I have been researching wholesaling real estate for about a week now and some things I’m still learning about and thought about posting my questions here.
Correct me if I wrong on anything. My assignment of contract should state that the buyer is paying me a fee? So shouldnt there be a line for the buyer to sign that says he is paying the fee? Where there are lines on the contract while making the deal are you writing in the amount your selling the house for on the contract in pen? So both the seller and the buyer will view everything thats going on?
On double closings. Are you still putting the seller’s house under the same contract you would use for the assignment of contract? And then a title company does the rest of the work? Do I need an escrow account for this? Im mostly trying to figure this one out.
Do you always tell the buyer what estimates you came up with in repairs? Will they want you to tell them, or they don’t care?
In your assignment of contract you are writing your terms of payment in Pen (Ink) on the agreement. If your primary contract has a $1k earnest money deposit, then I want at least $1k upfront and depending on the transaction terms non refundable.
You can get 50% of your assignment plus earnest money reimbursement upfront, you can get earnest money reimbursement plus $500, $1000, $2000, or ??? You negotiate the terms and conditions with your buyer.
In 2004 and 2005 sellers in Las Vegas and some area’s of Florida and Arizona were asking and getting all of the assignment fee and reimbursement of the earnest money upfront all non refundable. We were getting $20k cash for an assignment of a $350k contract.
Your the one who has to figure out and negotiate what you get upfront and what’s paid at closing.
The idea is the buyer should be reimbursing your earnest money and giving you some “At Risk” money to insure the buyers performance.
In a double closing you have your primary contract with the seller (with earnest money) and you have a second contract with you as seller and your buyer (with more earnest money than your primary contract). The terms and conditions you would like to mirror or have less contingencies with your second contract then you have in your first, and you want to have the same closing date.
I try to give myself 60 days on the purchase and limit the end buyer to no more than 45 days so you know you have about 2 weeks to find a buyer from your buyers list and get them into escrow. Yes you will need to do escrow as your transitional funding company will require it for your A-B and you want your end buyer to have title insurance as it very much limits your liability.
I always want to make disclosure “Home Needs TLC” or “Home needs minor work” let them ask questions if they need to, but always better to let them come up with there own estimate as you may think new carpet and they may think roll sod on the living room floor and that’s ok as soon as it becomes there house. (Carpet $1.25 sq. ft. & Sod $0.32 per sq. ft.) This is just my example and I wanted it to be parts of two extremes!
Gold River thank you very much! That was extremely helpful! This means alot to me. :beer
I have a couple more questions if you or anyone else can help me. Right now Im in the process of drafting a contract that I will use and change with each deal I make. Correct me if I’m wrong but isnt the contract between you and the first homeowner (the seller) and the assignment of contract between you and the new buyer two different contracts? I’m not sure if I’m going about this the correct way; did you and do most wholsalers draft their own contracts? After I have it drafted should I have a real estate attorney to look over it? And afterwards does a title company have to do anything with my contract I create?
How is this so far?
Assignment Of Contract
For Purchase And Sale
In reference to the contract for purchase and sale dated (date) between (Buyer on contract - You and Your company) or Assigns, Buyer, and (Seller(s) on contract) Seller, concerning property described as:
(Property Address Under Contract)
Buyer hereby assigns all rights to said contract for sale and purchase to (Assignee Buyer - who you’re selling the contract to) Assignee in exchange for compensation in the amount of ($ Your Assignment Fee $).
Your real estate purchase contract is between you and the seller!
The assignment agreement is between you and the end buyer taking over your contract!
When you get the buyer who signs and agree’s to buy your contract for an assignment fee, your going to take this party into escrow, introduce them to your title closing agent, submit the assignment of contract and then that party is to be the one dealing with the property purchase according to your contracts terms, conditions and contingencies.
The only thing you should need to do is monitor the situation for closing and being paid any balance still owed at close of escrow. The assignment should remove all legal responsibility you have to the original contract and you should get at least your earnest money and some non refundable money on the assignment upfront so any way you cut it you made money.
Now keep in mind that the assignment buyer should already have a mortgage loan approval from a reputible company as was probable required for you to make your original contract.
The purchase contract may be 4, 5 or more pages where your assignment agreement may be 1 or 2 pages. No, you don’t have to write your own contract as there are exceptable contracts available that meet state laws across the country and you do not need to use the board of realtors contract.
Thank you GR for your helpful responses. You are helping me a ton. I am very grateful. I recently downloaded the contracts and forms from a website that listed south carolina’s real estate contracts (my state) on their site. Any tips on this is well recieved on my end.
I have another question regarding double closing. If I decide to do a double close with my end buyer should I have him/her sign the contract or some other form before I put my name on the title? If I do not, can the end buyer walk after I have the property in my name to just to try and sell it to him/her moments afterwards?
Another thing I was thinking about was concerning probate properties? Is any heir allowed to sale a said property without informing the other heirs? Or is this a state by state thing? Thank you again for your help and insight.
I’m not too familiar with double closing, but I would never do one without some guarantee in the form of a contract… at least then you could sue for specific perfomance if they backed out. I’m not a real estate expert or anything, but I do know that escrows fall through pretty regularly for all kinds of reasons like issues with financing or failure to follow contingencies… You wouldn’t want to put your name on the title without some kind of guarantee from your buyer because if it fell through you’re SOL…
As for your question about procuring properties from heirs, that’s going to be circumstantial because it really depends on how the title was held. If title was held as joint tenancy, then if one of the owners dies the other(s) owner has the right of survivorship, which means that the property does not need to go through probate and therefore is held outright by the surviving owner(s). Tenants in Common is another way to hold title, but in the event of one of the owner’s death the property would go to the surviving heirs via will or probate. If the property is willed to 1 person, than that person would have the ability to sell to you… but if it was willed to multiple people, then any one heir could only sell his/her interest in the property because they would be Tenants in Common with the other heirs. Same goes for a probate ruling.
Yes, absolutely have your end buyer sign a sell-side contract and collect a deposit equal to or exceeding what you put out on the buy side. Don’t even worry about that, because if you do a double close your name won’t go on title until YOU close the buy-side transaction, and it won’t even get to that point unless you have a sell-side contract in place.
Don’t overcomplicate this. Just get a contract to buy, a contract (or assignment agreement) to sell, and send both agreements to the closing agent and see it through to closing.