I am wholesaling a deal in Boulder Cty Colorado and the Buyer wants to give me a portion of the assignment up front, but give me the rest after he rehabs and closes on the final sale to owner occupant. He suggested recording a 2nd DOT on the property, with his private lender holding the first for about 65% ARV. What do y'all think? How would i structure this?
Thanks in advance
Fees for services, such as a Realtor's commission are not valid amounts to fund a loan in some states, I'd first call a title company closer to see if that would be a valid lien to be paid from settlement, if you can in your state;
He owes the fee today so take a note and a DOT, check state law as to any minimum amount to be secured by RE. Say he owes 2k and the minimum is 5 K have him cash your check for 3K and he can pay 3 K down on that note leaving a balance of 2K. The note needs to describe the service being paid and the total amount and balance financed or a statement.
Might check lien laws in that state for a vendors lien, might be an easier option.
Another way is to have his lender use a future advance note, an agreement to pay your fee, the lender can then include that in a payoff to pay it at settlement instructing the closing agent to pay it from proceeds. If it's an individual lender they might do that, for a few bucks.
Why not simplify and take a non-RE asset as collateral on a demand note after a certain date, send in a car title with you as a lien holder, mark his billing for your services paid in full.
Also understand that the services you're charging for need to be squeaky clean, comply with all applicable laws, in wholesaling my guess is that you could have issues.
Sometimes you just work things out, a check is valid for one year before it is dormant, might just hold a check, if it bounces after he closes, well, he probably thinks he'd get nailed, and might be so, unless he fussed and brought up what you did and stopped payment. What ever you do in securing your fee and getting paid, how you earned it can be an issue.
He might just let you hold some unofficial collateral, his favorite coin collection or rifles with a receipt, you agree to return it's when paid, guns or coins I'd place somewhere very secure, like a safe. Maybe a little trust would solve the issue.
Your issue is to ensure your fee is included in his cost of acquiring the RE and accounted for. You can show 1/2 your fee being paid out of closing.
Very best way is for him to borrow it and pay you, he should be able to scrounge up a small loan somewhere. :)
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