Contracts im using for Wholesaling

Wholesaling
16yFollow

Contracts im using for Wholesaling

Larry Lee
Real Estate Investor · high point, NC · Member since 2010 · 59 posts · 11 votes

Well I've built a small buyers list of 6 cash buyers and 9 investors, my other forum shows the steps I took to build even this small list. Now im on to step 2 and I realize I have no idea how to find a property much less put it under contract, after much searching on this site I have yet to actually find an example of any contract that can be used for wholesaling. While searching the internet I found a flex option contract which i've listed below, those experienced take a look and let me know if its legit to use. Any beginners like me can atleast get an idea of what the contract looks like. Can someone share an assignment contract, what I would have the new investor sign to take over the deal, and a straight option contract? If you have examples that would be great thanks

Example of flex option contract:

Option to Purchase Real Property Agreement

Date: ______________

This option agreement is entered into between the Parties, Seller(s) and Buyer(s), below in consideration of and subject to the following terms and conditions.

1. Parties: XYZ LLC. and/or assigns as Buyer and as Seller

2. Property Address: __________________________________________________________

3. Offer: Buyer has the option to buy the property at $75,000

4. Period: 35 days

5. Provisions:
- Seller understands that Buyer’s intention is to find an End-Buyer and assign this Option Agreement to that End-Buyer for a fee (paid by the End-Buyer).
- Seller understands that Buyer is acting as a principle in the transaction and is not working as a licensed real estate broker representing anyone in the transaction.
- Upon Buyer’s decision to exercise this option, both parties agree to move forward with the necessary standard purchase and sales agreement.
- Seller may cancel this agreement at any time if they find their own buyer.
- Seller agrees to allow Buyer to put a sign in the yard, advertising the property for sale.
- If Buyer does not acquire an End-Buyer to assign this deal to within 35 days of acceptance of this Option Agreement, this agreement becomes null and void.
- All parties agree that property is being sold in “as is†condition unless noted otherwise.

6. Seller Added Comments:_____________________________________________________

_____________________________________________________________________________

Buyer: __________________________________________________ Date: ___________
XYZ,LLC

Seller: _________________________________________ Date: __________________

Seller: _________________________________________ Date: __________________

1Reply
571 views

Most Popular Reply

Jaremy Moritz
Real Estate Investor · Houston, TX · Member since 2010 · 122 posts · 126 votes
16y

The only other documents that you might use would be the Seller's Disclosure and/or the Lead Based Paint Disclosure, which you should also be able to find online (again, it all depends on your state's requirements). They are just "checklist" types of forms plus questions about specific items in the house. Most disclosures are similar in nature and just need to be filled out to the best of the seller's ability. I usually get the seller to fill it out after I have a buyer in place and the buyer has already seen the property. It's basically a CYA type of deal - better to have it than not.

Yes, the amount of money you put on the assignment is your profit spread. The buyer's total cost will be the contract purchase price plus your assignment fee and any closing costs not covered by the seller (ie title policy, escrow fees, recording fees, etc.)

The way to figure out your "sale" price is typically ARV x 70% (or 65% or whatever is the going rate in your area) minus the cost of repairs. Depending on the property, you may have to lower the price significantly in order to get a buyer. Other times, you might even get multiple offers at or above list price. Just depends on the quality of the deal.

Don't worry about your profit "taking too much from the deal". If the numbers work, they work. The better you get at negotiating low purchase prices, the more money you'll make on your assignment fees.

2Reply
See this reply in the discussion

73 Replies

Jump to latestLatest
  • Larry Lee
    OP
    Real Estate Investor · high point, NC · Member since 2010 · 59 posts · 11 votes
    16y

    Wow these companies are charging no less than 2k to do a back to back closing. Am I missing something, because it seems to make more sense for me to just assign the contract and keep that 2k in my pocket. Maybe it makes more sense when im making more than 6 or 7k on a deal. Maybe this is normal and im just new to it, but am I missing something? Is there a cheaper way to do a back to back closing without paying over 2k to use the funds for the a to b transaction?

