I have a wholesale deal. I found an investor who wants the property, however, he does not want to do an assignment of contract. He has agreed to pay my fee but does not want a contract assigned to him.
My question: How do I handle this? I don’t want to loose this deal. I don’t want the appearance as real estate broker or agent because it could cause legal issues for me down the road since I am not a licensed RE Agent.
:help
I would appreciate your feedback or response ASAP. Thanks!
What does he want to do? How does he intend to pay your your fee?
What are you wanting for a fee?
If he justs wants to make a contract with the sellers directly, there a few ways to accomplish this depending on the amount of $$$ involved.
Raj
He wants to do an Addendum to the contract which will include my fee which is $6K. The mortgage company has agreed to a short sale for the property. We have not agreed to the amount with the seller yet. I spoke to my attorney and she indicates to make sure that he does not leave me out because then it would appear that I would be acting like a real estate agent and I am not licensed. Being a new investor, I’m trying to approach this the best way possible without loosing this deal.
Typically a bank will not agree to an assignable contract anyways. Have they agreed to such a contract? Most of the time you will have to double close on a short sale or foreclosed property. Also, keep in mind when working shorts the bank typically doesn’t want to see any proceeds going to the seller. Before attempting a short I would make sure to clarify all of this with the seller. Otherwise, you may waste a lot of time. Good Luck
Brian
Thanks Briant1010,
The investor informed me of that and I relayed it to the seller. I thought that wholesaling was suppose to be easy. “Find the property, get it under contract, assign it to an investor, do a double closing and done.” Do you think the investor have a hidden agenda by creating an addedum to the Assignment of Contract?
If this is a short sale prop, then you won’t be able to do an assignment anyway. At this point, you’ve really got two options it seems.
Simply have the investor buy you out of your contract. I don’t know how much you are trying to make off of the deal, but let’s say it’s $3K. Then for $3K, you’ll cancel your contract and he can step in with his own.
You can simply ‘birddog’ the deal to him and follow along for the ride. You probably won’t get anywhere near the $3K (or whatever), but you’ll make some cash and possibly learn a few tricks in the process.
Raj
Thanks RogerJ. The investor has agreed to pay me a my fee based on if he is financed for this deal. How do you think the contract should be worded?
That depends on what you’re wanting to get out of the deal. If you lined up this deal, have it all arranged and simply are selling your position, then I wouldn’t do a deal with him at all. Wholesale deals aren’t based on the investor finding/obtaining financing. That should already be in place.
However, if you don’t really know what you’re doing, and are looking more to learn the process, then what you would be doing would simply be birddogging the deal for him which means you’ve pointed out a deal, now you get to sit back and watch him work. If it closes, he throws you a bone (some cash).
Raj
It is basically that simple. Note that assignment of contract & double closing are 2 different things.
Double closings are the way to go with a short sale. Having the other investor buy you out, or putting a finder’s fee in a contract just makes things extremely complicated & can cause the deal to fall apart.
With a double close, you enter into a contract with the investor to buy the same property. I always require at least 1% in earnest $. Submit that contract to the Title Company that does double closings. The investor deposits his $ to be the property. On the closing date, the Title Company disperses the funds, & you get the left over. It’s basically that simple.
Thanks rgchamb, excellent information.
Check what kind of financing he’s getting if you’re still working with him
to ensure his lender won’t have seasoning issues.
A double closing would probably be the easiest way to do this. Let us know what happens.
That is a good point about seasoning issues. That is something that can also sabotage a deal. It almost messed mine up. But the Title Company explained everything to the Seller’s financing company & we closed & I got my check!
Thank you. I am still waiting on this investor. He’s working on the short sale with the mortgage company and it looks like it going to go through. I was rather reluctant to ask him about what type of finance he has but I will do this because I want a quick close.
So, I just want to understand, I should get a title company to handle doing the double closing, correct? I am assuming that I should look in the yellow pages and find a title company, correct?
What is a seasoning issue?
A seasoning issue would mean the property was purchased (or changed ownership) either less than one year ago or less than 6 months ago. Each lender is different with seasoning requirmentments. Most require at least 6 consecutive months ownership with good credit - some want 12 months. The lender will look at 12 or 24 months chain of title. Does that make sense?
I just asked my local REIA if they knew a Title Company that does double closings. Before I knew it, I had 3 or 4 to choose from.