I realize that when a wholesaler assigns a contract, he/she needs to keep an eye on the process leading to a closing, just to make sure it goes smoothly to a completion. Makes sense.
Is that a matter of courtesy / ethics OR the wholesaler will be legally liable to an original seller, if the end buyer / assignee fails to close (for any reason)?
Will the wholesaler then be obligated to close himself to avoid losing the deposit, or even worse, to be pressed into a specific performance.
In other words, does the sale contract assignment releases the wholesaler / assignor from his legal responsibilities to an original seller?
I always follow through with the process. It was my initial name on there and it is my business. I make sure every deal is closed. I do not want bad P.R. going around town saying that I do not close (or my investors, but to them we are all one person).
I think its a matter of ethics, courtesy and its your business you decide.
On the other hand, I am not a lawyer so giving legal advice is not my thing. The best I can tell you is once you sign the contract of assignment your investor takes ownership of the contract and has the responsibility to close.
All of this can be avoided if you have done some pre-work and have several honest and reliable investors in your network. Finding the investors is key. You won’t have to worry about investors not closing if you have found the right ones.
Hello Mr Brando, I had some similar questions about the whole process,
I have the following questions when it comes to birddogging/wholesaling, please excuse for all the questions. if you would rather suggest a book on the topic I’ll gladly read it…
what is the mimimum amount of earnest money I should draw up on the purchase agreement? in the event the investor dosen’t close) (you answered this in your last last post to bkar)
when I assign the contract, how exactly do i get paid(will it be on the borrorwers hud-1 as an assignment fee?) does the title company handle this? or is it paid outside of closing by borrower and if it is handled this way… how is payment secured?
should I let the seller know that I am making an assignment fee?
Last but not least, will their be an issue with lenders on any title problems/seasoning etc… or do I even go on title at all while assiging contract?
Should birddogging be only done with investor to investor deals or could one shop the deals thru retail buyers as well?
Should one who is purchasing wholesale properties be using a hard money lender/cash or would conventional and subprime lenders allow me to assign contract on the end-buyers.
if the end buyer backs out of the deal, before the 45 day fund deadline, do I loose the earnest money and/or are they any legal ramifications?
Last but not least, is every title/escrow company able to do these type of deals or double closings… or can only certain ones do it…
As a general rule, when you assign a contract you transfer your interest to another person. The new person becomes primarily liable under the contract, while you are secondarly liable. If the new person defaults on the contract, you are liable to finish the contract.