    0Reply
  • Larry Lee
    OP
    Real Estate Investor · high point, NC · Member since 2010 · 59 posts · 11 votes
    16y

    Another update on my first deal. Just got a call from the seller. says he doesnt have the $800 to pay this months note and asked me if I could pay it or help pay it as he's already behind and the banks ready to foreclose. Wasnt sure what to say, I convinced him to ask family for the funds and he's gonna let me know tomorrow if he's able to save it. Now I just hope I can get someone in there to buy the property ASAP if he can get the funds together to hold the bank off, after hearin the stress in his voice im extra motivated to get him outta the situation and he's extra motivated to let me. On a good note I got a positive response from 2 investors and they want to see the property. Turning out to be an interesting first deal tho im sure most of you guys deal wit this on a daily basis. Anyhow I'll udpate once I find out something...

    0Reply
  • E. Jacobs
    Real Estate Investor · Chicago, IL · Member since 2009 · 91 posts · 22 votes
    16y

    Hey Larry, what's the latest with your deal? What did those 2 investors think of the property?

    0Reply
  • Larry Lee
    OP
    Real Estate Investor · high point, NC · Member since 2010 · 59 posts · 11 votes
    16y

    Wanted to give another update on my progress. The seller ended up gathering the money to pay the note for another month, but then decided he wanted to refinance the property instead and keep it. Im sure I could of been a jerk about it and made things difficult since I had 30 days left to market it but I just let it go and wished him the best. I got a call today from him saying that he wants to keep our original agreement and asking how soon I could get it sold. Not sure whats going on wit this guy but its my first deal so im just going with it. I'm gonna call the investors back that were serious about seeing it tomorrow and try to get them in there asap since I have the key lock now and dont have to pick a time when the sellers available to open up. I'll update again after I do my walk throughs.

    0Reply
  • Andrew Lemoine
    Real Estate Investor · Palm Harbor, FL · Member since 2010 · 7 posts · 0 votes
    16y

    I just learned something new thanks guys!

    0Reply
  • Deon C.
    Developer · Southfield, MI · Member since 2009 · 38 posts · 1 vote
    16y

    I have a new wholesale deal on the table in which Im doiing a double closing. My question is simple, what is the best contract to use for my end-buyer? Also, what contracts should I use for the seller or do they(seller) normally provide contract. Thanks in advance for your response.

    0Reply
  • Chris T.
    Wholesaler · Amarillo, TX · Member since 2008 · 369 posts · 75 votes
    16y

    Use a contract with no contingencies to the buyer and make sure you get an earnest money deposit from them.

    0Reply
  • Larry Lee
    OP
    Real Estate Investor · high point, NC · Member since 2010 · 59 posts · 11 votes
    16y

    quick question about putting a house under contract with a seller. I understand option contracts and flex option contracts, what about using a purchase contract with a contingency. I've looked into several types but the inspection contingency would seem to work the best to me. I'm assuming this is just a regular nc offer to purchase contract accept i'd add the inspection contingency to it for 10-15 days. If I cant find a buyer in that time i'd simply pick something I found wrong with the property and use that as an excuse to void the contract. Is that about the cut and dry of using this type of contract? What happens if I assign the deal to an investor and they end up not closing for whatever reason. Would I be liable in any way to the seller or once i assign it my risk is gone?

    0Reply
  • E. Jacobs
    Real Estate Investor · Chicago, IL · Member since 2009 · 91 posts · 22 votes
    16y

    Why not make your purchase contract contingent on your ability to find a cash or hard money end-buyer within xx days and nothing else?

    0Reply
  • Chris T.
    Wholesaler · Amarillo, TX · Member since 2008 · 369 posts · 75 votes
    16y

    My contract says:

    Buyer may cancel this contract at any time, and for any reason.

    0Reply
  • E. Jacobs
    Real Estate Investor · Chicago, IL · Member since 2009 · 91 posts · 22 votes
    16y
    Originally posted by Chris Trook:
    My contract says:

    Buyer may cancel this contract at any time, and for any reason.


