Closing on a Wholesale Deal

Wholesaling
13yFollow

Closing on a Wholesale Deal

Ember Meadows
Real Estate Investor · Columbus, OH · Member since 2011 · 74 posts · 25 votes

Hey guys, I have a question. I have done several deals already, but have never completed a wholesale deal. Well I have a deal under contract and I have a cash buyer. The deal is I am supposed to contact a title agency to do closing. My cash buyer does know I am making some money on the deal,but doesn't know exact numbers. I contacted a title agency today and they told me they could not close a transaction for me unless I had the money to close first, then after I closed, they could do closing with me and my cash buyer. I have done some research and I have heard there is2 options, a assignment of a option contract or transactional funding. I want to find out what other wholesalers are doing to close? I would prefer not to have to use transaction funding. I am not sure exactly the paperwork for a assignment of a option contract or how that works? For instance I'm not sure if my cash buyer will pay me the option fee before theres even a title search done. Any timely advice would be appreciated.

2Reply
294 views

Most Popular Reply

Timothy Rogers
Investor · Garland, TX · Member since 2010 · 99 posts · 92 votes
13y

You are probably not dealing with an investor friendly title company. Not all title company know how to work with investors.

I do a assignment of contract. My buyer always know what my fee will be when we fill out the assign contract.

Here is my process of wholesalin:g

1. put property under contract.

2. take contract to title company so they can open title.

3. assign contract to buyer for a fee and give copy of original contract with seller to buyer. Also, get some type of nonrefundable deposit($1000) from buyer so you won't get burn by buyer. This deposit will let you know if buyer is serious about buying. You would get the rest of your assignment fee at closing.

4. take assign contract and deposit to title company so new buyer and your fee will be on HUD1.

5. wait for closing to get your money.

That is how I do it.

Hope this has given you some clarity.

31Reply
See this reply in the discussion

69 Replies

Jump to latestLatest
  • Timothy Rogers
    Investor · Garland, TX · Member since 2010 · 99 posts · 92 votes
    13y

    You are probably not dealing with an investor friendly title company. Not all title company know how to work with investors.

    I do a assignment of contract. My buyer always know what my fee will be when we fill out the assign contract.

    Here is my process of wholesalin:g

    1. put property under contract.

    2. take contract to title company so they can open title.

    3. assign contract to buyer for a fee and give copy of original contract with seller to buyer. Also, get some type of nonrefundable deposit($1000) from buyer so you won't get burn by buyer. This deposit will let you know if buyer is serious about buying. You would get the rest of your assignment fee at closing.

    4. take assign contract and deposit to title company so new buyer and your fee will be on HUD1.

    5. wait for closing to get your money.

    That is how I do it.

    Hope this has given you some clarity.

    31Reply
  • Jeremias Martinez
    Raleigh, NC · Member since 2012 · 5 posts · 2 votes
    13y

    Timothy, thanks for your input I have been waiting to read a response, now when you say"take the contract to the title company so that they can open it" what do you mean when you say open it.

    2Reply
  • Timothy Rogers
    Investor · Garland, TX · Member since 2010 · 99 posts · 92 votes
    13y

    Jeremias Martinez open means the title company will begin searching to see if there are any liens or deed issues such as heirs on a deed. Title company is assuring that there is a clear title on the property before closing.

    4Reply
  • Jerry Kisasonak
    Residential Real Estate Agent · Mc Keesport, PA · Member since 2012 · 449 posts · 154 votes
    13y

    You can do either an assignment or double escrow. Most investors do assignments like Tim described if the deal has under 10K profit in it. Over 10K, it's better to do a double escrow so that the seller and the end buyer don't know how much of a spread you are making. This is best done, in my opinion, by double closing with transactional funding. You will have closing costs and funding fees, but with 10K+ profit there's still alot of net profit left!

    10Reply
  • Ember Meadows
    OP
    Real Estate Investor · Columbus, OH · Member since 2011 · 74 posts · 25 votes
    13y

    Thanks guys for the advice. Also thanks Jerry Puckett for the call and all your help. I am gong to do the assignment...

    2Reply
  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    13y

    Ember, just make sure your original contract does not say that it is not assignable. Most board of realtors contracts have similar language.

