Howdy, ya’ll!!! I have a 178 unit complex under contract. I’ve shown the deal to some other investors and have one that wants me to flip the deal to them. They have made the statement, “I don’t know how much you will get at closing, until we run the numbers, but it will be fair.” To be fair, the property needs rehab work, so I understand that until they get prices for the work, it is hard to make a firm offer, but I don’t want to leave myself in a poor postion at closing. Is this standard for flipping commercial properties? If not, how should I get a more firm commiment to an assignment fee? Thanks ya’ll and God bless!!!
Howdy Mike:
It is a cut throat business and some buyers will try to get around you and steal the deal. It is all talk and BS until the check clears the bank. Get it in writing and get them to run the numbers and know ahead of time how much you will get for the assignment fee. If you have a gold mine do not sell for silver prices. I would be glad to help you analyze the deal. Where is it located?
Ted is right…Get it in writing!
If we are talking big numbers I would even take it a step further and ask for a Standby Letter of Credit to be provided.
What you paid for the property should be of little consequence to the investor. The question is does it work for them at their price?
Run the numbers at their price and see what their return is. Also, are you flipping the contract or doing a double closing?
I flipped the contract on tuesday. that’s the approach I took as well; if I offer great returns to an investor, my fee is inconsequential. Thanks and God bless!!!
Great replies. These guys know what they are talking about.
Be cautious of those buyers who might say they are backing out just to get you to lower the price. I recently had some jokers tie up one of my developments that I was going to sell. Since I got such a great price, I think they felt that I would just accept their offer of $200K lower on a $1M property. Their contract release said…if you can lower to $750K, we still have a deal. Fortunately, I had the financing already lined up for the construction loan…and the property really is worth $950K.
Learning Point. The initial deposit of only $10K (during study period) I should have made NON-REFUNDABLE. I was just going to make the 90K extra non-refundable after the study period. I would consider getting non-refundable deposit no matter what. Something that hurts them a little bit if they do not close.