    Chris, just curious if and how much earnest money you are putting down for a contract like that? If I were a seller and you told me you can back out at any time for any reason, I would be thinking there is a much higher chance of you backing out and wasting my time. Of course from the wholesaler's perspective this is a great clause, so I'm wondering what kind of reaction you've gotten from sellers about that.
    0Reply
  • Chris T.
    Wholesaler · Amarillo, TX · Member since 2008 · 369 posts · 75 votes
    16y

    I don't put down any earnest money. Most of the time the sellers are not real well rounded when it comes to this sort of thing and don't even know what earnest money is. It's hard for a person to be in control when they are desperate. They are inexperienced.

    Learning from pros has taught me to listen to what the seller needs, agree to provide for them what they need, then finalize it with a signature at the bottom of the contract. It's never really about the words on the paper, but rather, what you can provide them.

    2Reply
  • Robert Pickett
    Investor · Dallas, TX · Member since 2009 · 66 posts · 19 votes
    16y

    Learning from pros has taught me to listen to what the seller needs, agree to provide for them what they need, then finalize it with a signature at the bottom of the contract. It's never really about the words on the paper, but rather, what you can provide them.

    Chris that's what you call ..REAL TALK...simple and to the point, no sugar coating...you get my vote for that

    0Reply
  • E. Jacobs
    Real Estate Investor · Chicago, IL · Member since 2009 · 91 posts · 22 votes
    16y

    Thanks! Great advice. Just wondering if it affects the enforceability of the contract with no earnest money given? What consideration are you providing?

    0Reply
  • Chris T.
    Wholesaler · Amarillo, TX · Member since 2008 · 369 posts · 75 votes
    16y

    In Texas, you don't have to use any money for consideration, however, I have noticed on my title work that the title agent always includes a $10 commitment. I honestly don't know if that has anything to do with anything.

    0Reply
  • E. Jacobs
    Real Estate Investor · Chicago, IL · Member since 2009 · 91 posts · 22 votes
    16y

    Even if it's not money, you aren't offering any other form of consideration though. The seller is offering to give up their right to sell to anyone else during your contract period. You're giving up nothing. I'm sure this has been discussed elsewhere though and probably varies state-by-state as well so I'll go do some researching on that

    0Reply
  • James Hobbs
    Virtual Assistant · Myakka City, FL · Member since 2010 · 10 posts · 2 votes
    16y

    You guys rock! Enough info in here for about 2-3 articles, at least!

    0Reply
  • James Hobbs
    Virtual Assistant · Myakka City, FL · Member since 2010 · 10 posts · 2 votes
    16y

    Thanks, guys. Lotsa good stuff here...

    0Reply
  • Larry Lee
    OP
    Real Estate Investor · high point, NC · Member since 2010 · 59 posts · 11 votes
    16y

    Its been a while, wanted to give a quick update. My first deal died or so i thought, I recently saw the owner in the grocery store and he decided to give me the spare key he made for me that had been sitting in his car for over a month now. I asked if he still had the contract i left and he said yes but he hasnt signed it yet. He said he's still trying to do a refinance but he's hitting alot of roadblocks. I dont want to start showing the property until I get the signed option contract back, Should I just let this deal go and give the key back? or just let him know when he's ready to sell ill be ready to buy?

    On a good note i've met alot of contacts thru my local reia president, He introduced me to an accountant thats also an investor and a attorney thats also an investor. The attorney gave me a good title company, insurance broker and mortgage broker. He's gonna be giving me a local hard money lenders information today. I havent reached out to any other wholesalers as of yet, their there but im a little hesitant for some reason.

    My teams coming together little by little, my biggest problem now is im completely broke. I was hoping the above deal would close and i'd use the 4k profit to fund my post card campaigns and buy some bandit signs but thats taking a bit longer than I expected. Anyhow thats it for now, If anything worth mentioning develops ill update again.

