How does a cash offer work in wholesaling propert.
At what point do you ask the buyer or investor to sign a non refundable check over to you.
In wholesaling you should be working with an assignment of contract (agreement). Hopefully, you included “and/or assigns” after your name (or company name) when you made the offer.
With the ability to assign the deal, enabled with the “and/or assigns” phrase, you can ask your buying investor for your assignment fee at the time they sign the assignment agreement. Sometimes they will balk at this, but I always insist on at least half up front and the remainder at the closing. This gives you a little protection and the investor some incentive to make sure they close the deal. (Be sure to add the amount of any hand money you put up as part of the assignment fee.) You would submit a request to the closing agent for the balance of your fee.
If your assignment fee is large (over about 7% of the deal) then you might want to do a double closing (which some closing agents will not do because they do not understand what you are trying to accomplish).
:bobble
InvestorDan
I have never gotten my assignment fee upfront. If I were on the other side of the transaction, I would not pay it upfront, either. There are too many things that can go wrong with the deal.
I do, however, get a non-refundable deposit from my buyer when they sign the contract. No exceptions. If it is someone I have not worked with before, I will ask for certified funds (cashier’s check or money order, or ca$h). I’ve had the deposit check bounce before, the day of closing, and then the buyer backed out of the deal. Lesson learned.
You can always try to get the assignment up front, but like Dan said, a lot of investors are going to balk.
Good luck,
Steph :cool
Steph is right on…I always get an amount of money for deposit that is equal or greater that the amount that I stand to lose if the assignee backs out of the deal. Meaning enough to cover my deposit that I used to put the home under contract as well as any other fees that I might incur
For earnest money deposits, could you word the contract “Earnest Money Deposit will be held by XYZ Title” and not state the amount? This way it is less likely to come up regarding the amount? or does it have to state the amount?
At what point do you ask the buyer or investor to sign a non refundable check over to you.
How to Take Deposits
When selling your contract what is the best way to take assignment fees? Okay, you have to realize that the business of selling contracts is all a negotiation. You want all of your money up front and let them hold all of the risk to make sure it closes on time or they lose their deposit. On the other hand they want to give you nothing at the time of the assignment, hold any money with their attorney and have the entire risk lie with you that they end up closing on time and don’t blow the deal with the seller during their inspections.
The next question is how much of the assignment fee do you ask for up front? Again, I like to get all of it but for several reasons maybe you cannot. Your price, property or location may not be that good. A good analogy is if you purchased dollar bills at $0.50 and were selling them at $0.60 it wouldn’t matter if you were in the middle of the worst neighborhood you would still have takers. However, if you had the same $1 for sale at $.85 and there was significant risk involved in picking them up you would have to sweeten the deal in some way to attract buyers.
A good rule of thumb is “He who controls the money controls the deal.”
Often times it is better to give the property back or renegotiate the deal than to accept an offer that you feel is not going to work.
On a decent assignment form, all deposits are non-refundable. Well, that’s fine if they are willing to write you the deposit in advance but what if they insist that all of the money go into escrow. Putting money into escrow really isn’t putting any money up on the property. If both parties do not agree to release the money, it is never released. If you feel the money should be released to your company and they do not, duh…duh…duh…dah. It is off to court you go.
By using an Escrow Release form (consult your attorney) they are agreeing that at the time of the assignment the assignment fee placed in escrow is fully earned and unless we cannot produce clear title, the money will be released without any further signatures. Our attorney drafted the one we use and it contains all of the proper legalism.
Matt
So Matt is it a good idea to have the non refundable check put into an escrow account ?
If possible the non-refundable check should always go into your bank account.
If they refuse, it can then go into an escrow account.
With an Escrow Agreement, that money is yours…so long as you provide clear title.
Get this document in place and your life will be happier and less stressful.
Don’t put it in place and you will always be stressed about the closing.
HE WHO CONTROLS THE MONEY CONTROLS THE DEAL…don’t ever forget that.