closing costs in wholesale deal

15 Replies

This may be a stupid question but I really dont know the answer (I am a newbie). When you find an end buyer, does the buyer expect to pay the closing costs? If not, how do you pass the cost on to the end buyer? Any advice or input would be greatly appreciated. Thanks.

If it is true wholesale deal (assignment vs double-close) the wholesaler does not typically incur closing costs. As a wholesaler you are assigning, or selling, a contract to the end buyer. The end buyer is responsible for closing costs incurred when completing the purchase. In a double-close situation both you and the end buyer would have closing costs.

:cool:

Makes sense. Thank you for clarifying that for me.

Rich is correct you as a wholesaler don't pay any costs.

If however you're sitting on a property you are trying to wholesale and can't sell it fast enough you can offer to pay for the closing costs out of your assignment fee to entice the end buyer to purchase the property otherwise you don't pay for any closing costs.

Thanks Mr Investor. That sounds like something I may want to do when im running out of time in terms of having the property under contract.

We do double closes all the time and part of our procedures and protocols states the buyer must pay all closing costs.

But the closing cost on a (QCD) Quit Claim Deed are minimal it's about $350 for the first transaction and $150 for each additional.

If the buyer does not go for that then we split it down the middle I always leave room in my prices to cover the closing costs.

The Quit Claim Deed take about 3-5 days to close and you get a wire transfer into your account direct from the title company!

I got into doing wholesale area double closings because I had all my money tied up in another portfolio of mine and this hedge fund company sent a pool of props that I could cherry pick.

Long story short I did not have any props in my portfolio my client wanted but they did so here we go 27 months later and over 2,050 transaction I'am tired. Whewwwww

There are no hard and fast rules as to who pays what. Everything is negotiable in a contract, including closing costs.

As was stated by Rich, if you assign a contract then the buyer takes over your contract and any closing costs that the contract states the buyer is responsible for. If you make the seller pay all the closing costs in the contract, then you're buyer would not be responsible for any, or vice versa.

And as James stated, you can always choose to pay for the buyers closing costs out of your assignment fee, even if the contract with the seller stated that the buyer would pay for them. That would need to be specifically addressed in the assignment though.

Now it is common that in most real estate transactions that certain fees/expenses are paid for by the buyer (lending fees, half the escrow fee, appraisals, inspections, survey, and attorney fees for the deed of trust) and certain fees/expenses are paid by the seller (title insurance, half the escrow, prorated taxes, prorated rents, deposits, and attorney fees for the deed).

Now it is common that in many wholesale transactions, the contract states that the buyer is elected to pay all closing costs. Though I understand the logic behind it, I don't think this is necessary, and I rarely do it. I use closing costs as a negotiating leverage tool if I need to, but I don't offer it if I don't need to.

Either way, everything is negotiable, and whatever you and the seller/buyer agree on and write into the contract is what the title agent is going to do.

Originally posted by CherryPickReos:
...
But the closing cost on a (QCD) Quit Claim Deed are minimal it's about $350 for the first transaction and $150 for each additional.

...


Unless the QCD is being recorded in a state like PA, where they impute a value for the property that approximates FMV, and they set real estate transfer taxes (between 2% and 4% of "value" depending on county) based on that imputed FMV.

You as the wholesaler should never have to come out of pocket for closing cost. NEVER!

When you get the property under contract, in your documents you make sure that it is annotated " seller will pay 1/2 of the closing cost.

The same will goes for the buyer. Make sure it is annotated the will also have to pay 1/2 of the closing cost. All you do is get the difference.

Everything is fair and everybody is happy. :D

Well if you are doing an assignment that works great, but if you are doing a double closing that's not going to work that way Delondon.

And even on an assignment, there's nothing wrong with paying some of the closing costs to get the deal done. Its better than letting it die on the vine.

Sure thing Ryan,

I would much rather come out the pocket to get the deal done than to let the deal die. Yes, this is true. But I am assuming that we are talking about wholesaling here.

1/2 of the closing goes to the buyer, the
other 1/2 goes to the seller. Why should you have to pay any of the closing cost even if it is a double closing.

If your attorney or title company is making you pay double closing cost then you better go and find you a different attorney or title company. Just my take on things.

Delondon, I would guess that you haven't done any double closings then. That's how assignments are structured but not double closings. A double closing is actually 2 whole and separate transactions. Two sets of fees are incurred.

1/2 of costs of 1 transaction and 1/2 of another transaction equals 1 full transaction paid for out of 2 transactions needed. You would still have a whole nother transaction to pay for.

Even if your title agent doesn't charge you twice, he or she will probably charge you once. So you would still owe for 1/2 of a transaction.

Some agents may not even charge you once, but that still doesn't take into account the title policy difference (if you're paying for a title policy, which in my area is customary when you are selling). You buy a house for 50K and get the seller to give you a title policy that costs lets say $500, but when you go to sell for 55K the title policy costs $550. That cost difference has to come from somewhere.

Now if you make the seller pay for all closing costs (yours and theirs) on the buy side and the buyer pay for all closing costs on the sell side(yours and theirs) then you would have no closing costs on a double close.

I personally have never set one up that way or ever heard of a wholesaler setting up a double close that way, but you could.

Originally posted by Ryan Webber:
Delondon, I would guess that you haven't done any double closings then. That's how assignments are structured but not double closings. A double closing is actually 2 whole and separate transactions. Two sets of fees are incurred.

1/2 of costs of 1 transaction and 1/2 of another transaction equals 1 full transaction paid for out of 2 transactions needed. You would still have a whole nother transaction to pay for.

Even if your title agent doesn't charge you twice, he or she will probably charge you once. So you would still owe for 1/2 of a transaction.

Some agents may not even charge you once, but that still doesn't take into account the title policy difference (if you're paying for a title policy, which in my area is customary when you are selling). You buy a house for 50K and get the seller to give you a title policy that costs lets say $500, but when you go to sell for 55K the title policy costs $550. That cost difference has to come from somewhere.

Now if you make the seller pay for all closing costs (yours and theirs) on the buy side and the buyer pay for all closing costs on the sell side(yours and theirs) then you would have no closing costs on a double close.

I personally have never set one up that way or ever heard of a wholesaler setting up a double close that way, but you could.


Good point. Big distinction between assignments and wholesales. But everything is always negotiable

I would love to know how someone did over 2,000 transactions in only 27 months? That to me sounds impossible!!! NOT POSSIBLE !!!

Help me out here Curt. Who are you talking about?

This was very informative thank you for your insight.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here