    0Reply
  • Mechelle Detres
    Pueblo, CO · Member since 2018 · 11 posts · 1 vote
    8y

    @jaremy 

    @Jaremy Moritz , I know this post is years old.   but I am looking to work on my first deal and to protect myself legally I am choosing to use the 17 page Purchase Contract for Residental Property courtesy of the Colorado Division of Real Estate.  On line 2.2 it says No assignability  unless otherwise specified in Additional Provisions which is Paragraph 30 of the contract that looks like this,  (The following additional provisions have not been approved by the Colorado Real Estate 735 Commission.)   In the blank space I should put:

    - Seller understands that Buyer’s intention is to find an End-Buyer and assign this Option Agreement to that End-Buyer for a fee (paid by the End-Buyer).
    - Seller understands that Buyer is acting as a principle in the transaction and is not working as a licensed real estate broker representing anyone in the transaction.
    - Upon Buyer’s decision to exercise this option, both parties agree to move forward with the necessary standard purchase and sales agreement.
    - Seller agrees to allow Buyer to put a sign in the yard, advertising the property for sale.
    - If Buyer does not acquire an End-Buyer to assign this deal to within 35 days of acceptance of this Option Agreement, this agreement becomes null and void.
    - All parties agree that property is being sold in “as is� condition unless noted otherwise.

    I was also informed that there is a difference between wholesaling and assigning contracts , wholesaling is when you actually buy a property from a seller and then resell it ,  so that you are not tieing up the property.  and assigning  is when you assign a contract to an end buyer without purchasing the property.   The seller is aware that you have no intention of buying the property.  something about being completely transparent with the seller.  

    0Reply
  • Bill S.Pro Member
    Moderator
    Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
    8y

    @Mechelle Detres what you wrote is a bit confusing to me. It seems you are proposing to insert the above statements within the "additional provisions" section (pg 15 of 17) of the Colorado standard form contract. If that is what your are proposing, you should consult a real estate attorney that specializes in wholesaling. Just by adding these statements into the additional provisions does not convert the standard form contract into an Option Agreement. The standard form contract is an agreement to PURCHASE the property and not an "option". If you want an Option Agreement, that should be a separate document drafted by an Colorado attorney. These disclosures would be appropriate in that option agreement. 

    0Reply
  • James Orr
    Real Estate Agent · Fort Collins, CO · Member since 2010 · 350 posts · 222 votes
    8y

    @Mechelle Detres ... what @Bill S. said is really good advice.

    If you need a recommendation to a good Colorado contracts attorney, let me know and I can refer you to one.

    I suspect others will have very different opinions on this, but in my opinion, if you plan to be a professional when wholesaling, you should get professional advice and professional tools and that means talking to an attorney to protect yourself. A little bit of money up front can save you a lot of headaches later.

    The other thing to be aware of in the Colorado contract when wholesaling is section 4.4.2:

    4.4.2. Time of Payment; Available Funds. All funds, including the Purchase Price to be paid by Buyer, must be paid before or at Closing or as otherwise agreed in writing between the parties to allow disbursement by Closing Company at Closing OR SUCH NONPAYING PARTY WILL BE IN DEFAULT. Buyer represents that Buyer, as of the date of this Contract, [ ] Does [ ] Does Not have funds that are immediately verifiable and available in an amount not less than the amount stated as Cash at Closing in § 4.1.

    Specifically, the spot you have to check for "Buyer represents that Buyer, as of the date of this Contract, [ ] Does [ ] Does Not have funds that are immediately verifiable and available in an amount not less than the amount stated as Cash at Closing in § 4.1."

    You should discuss with your attorney how they suggest you deal with this if:

    1. You don't have the money for closing on the deal yourself should you not be able to find an end-buyer.

    2. Your end buyer (the person you're assigning the contract to) is using hard money and does not have the cash personally.

    It is not a deal killer, but different attorneys may advise you differently on how to handle this.

    By the way, it looks like the original question by @Larry Lee also included some questions on how to find off-market deals. I am sure in the last 8 years, he's got the answer to that from others on BP, but if anyone wants a spreadsheet I built for analyzing the business flow of marketing for off-market deals, I have a good spreadsheet for that and happy to share/give you the spreadsheet and a video of me walking through the spreadsheet.

    Hope that helps. Thanks!

    0Reply
  • James Orr
    Real Estate Agent · Fort Collins, CO · Member since 2010 · 350 posts · 222 votes
    8y

    Sorry... duplicate post.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free