I wanted to find out if anyone can help me out with a frustrating situation. I do wholesale in the Bay Area and I happened to find 3 SFR homes in the Antioch area owned by the same person, all 3 home meet criteria and price of what my cash buyers are looking for but the problem is after making on offer on all the 3 properties was not my offer price but the contingency of assigning the contract to a buyer.
I have the buyers but most buyers want me to have the property under contract before even considering to take a look at the property. Does anyone know what I should do in a situation like this? or has anyone been in a situation like this that I can learn something from?
I'm confused. Do you have the properties in contract or not? Second, did you make it so that the contracts are assignable?
If neither, consider locking the properties up by purchasing an option to buy and then executing the option simultaneous to the resale to your buyers.
Curious how your house in Alameda worked out by the way.
so the owner will not accept an assignable contract? I'm a little confused at what you are saying. 3 in Antioch sounds awesome though, caught my interest ;)
After reading my post I can see how you can get confused lol. I do apologize for not explaining clearly. I did not get the properties under contract because they did not except assignable contracts unfortunately. I wanted to know how to work around a situation like that or get new ideas on how to make this situation work. Alameda went good thank you for asking!
Thank you so much for your response to my post!! I truly apprcaite it!!
Yup!! Thank you so much for explaining in it in a few words, that's excatly the situation they do not except assingnable contract.
Yes I did come across 3 properties in Antioch in need of rehab in good naborhoods, Great potantial!! Do you have any thoughts on how to go about this?
Thank you so much Eric, I truly apprcaite your responce to my post. Thank you so much for your support!
I am so sorry for all the typos in the post and the replys, I clearly need to get some sleep and rest.
@Yasmin Swaggerty have you thought about reaching out to your cash buyers with the deal and agreed price to see if any of them want it? If one of them wants it, they can write an un assignable contract to purchase it directly and still pay you your fee. The success of this strategy depends a lot on the integrity of your buyer, a short-sighted buyer could stiff you but I'm sure that would be the last deal you show them!
A good number of the successful wholesale deals that I've bought were brought to me before the wholesaler had a contract with the seller and we worked together to make sure the deal was successful. A lot of wholesalers want to tie up deals and then send it out to a big buyers list and take the highest bidder. Sometimes that works, but other times working as a team with a very capable buyer can win the day.
@Brian Burke Thank you so much for your reply to my post. That is something that I am considering definitely, now knowing that it could work out that makes me more comfortable reaching out to my cash buyers. I am currently working on locking In a price with the seller so that the numbers do not change and ensure that I don't waste any ones time.
Thank you so much I truly appreciate your feedback and support!!
I hope you have a wonderful day!!
@Yasmin Swaggerty ,
I gotcha the first time ;) There are a few options you have here. (PS. I'm not a realtor, attorney, etc, and don't know 'nuthin about 'nuthin..)
1) You said the seller didn't want to accept an assignable contract. This may very well be because they've built trust with you, and don't want the end buyer falling through. Can you arrange for your potential cash buyer to inspect the property? (as your inspector..?) Most cash buyers should be ready to buy a deal w/ no contingencies after a brief inspection (for a REAL deal), or just look at pictures of the interior, or not at all (again, if the deal is good enough..). Maybe having your buyer ready to write a contract w/ no contingencies and a solid EMD (earnest money deposit) will ease your seller's concerns about having a signed contract. As @Brian Burke said, it takes some level of trust, but most real investors wouldn't be willing to "sell their reputation" for such a low amount..
2) This may be more difficult now, depending on the sophistication of the seller, but some wholesalers will use a trust as a buyer. For example, the buyer in the contract may be "128 L St Trust, @Yasmin Swaggerty as Trustee." You are also the beneficiary of the trust at that time. Then you're in contract as trustee of the trust. Make your buyer the beneficiary of the trust when they pay you the wholesale fee. The trust document states that the Trustee (you) may only act on behalf of the beneficiary (your buyer.). Then you sign all the contracts and closing docs as trustee of the trust. The seller never needs to see who the beneficiary is. On close of escrow, you also sign with your buyer to have them fire you as trustee of the trust, and assign themselves as trustee. Then they are the beneficiary and trustee of the trust holding the real estate. They can then continue holding in that trust, or quit-claim to themselves personally.. This is not legal advice. Just what some have done..
