Wholesalers: How to Close A Real Estate Deal with an Out of State Seller

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I have noticed that a lot of times brand new real estate investors find it hard to understand how to close a deal with an out of state seller. The procedure is actually quite simple once you understand it. I have been working with absentee owners for just about 4 years now, and I can tell you that it generally is pretty easy. When you have found an absentee owner that is a motivated seller they usually are very cooperative in getting the deal closed.

An exception to that rule might be when you have a situation like the one I am working on now, where I have 6 folks in the deal in 4 different states, and some of these folks don’t get along. But, that is another story that I will post after the closing – which should happen sometime next week.

How do you find an investor friendly closing attorney?

In my state we use closing attorneys rather than title companies, but everything should work the same way regardless. I easily found several investor friendly closing attorneys in my local REIA group. These guys and gals are real estate investors themselves, and they understand all of the ins and outs of double closings, assignments, and are used to working with sellers that are out of state or “absentee owners” as they are commonly called. They have this whole process down to a science; even when the seller is in another state my typical time to close the transaction with my buyer is about 7 days, on average.

Exactly how does it all work?

Once I put a house under contract, I immediately begin marketing this house to my buyers list. I looked back at my transactions for this year, and I found that most of my deals sold in a matter of days, and those that didn’t, sold in less than a week. I am a wholesaler so this is a timeline that I love!

I hold onto the contract for my purchase until I have the second contract with my buyer. The reason I do this is to avoid any confusion at the closing company. Once I have both contracts, I send an email to my contact at the closing company and tell her I will be faxing everything to her today for a double closing, and I usually give them an idea of when I would like to close. I also tell them to go ahead and run the title which will take a day or two.

Ensuring things go smoothly

I always type up a contact sheet with the names, addresses, phone numbers, and email addresses of each person involved in all transactions, including my contact information. I put the information down separately for the A to B closing, and for the B to C closing. I also include things like my tax ID# and anything else I know they will need to close. This information is sent off with a copy of both contracts.

I also feel that it’s important to let them know of any special circumstances we need to take into consideration. It is my job to make their job as easy as possible. They love working with me because I do that, and I love working with them because everything is always flawless at the closing. You hear a lot about the importance of “building your team,” and I couldn’t agree more. My closing attorney is a vital part of my team. I take great care to nurture that relationship.

Getting ready for the closing

Once my closing attorney has everything from me and the title is back, we schedule a closing and the documents will then be prepared and sent out quickly to the seller. In most cases, the seller signs the documents in front of a notary the same day they are received, and the documents are sent on their way back to the closing attorney. If the seller is really on the ball, this may all happen within a 24 hour period.

Since the seller will not be at the closing, the only other person to be consulted about the closing time is my wholesale buyer. I always let them choose a time that is convenient for them.

Wholesaling Payday!

On the day of the closing I will typically go in a little early to sign the documents for the A to B closing. This takes maybe 10 minutes. My buyer will arrive for the B to C closing, sign the documents and we will be done. At that point, my check will be cut, the keys to the house will be given to my buyer (by me) and we will all go home happy. The closing typically takes about 30 or 40 minutes, tops.

There are folks that say they never go to closings. I love going to the closing! I get a chance to network with my buyer and further build that relationship. For example, the person I will be closing with next week has bought multiple houses from me this year, and I get to nurture that relationship with my closing attorney and his staff. It’s nice to be able to thank those people in person who worked so hard to pull this quick closing together for you. For me, attending the closing is just one more opportunity to build those relationships that are so important in business.

Photo: City Caucus

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About Author

Sharon has been investing in real estate since 1998. She owned and operated a successful home inspection company for 17 years. In January of 2008 she took the leap of closing her business to become a full time real estate investor.

40 Comments

  1. I drive truck over the road, but did wholesaling primarily in Texas, this is something that I can use as I revamp the business, especially since I have my laptop and internet connection always with me. Did you have many hurdles with the different REI laws that vary from state to state? Or is there not that much of a difference?

