Rehab Question

Hi y’all,
Tomorrow, I am meeting up with a Realtor to sign her representative’s assignment on a rehab property that I am going to buy with hard money. This will be my first rehab and HML. The Realtor stated that I need $1000 non-refundable for earnest money. My questions are: Is that $1k non-refundable standard to companies who wholesale properties and is the assignment I am signing taking the place of a regular sales contract. Is this assignment the “contract” that the HM lender wants to see? Is there usually no negotiating with the company holding the assignment?

Background info. - Selling price is $75000. $70k to seller 5K to wholesale company - ARV 115K - needs 5-8k in repairs

Thanks for any help.

Howdy TampaMike:

The $1000 non-refundable is OK if you know you can and want to do the deal. I have seen it a lot with wholesale deals. The wholesaler already has a sales contract with the seller and you will be signing an agreement to assume that contract. You would show both agreements to the HML. You can always negotiate. I bought two deals where the earnest money was non refundable $2000 and I got it for $100 each and refundable. And I actually only gave him $100 cash. The deals did not work out and he still owes me the $100.

That part was easy. Now you need help with the numbers to see if the deal with work. At the ARV of $115,000 the most you can borrow is $80,500 at 70% LTV. This gives you $4500 for the repairs and HML loan fees and closing costs and carrying costs. You will have to come out of pocket with roughly $5000 in closing costs plus the additional rehab money and monthly payments. Once you pay a Realtor to help you sell it and more closing costs the deal starts looking pretty thin about $5000 short of an OK deal.

If you decide to go ahead and do the deal make sure of alll the numbers before you risk your $1000.

Hope this helps


Thank you for the info. and advice! I’ll crunch the figures again too.