I'm a new wholesaler in the Memphis area and don't really have financing. How do I find someone to partner with who could help on the financing side? I don't want to get something under contract and not have the ability to close on it if needed and mislead a seller. Thanks.
If you are wholesaling you do not need any lender. You simply assign your contract to another buyer and your profit is factored into the deal. Your intentions are good in that if you can't sell the home you want to close on it. You have to approach it differently on the front end so that if it does not sell you are not on the hook. Here is how I might approach this with the owner:
You talking to the seller:
( I work with a large network of cash buyers and what I would like to do is present your home to them and see if I can bring you an all cash offer. If for some reason I am not able to bring a cash buyer within the next 30 days we can part ways as friends or adjust your price.) Feel free to change this up. The idea here is you have not committed to buying the home like almost all wholesalers do so when they can't sell it they disappear and now the owner is pissed and the next wholesaler to call them, they are no on guard and have heard this all before now.
Hope this helps a little !!
There are a few who actually do a double close, but not many.
I've got a few deals under contract right now, and few in the pipeline. If you'd like, I can walk you through the process.
Thank you both for your responses! @Ben Roberts, I would like to hear more about the process. I'm always happy to learn from anyone who has some experience.
@Lauren Brown Stop by our office every Thursday morning at 7:30 for a free breakfast and to network with local wholesalers and investors. We would be able to teach you anything you need to know to be successful in wholesaling
Thanks, Mark! I will stop in soon and check it out.
@Lauren Brown, @curtdavis and @benroberts (won't tag for some reason) are right. In most cases, wholesalers will assign the contract to their exit buyer. But sometimes you either cannot or do not want to assign a wholesale deal.
1) CANNOT ASSIGN: The contract is unassignable. Sometimes the seller demands that you cannot assign the contract. This is most common if you are doing a short sale or an REO (real estate owned by the bank, or foreclosed property).
a) NOTE: With many short sales, the lender requires that you, as the buyer, must own the property for a period of time before you can re-sell it. This time frame usually ranges from 30-90 days. This happens more often with large national banks as opposed to smaller local banks or credit unions.
b) NOTE: With REOs, the bank has already chosen the title company, and many times that title company will not allow double closes. This rule does not necessarily apply to HUD deals or online auctions.
2) DO NOT WANT TO ASSIGN: As a general rule, if the assignment fee you want is higher than 10% or $10,000, you can make more profit if you double close. This is because many times the exit buyer doesn't want to pay more than 10%/$10,000 for an assignment fee, and you risk losing the buyer if you propose more than that. Make sure you factor in your transactional funding fees and closing costs to make sure it will benefit you in the end.
As other covered it; you have two major options:
Assignment of contract for a fee
If margin is high; then use transactional funding to do the double closing of the A>B (you are B) and B>C transaction same day.
If the deal is good; there would be always local landlords or flippers; who can pay the fee and do this.
Always get to know title company who can handle these type of transactions.
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