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
305 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
  • ShamecaWillams Holloway
    Charlotte, NC · Member since 2017 · 3 posts · 0 votes
    8y
    Originally posted by @Timothy Rogers:

    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.

    0Reply
  • ShamecaWillams Holloway
    Charlotte, NC · Member since 2017 · 3 posts · 0 votes
    8y

    can you email me the contract please 

    0Reply
  • Account Closed
    Investor · Waco, TX · Member since 2017 · 14 posts · 12 votes
    8y

    @Ember Meadows

    In the buyer section of the contract, I write

    ABC Fund, LLC &/or assigns

    When it comes to "opening title" I then take the contract to the title company that I wrote into the contract with the earnest money check made out to them. I always do options so I make sure to give my option check to the motivated seller the day I sign up the deal. 

    It takes 3-5 days where I am for a commitment to come back, assuming it is clean, I do the following three things:

    Take the original contract, cut a tiny strip of paper and scotch tape it over the price and make a copy. Now I have the contract that my new buyer will have "attached" to them through assignment but without a lower price than they are paying. Anyone who says it is okay to let the other side know what you are making has not dealt with dozens of assignments for large chunks. You do enough where you make 20-25k per assignment and you will get the investor who can make things messy. May or may not blow up your deal but it's much easier if...

    Meet the investor with a clear title, a copy of the contract the investor that is being assigned (you can even meet at title so they can confirm that it is the contract), and an assignment form. My form ONLY has their total price, is 1 page, and is one that a former President of a large title company helped me create years ago. The assignment form has worked everywhere.

    Have the deal in my LLC. Investors will buck and pout because they really want the money to go to title where it won't be as easy for you to access it if they cancel- they will try to get it back. Large title companies will "accidentally" release to someone who is a legitimate player when they know the broke wholesaler is not. So now, if I meet up with the potential buyer, I have the assignment form, the contract, and they have to make out the $5000 non-refundable earnest money to my LLC if they want the deal. I tell them, "this is how it works if you are a builder, we aren't agents representing homeowner clients, so if you want to take my place on this contract and have the right to purchase, the check needs to be made to my LLC.

    Good luck

    1Reply
  • Brian Vaughan
    Real Estate Consultant · Texas Hill Country · Member since 2017 · 56 posts · 58 votes
    8y

    @StephenJ.     I did a quick Google search, and unfortunately it looks like the woman who started this thread (about 5 years ago), Ember Meadows, 34, of Galloway, OH, passed away on March 3, 2016 in a horrible car accident on the freeway.    R.I.P.

    0Reply
  • Dishon Davis
    Boston, MA · Member since 2017 · 1 post · 0 votes
    8y

    I'm new to investing and would love to get them contracts containing the purchase and assignment. I have my first deal in front of me and would feel a lot better with them contracts. Thank you @Timothy Rogers

    0Reply
  • Tommy Ricks
    Rental Property Investor · Warner Robins, GA · Member since 2018 · 10 posts · 3 votes
    8y

    @Timothy Rogers  can you please send me the purchase contract and assignment contract also? I am looking to buy and hold here in Texas, but if a good flip opportunity comes up, I would be willing to make a few bucks to add to my capital. Thanks.

    @Account Closed can you send a copy of that 1 page assignment form that you use for your deals?

    1Reply
  • Mark Chapman
    Humble, TX · Member since 2018 · 22 posts · 7 votes
    8y

    @Account Closed would you be interested in doing some JV deals in the future? I am interested in the Tyler,TX area.

    1Reply
  • Tommy Ricks
    Rental Property Investor · Warner Robins, GA · Member since 2018 · 10 posts · 3 votes
    8y

    Absolutely. Let’s talk.

    1Reply
  • Devin Morgan
    Baltimore, MD · Member since 2014 · 91 posts · 49 votes
    8y

    R.I.P to her...

    1Reply
  • Erin Elam
    Little Elm, TX · Member since 2014 · 356 posts · 47 votes
    8y
    Originally posted by @Account Closed:

    @Ember Meadows

    In the buyer section of the contract, I write

    ABC Fund, LLC &/or assigns

    When it comes to "opening title" I then take the contract to the title company that I wrote into the contract with the earnest money check made out to them. I always do options so I make sure to give my option check to the motivated seller the day I sign up the deal. 

