This article is part 2 in a 5 part series where I will explain the various methods available for closing REO wholesale deals and getting around the bank’s “No Assignment” clause.
Using the Quitclaim Deed Method to Wholesale Real Estate
Last week, I explained the mechanics of using a simultaneous closing, and this week I will discuss using the Quitclaim Deed Method to get your REO wholesale deals to the closing table.
When using the Quitclaim Deed Method, you will be adding your end buyer onto the purchase contract that you have with the bank, and then giving them a quit claim deed after closing in exchange for your wholesale fee.
Once you have a property under contract with the bank, and once you have an end buyer lined up to purchase the property, you will need to draw up an addendum (or have the agent do it for you), which states that you will be adding an additional buyer onto the purchase contract. This addendum will need to be signed by both you and the bank.
When presenting the agent with the addendum to add an additional buyer, I simply explain that I have to decided to bring on a money partner in the deal, and that I need for them to be on title as well. I have only closed a handful of deals in this manner, but I never had a problem getting the bank to sign the addendum. You do run the risk, though, of having the bank refuse, so you might want to have a back-up plan in mind, just in case
On the day of closing, the end buyer will show up with two checks- one for the purchase of the property, and one for the wholesale fee. Immediately after closing, a quit claim deed will be executed which will remove me from title, and in exchange, my buyer will pay me the agreed upon wholesale fee.
One of the advantages of using this strategy as opposed to a simultaneous closing is, since there is only one transaction taking place, there will only be one set of closing costs to pay.
If you decide to close your REO wholesale deals in this manner, I recommend having a competent real estate attorney draw up the proper documents for you to ensure that both you and your end buyer are protected in the transaction.
Next week I’ll be back with yet another way to get your REO wholesale deals closed, so stay tuned…
Photo Credit: Bohman
Article Author:
Stephani DavisStephani has written 15 articles for us.
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{ 16 comments… read them below or add one }
We are currently wholesaling REOs in the MD/DC/VA area. I am most greatful for you sharing the quit claim strategy, as it is one we haven’t used or considered. This is definitely another tool that will be added to our belt!
I look forward to reading the next 3 parts of this article series. For anyone reading this Steph really knows her stuff.
Scott Costello´s last blog ..30DC – Day 17 – Google Analytics and Pretty Links
Thanks Scott.
Stephani Davis´s last blog ..Simultaneous Closings and REOs- Saturday Night Reader Mail
Yeah, Scott . . . we think she’s pretty savvy!
GREAT INFO Steph. This is how close all of my reo deals now.
Daniel´s last blog ..WOW MONEY Making Deal!!!!
Thanks Daniel. Glad to hear you’re still out there makin it happen in the A-T-L.
Stephani Davis´s last blog ..Simultaneous Closings and REOs- Saturday Night Reader Mail
Very timely Steph! Yet another tool us wholesalers can use to get those deals closed.
Thanks
Steph,
Top notch, as always.
Thanks Steph, for always sharing timely win-win strategies. Since joining BP I have been looking forward to your inciteful blogs..
Of course this strategy requires your end buyer to come out of pocket for your fee. Since they have to be conventional buyers due to the FHA 90 day seasoning rule, that could be too much to ask of your end buyer in some cases. It also allows for your end buyer to know EXACTLY how much you will make before the deal is made.
That all said, it is a great tool and strtagey not only for REO properties but even more so for short sales.
Hi Will,
Actually, this will not work if you are selling to someone getting a conventional loan- I should have mentioned that in the post..
The deals that I have closed in this manner have all been sold to cash buyers.
And yes, just like a regular assignment deal, your buyer will know what you are making.
My experience has been that as long as my end buyer is getting a good deal, they don’t care what I am making. Some do, but most don’t. If I’m worried about it, I can always do a double close instead..
Steph
Stephani Davis´s last blog ..Simultaneous Closings and REOs- Saturday Night Reader Mail
Why would it not work with a conventional buyer Steph?
Hi Will,
I think they would require you to be on the mrtg if you are also on the deed.
Not 100% sure about that,though, as I have only done this with cash and hard money buyers.
Steph
Stephani Davis´s last blog ..Simultaneous Closings and REOs- Saturday Night Reader Mail
thanks, this is really awesome information. I’ve heard of this technique in general but never the details of the mechanics. Is there any standard paperwork that you use to document the agreement with your end buyer that perhaps you could share, or maybe just let us know what you think the most important points are?
Do you ask the buyer to reimburse the earnest money once they’re on the contract?
On the off-chance for whatever reason your end buyer flakes, are you then jointly held to be in non-performance?
Thanks again!
Eric Schwager´s last blog ..Cupertino and Mountain View among California cities with highest median home prices
Hi Eric,
I had my atty draw up the paperwork on the few deals that I closed using the quitclaim deed. It’s been a few years since I’ve closed a deal in this manner, so I can’t really remember the specifics of the contract(s). If you decide to go this route, I would definitely consult w a local atty first just to make sure you have everything you need..
As far as the buyer backing out- that is one of the reasons I stopped closing my REO deals this way… if the buyer were to back out, then you are stuck with their name on the contract, which could turn into a huge mess if/when you find another end buyer to take their place.
HTH,
Steph
Stephani Davis´s last blog ..Wholesaling REOs- it’s Just Like Riding a Bike…
Oh, and yes, I get a 2k deposit from my end buyer..
Stephani Davis´s last blog ..Wholesaling REOs- it’s Just Like Riding a Bike…