I am pretty new in this game and have a question. Have been dabbling in acquiring properties from wholesalers primarily for buy and hold. Wholesalers charges fee for their services. Usually when wholesalers have the property under contract the price includes his fees or considerations(or whatever you call) and he reassigns the contract.
But when I directly close with the seller such fees don't show up in HUD. The fee has to be paid outside of closing transaction. To keep my book clean how this transaction is handled.
I asked my lawyer about this. He basically said I would get wholesaler's SSN or EIN # may be in a W-9 form and a Receipt of the payment made and issue him a 1099 at the end of the year. Is this how this is done? Any help would be greatly appreciated.
I can say I have never heard of this before on a "wholesale deal" and would think that if that wholesaler you are dealing with was a "seasoned" wholesaler they would have had in their contract with the seller an assignment clause where they could assign you the contract to purchase.
I guess if they just want to basically hand over the deal to you and get a "finders fee" then yes you should 1099 them as an independent contractor for their fee, however I believe you don't have to if the fee is under $600. Don't quote me on that and it may vary from state to state so check it out in Illinois.
Thanks Tom for the validation.