I’m in Southern California focusing on wholesaling REO’s. We can’t do a double close here using our buyers funds, and with high price points, transactional funding would eat into our slim profit. (I know the bank won’t accept my offer with and or assignees). I’ve heard a number of different possible closings, adding “vesting to be determined at close of escrow” to my contract; adding my buyers name to the contract during escrow and quit claiming my name off at close for my finders fee; making the offer in a trust. Regardless of what close I use I was told I need to get my escrow to do a courtesy closing for the banks escrow so I can get paid and my fee won’t show up on the banks hud. Has anyone done any of these closings that can give me guidance?
I think the best way to handle this, is to sign the purchase contract with your LLC, and then sell the rights of the LLC to your end buyer (or sell him the LLC for your fee). That way, you’ll get your fee, and he can now step in and buy the buy under the LLC.
I’ve found that many rehabbers don’t seem to be eager to buy someone else’s LLC due to potential liability…they don’t know what business that LLC has done or what it owns. Plus you have to have the LLC bought, paid for, and in place BEFORE getting the REO under contract, which means you may own the LLC for who knows how long before even getting an offer accepted. The longer you own the LLC the more likely the rehabber will be suspicious of what’s in the LLC.
I simply get the REO under contract in a land trust (123 Main Street Land Trust) and assign the beneficial interest of the trust to the rehabber at closing for my fee. Some banks don’t like land trusts though.
I’ve flip many REO’s and have never bought or sold an LLC. I’m not sure about the land trust option.
As a discourse I’m in Phoenix not California so this may or may not be relevant.
Process: We make the offer on the REO and if accepted we open escrow with the banks preferred escrow officer.
We then market the property to our buyers and when we get a contract we’ll open escrow at OUR preferred escrow company.
At closing buyer wires in funds, OUR title co. will then wire funds to THEIR escrow co. THEIR escrow will record and then send the recording info to OUR escrow co. and record the 2nd leg.
We make the spread…
All you need to do is find an escrow agent that understands this procedure.
Good luck!!
Sean
Brilliant solution! Question - when utilizing this strategy, do you only incur one set of settlement charges (primarily asking about transfer taxes, which are high as crap here in DC/MD)? I know you’ll have 2 sets of some closing costs, such as 2 attorney fees & stuff like that…it’s the transfer taxes that are killer here.
land trust help.
I am assigning a deal here in LA, REO DEAL. I am the “trustee of the property trust name” in the contract.
I have a buyer-invetor who will I assign this deal (wholesale). this buyer is using hardmoney loan to buy this deal.
problem is that REO, escrow and title company want me to be included in the deed of trust and or loan documents from the hardmoney lender for my investor. I dont want to be in the hook, he is the borrower.
But escrow and title says… “Oh now, you are in the contract, we have to match your name with these docs,otherwise title wont insure this deal and THE ASSET MANAGER and listing agent needs to know that there is other buyer (my investor) in this deal, we need to get authorization from reo asset manager” any thoughts or why they do this?
They say, to add my partner (investor) to contract, but, I will be in the same boat cause even if they added this investor, they want me and this investor to be the the deed of trust documents, yes, both together, they have to match the name.
Any ideas, help here???.. I thought will be simple, yes, if Cash investor it is, but hardmoney loan investor, it is hard.