOL
wow…that did kind of confuse me more. So assigning the contract is also considered wholesaling? There seems to be some many variations of it. I purchased Chuck Smith’s course, and he says wholesaling is quick turning a property (that is not in your name) to another investor right after you’ve signed the contract with the buyer.
So what you are saying, when wholesaling, your name may or may not be on the deed. Can you tell me if there are any disadvatages/advantages for each way?
When you say for wholesaling, signing two contracts, you mean signing a contract with the seller and then reassigning the contract to another buyer (investor) right?
Also, what happens if you sign a contract with the seller but can not find a buyer? Are you still obligated to follow through?
Also, in his course, he says when assigning a contract, it doesn’t usally involve any closing/lawyers. You just sign this agreement over to the interested buyer/investor and they write you a check (your assignment fee) to you or your escrow company. Usually assignment fees are around $2,000-$3000. So your $8,000 deal is actually a wholesale deal right?
Howdy dn58650:
Actually wholesale may be more to where you get it under contract and sell it to another fix-up investor. Usually while you have it under contract and no matter if you assign the contract or sign two contracts and have two closings, one with the seller and one with your buyer. It is all kind of the same. Some wholesalers like to do double closings if the fee to them is over $5000. This helps keep the seller from finding out how much profit you make on the deal and your buyer as well.
I can see how all the terms can confuse you. Perhaps we should make up some new terms and confuse new investors even more. It is basically simple: Find a super deal and get it under contract and sell it to someone else some how, either assignment or double closing or buy it yourself and then resell it. If you sign a contract and all your contigencies have expired you may lose your earnest money. The seller will have a hard time making you buy something that you can not afford and would be wasting time and money trying. So your only real risk is the earnest money. Try to keep it as small as possible.
The $8000 was the guys assignment fee. He assigned me the contract and was to be paid the assignment fee at closing when I bought the house. I do not know if it was wholesale or flip or assignment but he came close to making $8000 so who cares what the terms are. I hope yoy do not get all bogged down trying to figure out all the terms. I know guts who can not even read who have done great with REI. Buy low and sell high asap
Again this may confuse even more. Believe me I try not to do so.
LOL
Hi dn58650
I’ve been researching this stuff for a long time and am in the process of finalizing my first deal. Let me see if I can clear things up a bit.
Wholesaling is the same process in RE as it is in retail, it simply means buying properties for less than 65% of the fair market value (FMV) and then reselling for a profit. When you pick up a property at wholesale, you can then do a few things with it. You can fix the property and sell at retail to a homebuyer (this is known as rehabbing) or you can flip the property to another investor who will do the legwork. Depending on how much profit is in the deal, you could make $3-5k per flip.
You have a few options to execute the flip also. You could get the property under contract and assign that contract to another investor and ask that investor for your assignment fee by check. This is quick and dirty but it allows your buyer/investor to see how much profit you are making in the deal which isn’t always a good idea. Alternately you can flip the property via a double closing which means your buyers contract and your sellers contract to your investor close at the same time, thereby never really having the property in your name. The advantage is that your buyer/investor never sees your buyers contract and therefore has no idea what you paid for the property.
Hopefully this makes sense. Let me know if I need to clarify.
Howdy Drew:
You splained that wonderfully. Way to go
Thank you very much! That did clear it up 
Congratulation on your first deal! Was it easier then you thought it would be? 
Honestly, the first one is rough. My biggest challenge has been finding the deals. If I had them lining up offering me properties I could land a lot more. Guess I need to start advertising. 