3) Double Close - There are some title companies that will allow you to simultaneously close the transaction between you and the seller, and you and the buyer.
4) If there is enough margin, and you can get a hard contract from the end buyer (non refundable deposit for delivery of property), you could borrow money from someone and close on it yourself, then immediately sell it to your end buyer.
Can't think of any more.. Good luck!
Ask the seller to give you 3 weeks to perform and allow you to go to escrow as yourself or assignee to close the deal, if you don't pursue the escrow is automatically cancelled. So then he or she know they are only obligated to deal with you for just 3 week or whatever time you need.
Your difficulty is 3 properties, and the owner who wants to make sure all 3 are sold. Do you have a buyer for all 3 properties?
This is where land trust is so powerful and helpful but most investors do not know how to use it. I used it over 1,000 times. It helps to smooth things out.
One time I was going to buy a wholesale deal but the title company wouldn't do a double escrow and it was a short sale so the buyer couldn't assign the contract. So I "loaned" the wholesaler the money by funding 100% of the purchase price to escrow and the title company drew up a note and deed of trust. Loan terms were 0% interest with principal balance due in full in seven days. As soon as we closed we delivered a purchase agreement from the wholesaler to me for my price with the outstanding loan balance to be credited toward the purchase price and opened a new escrow. Prelim came in a couple of days and then we closed the second escrow. Wholesaler was paid out of escrow.
It's a bit high cost because of having to pay transfer tax twice but saved the cost of transactional funding from a third party. If the wholesaler failed to convey title as per the pre-executed purchase contract I could just foreclose on the loan so I had security albeit at huge inconvenience. There was zero chance the wholesaler would intentionally default on our agreement (I know him well) but if he were hit by a bus the day after the first closing I would have been caught in a mess so it was really just protection from Murphy's law.
Its a bit off the chain but I haven't seen anybody do it this way. Heck, maybe there's a good reason for that! But it worked for me in that particular case when our options were limited. I wouldn't recommend this strategy if you don't have a close relationship with the wholesaler.
I do apologize for not responding to your post promptly. Had a crazy busy week:(
I would like to thank you all for your support because if it wasn't for all of you I would not know how to go about this situation. Thankfully with all your support I was able to work something out with my buyer. I don't have enough words to show my appreciation, thank you all for the time you toke to explain and help me out.
Thank you all again and I look forward to working with you in the near future!!
Hope you all have a wondeful and enjoyable long weekend!!
usually when I buy I list my name and/or assignee by default, and most sellers don't have a problem with it. On my last deal, with a different agent, it was my name only. I'm not in the business of wholesaling (I buy only for myself) so it didn't really matter. But when I asked my agent about it, she said that California law allows you to assign contracts anyways (implying that writing the "and/or assignee" is not mandatory). Is that true? Could you assign the contract anyways? I always wondered about that, so any feedback from CA people on this would be helpful :)
Amit, my understanding is that unless otherwise specified, California contracts are assignable (is there a California lawyer in the house?).
However, that has changed with the newest revision of the C.A.R. Form (California Association of Realtors). Now, "and/or assigns" must be written in or the contract is not assignable.
Yasin, I'm glad that it worked out. BiggerPockets is a great community! When the dust settles, can you share more details about which route you took?
Best wishes for a prosperous 2015!
A title agent told me that I could write in "et al" and anyone could close, i.e., John Doe et al. I've never heard that before and I've never tried it.
et al means "and others". Seems like odd advice given that "and" implies that you will close with someone else, rather than someone else will close instead of you.
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