    It takes 3-5 days where I am for a commitment to come back, assuming it is clean, I do the following three things:

    Take the original contract, cut a tiny strip of paper and scotch tape it over the price and make a copy. Now I have the contract that my new buyer will have "attached" to them through assignment but without a lower price than they are paying. Anyone who says it is okay to let the other side know what you are making has not dealt with dozens of assignments for large chunks. You do enough where you make 20-25k per assignment and you will get the investor who can make things messy. May or may not blow up your deal but it's much easier if...

    Meet the investor with a clear title, a copy of the contract the investor that is being assigned (you can even meet at title so they can confirm that it is the contract), and an assignment form. My form ONLY has their total price, is 1 page, and is one that a former President of a large title company helped me create years ago. The assignment form has worked everywhere.

    Have the deal in my LLC. Investors will buck and pout because they really want the money to go to title where it won't be as easy for you to access it if they cancel- they will try to get it back. Large title companies will "accidentally" release to someone who is a legitimate player when they know the broke wholesaler is not. So now, if I meet up with the potential buyer, I have the assignment form, the contract, and they have to make out the $5000 non-refundable earnest money to my LLC if they want the deal. I tell them, "this is how it works if you are a builder, we aren't agents representing homeowner clients, so if you want to take my place on this contract and have the right to purchase, the check needs to be made to my LLC.

    Good luck

     Hi,

    Can you please explain the difference between the 3 checks you mentioned: option to seller, earnest to title company, and non-refundable deposit to you? 

    Who pays the earnest money to the title company? And why?

    Thanks to anyone able to answer this! :)

    0Reply
  • Rochelle Marie
    Member since 2019 · 1 post · 0 votes
    7y

    @Timothy Rogers Thank you for the informative information! Can you email me copies of those contracts also? I greatly appreciate it! 

    0Reply
  • Jimmy Timmons
    Member since 2018 · 1 post · 0 votes
    7y

    @Timothy Rogers 

    could you send me a copy please, it would be greatly appreciated

    0Reply
  • Lydia R.
    Investor · Austin TX · Member since 2016 · 1k+ posts · 2k+ votes
    7y

    @Erin Elam

    Option money to seller is what you pay for the right to cancel the contract for any reason within the designated time frame

    Earnest money is what goes to the title company as your good faith deposit that is meant to show that you are serious about closing the transaction. Typically when wholesaling this EMD is not a whole lot of money.

    Non Refundable EMD is what some wholesalers require from their buyers. Some wholesalers insist that money should be paid directly to them. Personally I require they give the money to the title company and it is refundable in the event I cannot deliver clear title.

    Hope this clears it up for you!

    1Reply
  • Todd Coleman
    Wholesaler · Austin, TX · Member since 2019 · 4 posts · 0 votes
    7y

    New to industry so sorry for nube question but what prevents a buyer from going over your head and getting info on property and speaking directly to your seller about a deal? 

    0Reply
  • Linda Osborn
    Real Estate Agent · Austin, TX · Member since 2016 · 111 posts · 64 votes
    7y

    Hi Todd, welcome to BP! 

    In response to your question (1) hopefully a contract (if you're an investor) or (2) if you are or have an agent, a listing agreement. To be really safe, if you have a contract you can record the contract with the county for a few $$. The contract is legally binding, and if that happens you'd have to prove that you were under contract with the seller when the buyer approached him/her. Also, many (but obviously not all) sellers don't really know what to do so the buyer would have to convince them they do know what to do (with regard to paperwork, money, and legal issues.) Other than that, nothing really stops it from happening. Which is why you'd want to get the property under contract asap. 

    0Reply
  • Itziar Ramirez
    Member since 2023 · 1 post · 0 votes
    3y

    for title company when closing the deal do I need to be at the title company with the seller and buyer in person???

    0Reply
  • Jeremy RIvera
    Member since 2019 · 1 post · 0 votes
    2y

    Who acts as the settlement agent in a wholesale deal 

    0Reply
  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    2y

    @Jeremy RIvera All deals you do should go through a title company or an escrow company. Local investors or agnets that work with investors will know who to go to.

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