Let’s say I got some money from a HML to close a REO and turns out the buyer doesn’t show for the second close (and I have no other buyers)? What happens then? Am I stuck with the property and the loan? Please advise.
Thanks,
Yia
If you closed and funded the deal, yes.
Hmmm…What happens then? I know I can market the property and see if I can close again with another buyer but what if the loan that I got the close the deal was a one day only loan?
Well, you need to talk to your lender and see what happens, it is totally up to them and the paperwork you sign.
Also, talk to the title company see what they recommend.
Here is a good article that might answer some questions.
Most likely you will just incur lots of extra fee’s and interest. make sure the buyer is a serious buyer when using lenders like this.
No contract with earnest money down?
Yes, but what if they still doesn’t show? I mean, what are the chances of the buyer not showing up with the earnest money upfront? So, no earnest money upfront, no deal?
Yia
You get to keep the earnest money. Is that a bad thing?
I am assuming you are double closing this transaction. With that in mond, the first thing you should do is find another, more friendly title company. The few I use allow me to close on the REO AFTER I have already closed with the end buyer. This allows me to assure that the buyer shows and to eliminate the need (and fees) of a HML.
I ran into this problem frequently with buyers (usually pulling out a day or two before closing) until I instituted a simple rule. $5000 non-refunadable deposit. If they don’t show, you make $5,000. You may get stuck in an uncomfortable position with the REO realtor, but you won’t be stuck with the property and you’ll be paid for your efforts.
Control your deals to do everything you can to eliminate a no-show buyer. You control your deals by “requiring” your end buyer to use only “your lender”.
CP
What Title Companies allow you to do this? Are any of them in Illinois/Indiana?
Why do you guys keep using “earnst money” isnt earnst money what you use to secure a contract from a seller?
A lot of Title Companies will not let you do that. Alot WILL. You will have to talk to them and ask them. You need to have a good relationship with your Title Company.
First tip - Stay away from the big boys. Go to a smaller title company. Typically, they use the big companies as an underwriter but they will do things that the big guys won’t do. Of course, if their underwriter finds out they ARE doing things they don’t want them to do, it could cause trouble, but they know this and assess that risk.
Next - When you talk to the manager or owner of the title company, be up front about what you’re doing.
Third, and this might sound funny. BUY THEM LUNCH! Seriously, take lunch to them. Treat them well, they weill treat YOU well!!
Why do you guys keep using "earnst money" isnt earnst money what you use to secure a contract from a seller?
Yes, you pay eranest money to the seller to secure your contract. When you assign your contract to an end buyer, that end buyer should give you earnest money.
Yia,
If you are going to wholesale it is highly recomended you keep control fo the deal. Make sure you know where the buyers money is coming from. If they don’t have the ability to close don’t sell to them.
Certainly they should give a big enough deposit that they have a strong incentive to close and if not you make money by keeping their deposit. Their deposit to you should always be larger than your deposit to the seller. If they don’t have the money for a decent size deposit that is a red flag.
No deposit from my buyer - no deal. There is also nothing wrong with having backup buyers.
I see many wholesalers that have lousy deals. If their buyer backs out they scramble to resell their lousy deal. That is just a bad business model. You should have deals that are so good you have your pick of buyers and you chose the strongest. If that buyer backs out, your deal is so good finding another buyer shouldn’t be a problem.