Contract Type for wholesale

Wholesaling
8yFollow

Contract Type for wholesale

H J.
Norcross, GA · Member since 2017 · 36 posts · 5 votes
Hello,

Hope this finds everyone having a fantastic weekend. I made the following offer to a seller and she accepted:

>>>>>>>>>>>>

A - $75,000 in two months

$35,000 down, $40,000 in two months.

There is no downside/risk for you. If we were to become unable to pay the remaining $40,000, you keep the $35,000, and you keep your house. And you can sell it to someone else in two months.

>>>>>>>>>>>

Now I need to create a contract. My intention is to wholesale the property. Question: would this be a Contract for Deed? Or is there a better contract for this? Thanks.

Hassan

0Reply
50 views

Most Popular Reply

Jansen Jamielyn
Investor · Temecula, CA · Member since 2017 · 6 posts · 6 votes
8y

Sounds like you got the verbal agreement but need to get a purchase agreement signed.  If wholesaling is the end game in this scenario, make sure you have your assignment clause in place, then simply assign it my friend.  It sounds pretty straight-forward.

@H J. Close can happen immediately if your end-buyer is prepared for a short close... granted you have buyers and a list ready to rock!  Hope that helps.

3Reply
See this reply in the discussion

21 Replies

Jump to latestLatest
  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y

    This sounds like a straight up purchase with a $35,000 non-refundable EMD and 60 day close.

    Gimer Law518 Reviews
    WebsiteView Page
    0Reply
  • H J.
    OP
    Norcross, GA · Member since 2017 · 36 posts · 5 votes
    8y

    Tom, thanks for prompt response. So close cannot happen immediately, for end buyer to have ownership and start rehab? 

    0Reply
  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y

    Your initial post suggested there would be a delayed closing. I figured the 2 month delay on the $40,000 was for you to find your buyer. 

    It would be extremely rare to find a seller who will give you possession and title without payment. That also goes against what your offer says.

    So tell us what you really want to occur here and let's see if it can be done.

    Gimer Law518 Reviews
    WebsiteView Page
    1Reply
  • Kyle J.
    Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
    8y

    What about doing seller financing with $35k down and $40k seller financed with a balloon payment for the full amount due in two months?

    0Reply
  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y
    Kyle J. Sounds great! But that is a bait and switch.
    Gimer Law518 Reviews
    WebsiteView Page
    1Reply
  • Kyle J.
    Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
    8y
    Originally posted by @Tom Gimer:

    Kyle J. Sounds great! But that is a bait and switch.

    How is seller financing with a balloon payment a “bait and switch”? 

    0Reply
  • Larry Burklow
    San Marcos, TX · Member since 2017 · 4 posts · 0 votes
    8y

    What's the ARV? 2 months is a long time to find a rehabber (but certainly a short time to actually rehab) if your deal has enough upside. Do you have the $35,000 and just need the $40,000 to close on it, or are you borrowing the $35,000 for the down and hoping to wholesale it by the end of the 2 months?

    0Reply
  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y

    @Kyle J. I'm guessing you didn't read OP's original post.

    There's this little tidbit in the offer that the seller has already agreed to: "There is no downside/risk for you. If we were to become unable to pay the remaining $40,000, you keep the $35,000, and you keep your house. And you can sell it to someone else in two months."

    It's bait and switch because they would no longer own the property and would have to hire and pay for an attorney to foreclose. Wouldn't be the first time a seller went to closing, signed some docs and only later found out they were totally hoodwinked.

    Gimer Law518 Reviews
    WebsiteView Page
    0Reply
  • Jansen Jamielyn
    Investor · Temecula, CA · Member since 2017 · 6 posts · 6 votes
    8y

    Sounds like you got the verbal agreement but need to get a purchase agreement signed.  If wholesaling is the end game in this scenario, make sure you have your assignment clause in place, then simply assign it my friend.  It sounds pretty straight-forward.

    @H J. Close can happen immediately if your end-buyer is prepared for a short close... granted you have buyers and a list ready to rock!  Hope that helps.

    3Reply
  • H J.
    OP
    Norcross, GA · Member since 2017 · 36 posts · 5 votes
    8y

    Sorry for the confusion.

    My intent is to wholesale the property. Seller wants $75,000. My reason for splitting the payment into two is that I thought it would help make it more attractive to buyers. Because buyer would not have to get $75,000 hard money loan. Buyer would only get $35,000 loan. And given that renovation needed is not too extensive, buyer could complete renovation within two months. Buyer then sells property and pays seller the remaining $40,000 from the sale. 

    So my thinking was: I find buyer in the next week, and assign contract. Buyer closes with seller(perhaps with a land contract), so buyer has ownership and can feel confident in getting loan and paying for repairs. Then after two months buyer pays remaining $40,000 from selling house. 