    • Sharon Vornholt

      Direct mail is my biggest source of leads by far. I don’t use bandit signs regularly, but they work great for some folks. I am getting ready to have someone put out signs for me in one targeted area. It will be interesting to see what kind of results I get given the economy. I have mixed feelings about those signs.

      I should have my new buying website up and running in 1 week or less. I am hoping that this will give direct mail a run for the money when it comes to leads. I write articles and link those back to my blog now, so I am going to incorporate some of this for my buying site. I want to provide useful information for folks that are still on the fence.

      I also try to use every opportunity to network and let folks know what I do so.

  2. Excellent article Sharon! I get most of my out of states leads from direct mail too – usually from an absentee owner list. I love closing out of state deals from my mobile office :)

  3. Chris Clothier

    Sharon –

    Very informative blog today about buying out of state properties. There are so many hurdles for investors today, some real and some imagined. Buying out of state is an imagined problem and you did a great job providing a solution!

    Chris

    • Chris –

      I believe that real estate investing can be overwhelming in the beginning. There is just so much to learn. And like you said, some of the challenges are real. But a lot of them are not really problems at all once you understand the procedures. I’m glad this article helps to clarify the process of working with absentee owners.

    • It’s really pretty simple Bryan once you understand it. I have found great opportunities working with absentee owners. Be sure you have a good closing attorney or title company on your team. That makes all the difference.

  4. So are you buying absentee owners lists and probate lists for your area? If so, what company do you recommend. If not, what is the best source for this information.

    • Probates are free in most areas. Here they are printed in the newspaper.

      I used to get my absentee owner lists from the tax assessor’s office. I would pay about $230 for somewhere in the neighborhood of 3000 names. They do a pretty good job of keeping it updated.

      • Wow, thanks for the excellent article. I listened to your podcast, great info there too!

        You can buy the lists directly from the tax assessor’s office? I thought you had to use Listsource.com…

        One other question, is your closing attorney your state of residence or does he/she have to be licensed in the state there you’re buying property.

        Last question, how to you vet properties out of state, i.e. estimating repairs, damage, etc?

        thanks so much!

        • In my area you can, but I wouldn’t recommend that you do that because you can’t filter the list.

          Go to listsource.com and set up an account, then get your list from them. You can set your values, equity etc. You can’t do that with your tax assessor’s site.

          You will have to send direct mail campaigns to the sellers, then if there is some interest you can make arrangements with them to see the house. Often someone has a key; a neighbor or a relative. Sometimes they will mail you a key. You have to get in the house, but I have never had a problem.

          Sharon

  5. Thanks Sharon, and then it’s up to good marketing pieces? Phone call? Timing? Seems they would get hit with a lot of Buyers finding leads this way. How do you break through the noise and stand out? Thanks again for all your valuable insight!

    • Jill – You always have to use quality marketing pieces.

      You would be amazed at how many investors go to the trouble of marketing, but don’t bother to call the sellers back. So always call people back in a timely manner.

      The sellers may get multiple letters in the beginning, but most folks will send out a couple of letters and then quit. Your results go up with subsequent mailers. I stand out because I keep mailing. You can check out a post on my blog called “Are Your Marketing Efforts Falling Short?” I have some statistics in there that show how much your results go up over time.

  6. Hi! I am new to wholesaling. What is an approach you use when trying to get motivated sellers under contract? Do you tell them you are going to sell their house or do you tell them you are going to buy to get them under contract and start looking for your buyer? Also what method of closing do you typically use and are you, your buyer, and seller in the same room at this closing?

    • Ayana –

      When I meet with a seller for the first time, i just tell them that I’m not sure what I will do with the property; I don’t know whther I will keep it or pass it on to another investor. I further explain that it depends on many factors including how many properties I have at that particular time.The seller never has a problem with this.

      I also tell them that I have a money partner, and I will need to put a lock box on the house so that he can look at the house and also to get contractor estimates. I have never had anyone say no. Part of the reason is that I typically work with probates and absentee owners, and these houses are vacant.

