When I find a buyer to wholesale to and they give me the deposit, how much should I try to get and should it go into an escrow account or do I just hold it until after closing?
It really comes down to what your buyer feels comfortable with. I have done it both ways in the past. Sometimes the deposits go straight to me and sometimes straight to escrow with your closing company.
Just ask your buyer what he/she feels comfortable with to keep the transaction running as smooth as possible so you can close out the deal and get paid!
Hope this helps…
I think if you set a “policy”, you will be fine. I ask for $1000 every time. In general, there are enough buyers out there that if they balk at it, move on to the next. Once you establish your way of business, most of your investors will know what to expect and it won’t be a “surprise”.
There are the minor exceptions, like if you have a good repeat buyer or if it’s a very small crappy deal, perhaps $1K might be excessive. But, as a rule of thumb, just decide what you want to do and do it every time. Don’t make exceptions for people. You need to have your buyer have something at risk, too. It’s incentive for them to follow through on the deal.
Should something come up that is unavoidable (just had a buyer back out because their electrician gave some bogus quote), give them their money back. But, if they just decide they don’t want to do it anymore, keep their $1000 and next time they want to do business with you, ask for double the amount. That’s just me…
The point is, be consistent, establish a policy and don’t deviate. I would always suggest giving to your closing agent, unless you have a relationship with someone. Just takes the edge off doing business for the first time (or first few times). I have repeat buyers that don’t care one way or the other as long as the contract is written correctly.
Thanks for the good info. How much do you usually put down on a wholesale deal with a realtor? I am going to be making offers through realtors and I am worried about not being able to get my deposit back if I can’t close because of my buyer and I would like to atleast have my deposit covered by my buyers deposit to break even. I am going to start my offers this week and I’m a little scared. Can you guys tell me your experiences and worst case scenarios.
Look, forget holding a check in escrow and all of that crazy stuff. If this buyer is serious, then get a $500-$1000 none refundable binder deposit. Make sure you annotate that they gave you this when filling out the P&S.
If they have a problem with giving you this, they are not serious about buying this from you. Period point blank.
Wholesale investors, get some heart. Ask for the check, they will give it to you. We are not in business to be nice and hesitant. We are here to make money!
After you have the agreements signed, take what you signed from the seller and the buyer over to your title company or attorney.
Go to closing and collect your check. :beer
Do it again tomorrow.