Here is the scenario
Three people involved, seller, wholesaler, buyer
Now besides for the standard wholesaler contracts with seller, then wholesaler assigns to buyer,
I would like to get a consenus for those out there the differnt ways to structure the contract for the wholesaler to get paid here…
Craig
The easiest and safest way (for you the wholesaler) is a straight option. In my opinion it’s the best way to go. Here’s why…
First… A straight option gives you the RIGHT but not the OBLIGATION to buy at a predetermined price. It is also a legal document and can be recorded at the city hall.
Second… You have 2 options with this method. sell the option to your buyer or roll it into the closing. your listed on the HUD 1 form and the closing attorney cuts you a check.
Here’s how I do it…
Your wholesale property is worth $100,000. You have a seller who will let it go for lets say $65,000, your buyer will pay $80,000.
You pay the seller whatever you negotiate for the option. Let’s say $500. (I’ve heard guy’s say they can buy them for $10 but I want at least something reasonable on the table. To me $10 sounds like a joke, but if they can good for them) The option states that the selling price agreed on is $65,000. It’s good for however many days you negoiate. Let’s use 30 days. Now you put the deal in motion.
The buyer goes to your Lawyers office and drops off a deposit to be held in escrow( makes everyone feel safe) and signs the sales agreement for the $80,000.
Next… your seller goes to the same attorneys office to sign the sales agreement. You notify the seller of your intention to exercise your option in writing. (basically your lawyer gives him a piece of paper stating this when they come by to sign. (very simple)
A closing date is set. and at the closing the buyer gets a check for $65,000 You get a check for $15,000 (for your $500 investment) and the buyer gives the attorney a check for $80,000 for a $100,000 property. AND ALL IS RIGHT WITH THE WORLD.
The best thing about the option is it LEGALLY prevents a buyer from cutting you out of the deal. The owner CAN NOT sell to anyone else for those number of days you agree on. I’ve had scumbag investors try to cut me out, and as soon as their lawyer hears you have a legally drafted option they won’t go near you.
I am NOT A LAWYER but have learned that they can be priceless in this business. Just have one draft an option agreement for you that meets your states requirements and have them email to you. I just use the same one over and over. I also send that lawyer all my buyer and sellers so he can make some money. Everyone wins.