      I always do a double closing. The seller and the buyer are in two different rooms. My buyers are all investors so they know that I am double closing. I close the B to C transaction (my sale), and then I walk into the other room and close the A to B (my purchase). We do it all the time in my area.I know that it is backwards, but it all happens in the scope of 15 minutes or so.

  7. Thanks so much! You have been very helpful. I am meeting with 3 potential sellers today and your approach sounds great. Hoping to land my first contract soon!

  8. Thanks Sharon for the great article! Very helpful for someone like me starting out.

    I have a question. I live in Virginia. I found an absentee owner who has a property in Pennsylvania that he needs to sell. Do I need to find a closing attorney or title company in PA to perform the title search and take care of the double closing? How would I best handle this since I’m not in the state of the subject property? Thank you.

    • Angela-

      I don’t work in other states, but I think you would need a closing attorney/title company from that state since the laws are different in all areas. What do you plan to do with the property? Also, who is going to look at it for you? I know a lot of investors buy in other states, site unseen but I have never been comfortable doing that myself.

      • Thanks Sharon! I am the wholesaler in this case. I am still gathering initial information from the seller to determine if this would be a great candidate for a wholesale deal (which is what I would prefer). If so, I would connect with an agent in PA to help verify my comps. Also, I would locate another wholesaler in the property area that would like to work together with me once I have an accepted offer from the seller. I would use the closing attorney/title company in that state for the title search and closing.

        This is what I’m thinking. I know there would be other steps involved in closing a deal out-of-state(marketing for buyers, etc.), but hopefully I have a large part of the process planned out. I’d appreciate any advice on anything I’m missing. Thank you again!

        • Angela –

          Just be sure you are buying the property cheap enough. Wholesalers are going to be looking at an offer of 60-70% or the ARV depending on where they are. Also, when the Realtor gives you comps look at all of them; the high, the middle and the low comps. Don’t base your offer on the hight comps. because an investor won’t. The lowest comps will tell you what investors are paying if the house needs a lot of work.

  9. Hello Sharon I just have a question about signing documents. Once you receive the contract signed in the mail do you mail a copy back to the owner for his records?

  10. Great post Sharon! I’m a new wholesaler and am trying to find a great list provider. Can you give me a recommendation for an absentee list provider or any other provider that you’ve been very happy with? There are many out there and I’d like to get a thumbs up on one before I go and spend what little money I have. Thanks in advance for your advice!

  11. Hi Sharon
    What documents do we use with our Seller and Buyer during a double close? Is it still the Assignment Contract with both?
    Thanks

    • Sharon Vornholt

      Al –

      I just write two contracts since I usually double close. The one I use when I buy has a sentence or two (subject to partner approval) that the one I use when I sell doesn’t have. Other than that, they are identical. I don’t want any contingencies when I am selling to another investor. They need to do their inspections before we sign the contract.

      On the rare occasion I do an assignment, I just write up an addendum to the other contract. It simply says that I am assigning the rights to this contract to (put their name) for consideration of (the dollar amount I am making). It really is that simple. So in that case, I would have a contract with my seller and just write an addendum to the original contract with my buyer. I just tell my seller that the funds are coming from my “partner” and introduce him or her. We sign the paperwork, cut the checks and all go home happy.

      My closing attorney is OK with having my buyer bring a certified check for the whole amount needed to close the first deal and pay my assignment fee. They will then cut my check. You could however have your end buyer bring a certified check for the amount of the first closing, and a separate certified check for your fee too.

      Sharon

      Sharon

        • Brian –

          I have a simple 1 page investor contract if you want to send me an email so I can attach it.

          There are also contracts in the file place here on BP. My suggestion would be to get one from a local attorney. If you belong to your local REIA, there is bound to be an attorney in there that is also an investor who would share his contract. I got mine from my closing attorney who is also an investor.

          Sharon

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