If I wholesale a house to another investor and assign the contract to the investor, what information is visible to the investor and the seller?
For example, can the seller see the name of the investor who is buying the house, and vice versa?
What about the prices? Can the seller see the price the investor is paying and vice versa?
As long as you are upfront in everything you do, it really doesnt matter.
Brandon, if you're working with a seasoned investor he won't mind paying you an assignment fee. Your seller will see who is buying the property but they don't usually have to see the buyers closing statement which will have your assignment fee listed. As Pete said as long as you're upfront about everything there shouldn't be any problems.
@Pete T. I hope I did not give the wrong impression. I want to clarify that I don't even have an intention of becoming a wholesaler, and so I likely will never even assign a contract. However, I am in the process of learning real estate investing. I know nothing and want to learn as much as I can. Therefore, to me, it actually does matter.
@Account Closed I appreciate the info!
@Brandon G. In theory both parties will eventually see everything. When you assign the contract They buyer should get a copy of the original contract. That is what you are actually selling, a contract, not a house. I think it is incredibly stupid but some buyers don't look at the original contract. They just go by your assignment contract.
The seller will likely meet your end buyer at closing. Although sometimes the parties sign docs at separate times. You assignment fee is likely o be on the back of the HUD-1 (that's the settlement document) under the buyers side of expenses so they don't tend to even notice it.
I love Real Estate and the regional difference's WE NEVER Ever except for very rare occasions have the buyer and seller in the same room or have the two parties actually meet.
Title company schedules each at different times. And when your home is showed the agents always want you out of the house and that is done 99% of the time. I just sold my personal residence this month never met the buyer or the other agent all handled over e mail and went to title company to sign the day before they signed and that's how it works here.
On assignment deals I have seen in our market.. the bird dog usually gets a fee to assign the contract and gets it at the time of assignment and outside of escrow or closing.. So if the new buyer does not close the wholesaler is still paid.. Now the difference I think in our market is we do title right up front instead of waiting to the back end of the deal to make sure you have clean title and the property can close.. Of course there are I am sure isntances of bird dogs getting paid at closing as well and off the Hud.. so many of our deals go with a federally insured mtg and you know how picky those underwriters are :)
@Jay Hinrichs I heard the CA was that way to, in fact it is done by mail and there is no settlement in what would be considered the traditional way here. At least if I understood correctly. That is why I said;
Although sometimes the parties sign docs at separate times.
I've learned a lot about the differences around the country by being corrected or having posters add to my comments.
Hey Brandon, this is a great topic, I'm glad u brought this up. I have coaching clients ask me this a lot. They ask: when the seller signs the hud and sees my assignment fee on the hud(which they will), what happens when they ask me about it? you can ie. tell the seller that's your fee, OR merely tell them that's ur construction draw on the house. I get that question very frequently, but the truth is, the seller rarely even cares because their getting the money agreed to them. If this info helps in any way, pls vote for my post....
Not correcting you just pointing out the geographic difference's and it tends to be in my expeirnce.. WEst coast from continental divide west close the same way.. Mid west is both title co and closing attorney then East coast where the properties are much older ( IE created in many instances a hundred years or more before any west coast properties. So title is more of an issue.. Plus we don't have title abstractors.. We have title plants at the Title and escrow companies and they are the big boys.. FATCO Fidelity, ( all of Fidelities children) So title can be done in a matter of hours.. If your a top tear client on the west coast you can call in an order at 8 am and have full prelim and title commitment by lunch no problem. When I do my deals on the east coast its for ever getting title a little frustrating sometimes but it is what it is.
Not an expert on Texas but I just pulled my file on the last two I funded in Houston and they went through Fidelity title Not an attorney
Either a title company or an attorney can close a transaction in Texas.
Please do not ever try to hide your wholesale fee from either buyer or seller. Explain to them how much work you put into the deal. If they still do not understand, they are probably the type that do not like realtors too. Not a lot you can do. But never compromise on morals. As an investor, if I buy from a wholesaler, I want total honesty. If the wholesaler cannot be forthcoming of their fee, I have to wonder what else might they be witholding?
@Brandon G. Generally speaking if you assign a contract both the buyer and seller will see your "assignment fee" on the hud statement. The buyer will also be able to see the name of the person selling the house.
If you want to keep this information confidential, then you should do a double close. This will generate two separate transactions:
A to B (Your Seller selling the property to you)
B to C (Your Buyer buying the property from you)
This way your buyer will not know how much you got the property under contract for, and the seller or buyer will not know how much you are making on the transaction.
Generally speaking if my assignment fee is less than 10K I will just use an assignment of contract, as this way incurs less closing costs.
If my assignment fee is greater than 10K I will typically do a double close to keep these numbers confidential.
Because if the seller, for example, knows I'm making 20K+ on the transaction, the seller might not like that.....get cold feet....and back out of the sale. So in those situation doing a double close is just safer.
Hi Brandon, great question. They will see everything on the HUD if you do an assignment. The HUD has a long list of fees as you may know, and your assignment fee will be visible to the seller and buyer. However, you can do a double closing if your fees is over 10k because it will avoid a lot of issues with the seller. My suggestion is if your fees is over 10k, you should do a double closing or simultaneous closing. Also another piece of advice that i 'd like to offer you is to choose a good title company. Some title companies will not be comfortable with you making 30k on an assignment fee. Who are they to tell you how much you can make and how much you can not make? At the end of the day, don't let title companies tell you how you should run your business.
@Sonny Ngo Thanks for the info. Your post came in as I was writing my previous post, so I'd also like to include you in this question since you're in Texas:
"I was reading on some posts here on BP that double closing is illegal in Texas. Since you both are in Texas can you confirm or deny this?"
Hi Brandon, I'll answer your question above. Double closing is not illegal. I've been there and done it. There are a lot of title companies in Texas can do double closing.
I have come across certain Title Companies in Houston who would not do double closings, not that it was illegal, it was just their company policy......or so they claimed.
I concur with Stephen.
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