Questions about a few steps in wholesale process

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Questions about a few steps in wholesale process

Darvin Ezell
Jacksonville, FL · Member since 2014 · 75 posts · 9 votes

I have a few questions about the wholesale process and would appreciate someone clearing up the few questions that I have:

1. Once I get the seller to sign purchase agreement, do I take that to the title company or wait until I find a buyer to sign the assignment contract and just take both at the same time?

2.Do I give the $10-$100 earnest money deposit directly to the seller or title company? I have watched videos where some people said they gave it directly to the seller if its  a small amount like $10 and some say give it to title.

3. If I have a 14 day inspection period contingency in my contract with my seller, Do I give my buyer a new 14 days to inspect once he signs the assignment contract? Or do I give him however much time I have left before my 14 days is up?

4. Once my buyer signs my assignment contract, does he give the earnest money deposit directly to me in form of cashiers check, or does he give it to the title company?

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  • Brandon SturgillBusiness Member
    Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
    8y

    @Darvin Ezell

    Q1- Yes, to title immediately to get the workup completed- you need to verify clear and insurable title

    Q2- To the title company to hold in escrow

    Q3- This is a one-shot deal...it's your opportunity to exit the contract based on findings

    Q4- To title (based on your question)

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  • Darvin Ezell
    OP
    Jacksonville, FL · Member since 2014 · 75 posts · 9 votes
    8y
    Originally posted by @Brandon Sturgill:

    @Darvin Ezell

    Q1- Yes, to title immediately to get the workup completed- you need to verify clear and insurable title

    Q2- To the title company to hold in escrow

    Q3- This is a one-shot deal...it's your opportunity to exit the contract based on findings

    Q4- To title (based on your question)

    Thanks for answering , as far as the buyer earnest deposit, do I have them give me the cashiers check and I give it to the title company or do I have them wire the funds to the title company to hold? How does that work?

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  • Brandon SturgillBusiness Member
    Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
    8y

    @Darvin Ezell depends on the amount...but wire typically works...title can hold it in escrow and distribute funds accordingly when you close...maybe call the title company and ask their system...what they prefer. 

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  • Account Closed
    Rental Property Investor · Beverly, MA · Member since 2018 · 41 posts · 16 votes
    8y

    Solid questions Darvin 

    @Brandon Sturgill I'm confused about your answer to Q3 though -

    Darvin - "3. If I have a 14 day inspection period contingency in my contract with my seller, Do I give my buyer a new 14 days to inspect once he signs the assignment contract? Or do I give him however much time I have left before my 14 days is up?"

    Brandon - "Q3- This is a one-shot deal...it's your opportunity to exit the contract based on findings"

    Not sure if I'm missing something or perhaps you misinterpreted the question. 

    If the wholesaler got the property under contract and had a 14 day inspection period, then 7 days later gets it under contract with a buyer, does the buyer have 14 days to inspect (a reset of the period) or 7 days (buyer just assumes the period you started with the contract with the seller)?

    I'm guessing it would be the latter, but would love to hear a clarification from someone who has the experience.

    Thanks!

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  • Darvin Ezell
    OP
    Jacksonville, FL · Member since 2014 · 75 posts · 9 votes
    8y
    Originally posted by @Brandon Sturgill:

    @Darvin Ezell depends on the amount...but wire typically works...title can hold it in escrow and distribute funds accordingly when you close...maybe call the title company and ask their system...what they prefer. 

    thanks for your answers ,cleared a lot of that up for me. Are you familiar with Memorandum of Contract? If so, do I make my seller sign that,  or do I just place that with title co.?

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  • Brandon SturgillBusiness Member
    Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
    8y

    @Darvin Ezell I've not heard that term before...is it like a letter of intent?...seems like an unnecessary step...maybe to give your end buyer an exit?...

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

    If your contract says 14 days, there is a set date... If 7 days later you find a buyer that set date does not change... he now has 7 days...

    Also I imagine the $10 or $100 goes to a title company, however offering someone $10 to lock their house up under contract, seems like it isn't even worth it. Why offer anything at that low of a dollar amount?

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  • Kerry BairdPro Member
    Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
    8y

    A legal path to do this or any deal is to get the deed, and then sell the house that you own.  This is done with a double closing.

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  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    8y

    @Account Closed your end buyer has to honor all terms of the original contract.  If the original contract says the inspection period ends 14 days, it means 14 days from the original contract date.  

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  • Account Closed
    Rental Property Investor · Beverly, MA · Member since 2018 · 41 posts · 16 votes
    8y

    @Brian Pulaski @Ned Carey Thanks for the clarification, that makes sense.

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  • Shari Peterson
    Lender · St. Louis, MO · Member since 2009 · 348 posts · 164 votes
    8y

    Re Q3 and 14 days for the Inspection Period: If you ASSIGN, the one you're assigning the contract to must abide by the original terms of the contract. The 14 days holds

    If you DOUBLE CLOSE, it would be best to have the Inspection Period end at least one day before your 14 day Inspection Period ends. That way, you can still exit the contract if it doesn't meet your end buyer's inspection requirements. With a double close, you are creating a brand new sales contract with your end buyer and you set the Inspection Period terms (as you negotiate the agreement with the end buyer). 

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  • Darvin Ezell
    OP
    Jacksonville, FL · Member since 2014 · 75 posts · 9 votes
    8y
    Originally posted by @Shari Peterson:

    Re Q3 and 14 days for the Inspection Period: If you ASSIGN, the one you're assigning the contract to must abide by the original terms of the contract. The 14 days holds

    If you DOUBLE CLOSE, it would be best to have the Inspection Period end at least one day before your 14 day Inspection Period ends. That way, you can still exit the contract if it doesn't meet your end buyer's inspection requirements. With a double close, you are creating a brand new sales contract with your end buyer and you set the Inspection Period terms (as you negotiate the agreement with the end buyer). 

    thanks for answering. How do I double close when assigning? Wouldn't I need to have the funds to buy the house from the seller first?

    Also, when it comes to earnest money deposit, is that something that i bring up and state the amount or do I let the seller bring up and request?

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  • Shari Peterson
    Lender · St. Louis, MO · Member since 2009 · 348 posts · 164 votes
    8y

    Double closing and assigning are two different things.

    When you double close you buy the property at a first closing -- the A to B Transaction. You then immediately sell that property to a new buyer THAT SAME DAY at the second closing -- the B to C Transaction. 

    A=The Seller, B=The Buyer, C=The End Buyer.

    When you assign, you have a contract with the Seller. This is the A to B Contract. You then find an End Buyer to buy that contract from you for an assignment fee. Now, the deal is an A to C Contract. You drop out of the transaction after you receive your assignment fee. The C End Buyer closes when he buys the property from the A Seller.

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