    2Reply
  • Mike Nelson
    Wholesaler · Washington, D.C · Member since 2011 · 449 posts · 94 votes
    13y

    Yeah I agree, try a different title company because they are clearly not use to assignments.

    3Reply
  • Jeremias Martinez
    Raleigh, NC · Member since 2012 · 5 posts · 2 votes
    13y

    Timothy thank you.

    0Reply
  • Caleb Thurston
    Wholesaler · Charlotte, NC · Member since 2012 · 6 posts · 4 votes
    13y

    Timothy Rogers I appreciate that clear response. I've been searching and searching for a list of steps to close a wholesale deal and this is the first clear and concise response I've found.Thank you!

    How do you know if you should use a title company versus a Real Estate Attorney?

    3Reply
  • Timothy Rogers
    Investor · Garland, TX · Member since 2010 · 99 posts · 92 votes
    13y

    Caleb Thurston most title companies are own by an attorney.

    3Reply
  • Caleb Thurston
    Wholesaler · Charlotte, NC · Member since 2012 · 6 posts · 4 votes
    13y

    Timothy Rogers oh really, I didn't realize that. That makes sense though. So the only paperwork you use during the wholesale contract assignment process is your purchase contract between you and the seller, another contract between you and the buyer and the HUD1 form from the title company? What about notice of assignment ?

    1Reply
  • Timothy Rogers
    Investor · Garland, TX · Member since 2010 · 99 posts · 92 votes
    13y

    Caleb Thurston there is the purchase contract between you and the seller. When you assignment the purchase contract to the end buyer. The end buyer is taking over the purchase contract that you have established with seller. You will have an assignment of contract between you and the end buyer. I can email you an assignment contract. Once the end buyer has agreed to take the deal and has signed the assignment of contract. Then you will take the assignment of contract to the title company. This is letting the title company know the end buyer is the buyer now. Now, you just wait to be paid at closing. So, you are dealing with paperwork 2 times. The Purchase contract and Assignment of Contract.

    14Reply
  • Ibrahim Hughes
    Real Estate Consultant · Bloomfield, NJ · Member since 2010 · 2k+ posts · 1k+ votes
    13y
    Originally posted by Caleb Thurston:

    How do you know if you should use a title company versus a Real Estate Attorney?

    I guess (northern) NJ isn't the only state that customarily uses attorneys in real estate transactions.

    Caleb Thurston - my rule is that I always use an attorney for first time assignees/end buyers to protect my fee. This, usually regardless of the amount of the fee. However, once I assign a deal or two to an investor with no issue, I will usually cut out my attorney and just deal directly with the investor and title co on subsequent deals.

    0Reply
  • Caleb Thurston
    Wholesaler · Charlotte, NC · Member since 2012 · 6 posts · 4 votes
    13y

    Thank you so much for that explanation and sending me the Purchase contract and the Assignment of Contract Timothy Rogers ! That was a huge help! Should the paperwork you sent me work in most states? My goal was to get all of my paperwork together and bring it to an attorney who is also a real estate investor or an investor friendly title company and make sure that it will be sufficient for the state of NC so that I can get my hands dirty immediately.

    0Reply
  • Caleb Thurston
    Wholesaler · Charlotte, NC · Member since 2012 · 6 posts · 4 votes
    13y

    " my rule is that I always use an attorney for first time assignees/end buyers to protect my fee. This, usually regardless of the amount of the fee. However, once I assign a deal or two to an investor with no issue, I will usually cut out my attorney and just deal directly with the investor and title co on subsequent deals."- Ibrahim S

    Thanks for the clarification Ibrahim. The decision of which one to use makes more sense to me now since you explained your reasoning. Does your end buyer often cover the closing costs and attorney's fee or is this something you take out of your profit on the deal? Either way, how much does this process usually tend to run you on a contract assignment deal?

    Also, I'm very curious what is forecasted for the wholesale market in your region after the recent hurricane, any opinions?