    So initial question was: what type of contract would best achieve this goal?

    I do not know why anyone would say this is hoodwinking seller. Surprised, actually. Seller is in poor physical health, and in a bad position. I chose to not lowball her, and I accepted her full price for that reason. Then I thought... how can I make this more attractive to buyers? Because a previous wholesaler had been unable to find a buyer. So I wanted some way to entice buyers. Then the idea of splitting the payment came as a way to do that. 

    ARV is $145,000, and repairs are thought to be around $20,000. I say "thought to be because I am doing this from a different state. So I've not gone to see the property. But I trust the things seller has told me about it.

    Thanks for all your thoughts though. Really appreciate it.

    Hassan

    0Reply
  • H J.
    OP
    Norcross, GA · Member since 2017 · 36 posts · 5 votes
    8y

    If you were a rehabber/flipper, would you not prefer to pay less money up front(roughly half), and pay the remainder after sale of property? I'm thinking that would result in less interest payments, and might therefore make rehabber accept higher price for the home that he pays the original seller. Am I wrong?

    0Reply
  • Larry Burklow
    San Marcos, TX · Member since 2017 · 4 posts · 0 votes
    8y

    Remember that a retail buyer generally takes 30-45 days from contract to close, unless it's a cash deal.

    Here's a different question: How much do you want for the assignment?

    0Reply
  • H J.
    OP
    Norcross, GA · Member since 2017 · 36 posts · 5 votes
    8y

    I'm open. Would love $5,000, but would accept $1,000. At this point I want to get this done for the seller to have money to buy a car and find a more affordable home for herself.

    0Reply
  • H J.
    OP
    Norcross, GA · Member since 2017 · 36 posts · 5 votes
    8y

    Did not know retail buyers take that long. But will keep in mind for the next one. 

    0Reply
  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y

    @H J. The problem with your scenario is that title doesn't transfer until payment is made. This is the case with a traditional sale as well as with a land contract. 

    Nobody is going to deed over the property without payment in full. If they want to owner finance some of the purchase price, sure... they can hold paper for some of it. But that's definitely not the scenario you promised in your original offer. 

    And no HML is going to lend in 2nd behind grandma.

    Gimer Law518 Reviews
    WebsiteView Page
    0Reply
  • H J.
    OP
    Norcross, GA · Member since 2017 · 36 posts · 5 votes
    8y

    Tom... so you're saying Hard Money Lenders would not agree to lend given that title is not clearly transferred to rehabber? Okay, I can see the reasoning there. 

    Another complication is that there's a mortgage still, and seller owes $46,000. So better if I tell seller to just accept a one time payment probably. 

    0Reply
  • H J.
    OP
    Norcross, GA · Member since 2017 · 36 posts · 5 votes
    8y

    Given Tom's statement, it's likely that Hard Money Lenders would not want to lend while the $46,000 is still owed. 

    0Reply
  • Paul AmegatcherPro Member
    Rental Property Investor · Brookville, OH · Member since 2016 · 488 posts · 363 votes
    8y
    Originally posted by @H J.:

    Given Tom's statement, it's likely that Hard Money Lenders would not want to lend while the $46,000 is still owed. 

     Hassan,

    1. You are making this deal harder than it needs to be. If this deal is a good deal at $75K then an investor should have the funds to close on $75K and not have to play the game of financing some of the deal or taking the property via land contract.

    2. You are worth more than $1000. If you have done the work to get the deal then get paid for it. Do not tie up a house just to make some chump change. There are far too many deals out there to be playing for crumbs.

    Good luck to you.

    1Reply
  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y

    @Paul Amegatcher Exactly... on both counts.

    And OP shouldn't be promising $35k up front in his offer when what he's really talking about is his future assignee's money. 

    Gimer Law518 Reviews
    WebsiteView Page
    1Reply
  • H J.
    OP
    Norcross, GA · Member since 2017 · 36 posts · 5 votes
    8y

    Thanks for the responses, folks. I really appreciate the perspective of those who know a lot more than me about this industry. Glad to know what's doable and what's not. 

    Yes, would love to make more than $1,000 but at this stage a little bit of the deal is better than nothing. Seller is going to sell, one way or another. If I can help find her buyer and get a little bit, I would take it. But yes, will try and make more if that's possible.

    0Reply
  • Brian Pulaski
    Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes
    8y

    I would be very careful on saying repairs are thought to be $20k, when you actually have no idea and you are going off what the seller (a woman in poor health, not someone I would expect to be keen on current rehab costs) is quoting you. What if repairs are $50k? Also how will you be showing this property from out of state? Who is paying the $35k initial payment, you or this buyer you plan to find? Does the seller know someone else will be buying the property?

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