Who pays closing costs and how to specify

Bird Dogs, Wholesaling
1

A few questions about closing costs on wholesale deals in TX:

1.) Who typically pays closing costs - buyer or seller?

2.) How does “assigning” vary from “double closing” and who pays?

3.) How do you specify who pays for closing costs. Is this worded in the sales contract or addendum or what??

Thanks!

2

I don’t play around too much with the double closings, so I’ll leave that for someone more familiar with it. However, a standard TREC contract will have different spots where you can specify who pays for what in closing costs. There are some general tendencies that I have seen more and more though. Selelr typically pays for title since it is them that is insuring that you will have clear title to the property. Buyer typically pays for survey, inspections, etc. Everything is negotiable though. If I represent a buyer, I tend to put that the seller will pay for everything that I can. Many times the seller comes back and says no to a couple of items, but you never know unless you ask. Why pay more than you have to as a buyer? You can also stipulate in that contract that the seller will contribute x dollars towards your closing costs. This is a nice little feature that keeps you from having to bring more to the closing table. If you don’t have a version of that contract, shoot me an email. I’ll show you what I am referring to.

Lee Warren

3

  1. As the buyer, I usually pay the closing costs to “sweeten” my offer to the buyer. It also usually keeps me in control of the process - i.e., I pick the Title Company. Besides, the price should be so low, closing costs are not a big deal.

  2. I’ve done double closings. I specify in my contract with the Seller that I (buyer) pay the closing costs. When I flip it, I have my buyer pay closing costs.

Here’s the difference I’ve seen with double closings vs assignments:
a. Double Closings: You have separate contracts b/w you the buyer and the Seller, and you the Seller and your buyer

b. With double closings, you’re buyer does not know how much you’re making.

c. My opinion, with double closings, you have more control. I always require my buyers to put at least 1% of the purchase price down as earnest $. Then if they don’t perform, I keep their $.

d. With assingments, the other investors take your place on the contract. If your profit in $10K or less, then assignments can be good. If you want to make more than $10K, some investors may have a hard time with that, unless you’re dealing with HIGH DOLLAR properties. I know as an investor, I am not a Motivated Buyer!

  1. In one of the double closings that I said my buyer had to pay closing costs, they put in the contract under special provisions that all closing costs are to be paid by the buyer.

Hope this helps.

4

Thanks for the reply rgchamb. Since you usually pay closing for your seller, where do you specify this? Do you specify who pays closing in your TREC or addendum? Also, at closing I assume the closing costs simply comes out of your check right?

What if you don’t close for whatever reason? Do I still need to pay closing costs?

5

Ballgum: I put it in Section 11 of the TREC contract.

6

Ok, thanks rgchamb!

Do you find that you get more deals if you pay for closing?

7

I don’t know. I just tell the buyers that all the need to do is show up at the Title Company at closing & sign the paperwork, and walk out with a check! I try to keep it simple. They seem to like that!