    0Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    13y

    Buy it with 100% seller financing with a balloon note, buy it and close, thirty minutes later sell it and payoff the note. If there is a loan on it, buy subject to and finance the difference.
    :)

    4Reply
  • Ibrahim Hughes
    Real Estate Consultant · Bloomfield, NJ · Member since 2010 · 2k+ posts · 1k+ votes
    13y
    Originally posted by Caleb Thurston:
    " my rule is that I always use an attorney for first time assignees/end buyers to protect my fee. This, usually regardless of the amount of the fee. However, once I assign a deal or two to an investor with no issue, I will usually cut out my attorney and just deal directly with the investor and title co on subsequent deals."- Ibrahim S

    Thanks for the clarification Ibrahim. The decision of which one to use makes more sense to me now since you explained your reasoning. Does your end buyer often cover the closing costs and attorney's fee or is this something you take out of your profit on the deal? Either way, how much does this process usually tend to run you on a contract assignment deal?

    Also, I'm very curious what is forecasted for the wholesale market in your region after the recent hurricane, any opinions?

    Caleb - I pay my own attorney fee ($650) on an assignment. I order title in advance to make sure there are no surprises and am usually successful at getting the end buyer to use and pay for the title report/binder ($200-250 for the search and binder).

    Most of the damage in NJ from the hurricane took place in south jersey. No real changes up here in North Jersey. The key, imo, will be to keep an eye on NYC residents entering the NJ home buying market. Much of lower Manhattan went for almost 2 weeks without electricity, heat etc. The last major calamity to effect lower Manhattan was 9/11. The RE market was already heating up back then. It took off months later with many of the new buyers in the market consisting of NYC residents looking to get away from such a huge metropolitan area and into a NJ suburb in time for the next catastrophic event. There's been a steady stream of New Yorkers coming down here ever since. So we'll see if the numbers start to pick up.

    0Reply
  • Samantha Bradshaw
    Lincolnton, NC · Member since 2015 · 7 posts · 2 votes
    11y

    I would like to get the same email containing the purchase and assignment contract ! This would help me so much. I'm a newbie to all of this and I will either fail or succeed ! 

    2Reply
  • Konjett V.
    Real Estate Investor · Salem, OR · Member since 2014 · 7 posts · 2 votes
    11y
    I would like both as well Timothy Rogers if it isn't too much trouble! TIA
    0Reply
  • E Summer
    Phoenix, AZ · Member since 2015 · 2 posts · 0 votes
    11y

    Very interested in examples of your purchase contract and assignment contract as well.

    @Timothy Rogers 

    0Reply
  • Jeremy Tillotson
    Investor · Fort Wayne, IN · Member since 2014 · 1k+ posts · 515 votes
    11y

    @E Summer welcome to BP first of all. Check of this for examples of contracts and options. Then below for all about wholesaling. Best of Luck.

    http://www.biggerpockets.com/files/category/contra...

    http://www.biggerpockets.com/renewsblog/2010/06/10...

    1Reply
  • E Summer
    Phoenix, AZ · Member since 2015 · 2 posts · 0 votes
    11y

    Thank you @Jeremy Tillotson . Much appreciated. 

    0Reply
  • Jay Luke
    Sacramento, CA · Member since 2015 · 42 posts · 3 votes
    11y

    @Timothy Rogers I just read all of your advice and you made things extremely clear. I was wondering if I could get copies of those contracts as well?

    0Reply
  • Christopher Oliver
    Lender · Peekskill, NY · Member since 2015 · 54 posts · 10 votes
    11y

    i would like to receive those contracts too im actually in the proccess my first deal and i want to have my contracts ready. let me know if you can thanks

    0Reply
  • Barry McCoy
    Investor · Wilson, NC · Member since 2015 · 13 posts · 2 votes
    11y
    Originally posted by @Timothy Rogers:

    You are probably not dealing with an investor friendly title company. Not all title company know how to work with investors.

    I do a assignment of contract. My buyer always know what my fee will be when we fill out the assign contract.

    Here is my process of wholesalin:g

    1. put property under contract.

    2. take contract to title company so they can open title.

    3. assign contract to buyer for a fee and give copy of original contract with seller to buyer. Also, get some type of nonrefundable deposit($1000) from buyer so you won't get burn by buyer. This deposit will let you know if buyer is serious about buying. You would get the rest of your assignment fee at closing.

    4. take assign contract and deposit to title company so new buyer and your fee will be on HUD1.

    5. wait for closing to get your money.

    That is how I do it.

    Hope this has given you some clarity.

     How does the closing process works,like do we meet back at the title company...or ??

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