Seller Wants Some Money Before Closing for Moving Costs

Wholesaling
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Seller Wants Some Money Before Closing for Moving Costs

Niklas Hilmoe
Akron, OH · Member since 2020 · 14 posts · 12 votes

What's your process in situations where a seller needs some cash before closing to help with moving costs?

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Tom GimerBusiness Member
DMV · Member since 2017 · 3k+ posts · 3k+ votes
4y

It depends on how good the deal is. Many times we've seen advances for seller moving expenses to be paid back on the settlement statement. The day of settlement the buyer does a walk through, confirms that the seller has vacated, changes the locks and proceeds to the settlement table. You can secure the $ with a confessed judgment promissory note. Killing a deal over a modest seller advance is short-sighted.

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  • Joe S.Pro Member
    Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
    4y
    Originally posted by @Niklas Hilmoe:

    What's your process in situations where a seller needs some cash before closing to help with moving costs?

     How much money? 

    We bought a house or two Where we did a hold back on quite a bit of the funds until we received Possession. Proceed with caution.

    3Reply
  • Brendon Pishny
    Investor · Olathe, KS · Member since 2017 · 123 posts · 99 votes
    4y

    @Niklas Hilmoe

    I’m definitely for giving some money at closing as part of the deal but never before closing. Just my opinion. If you do anything at least have it all in writing. If it goes bad you’ll have to sue to get anything back.

    2Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    4y

    They have zero credit cards? 

    Do they own anything you can “buy” at a discount and sell back to them at the same price after closing? (Car?)

    Is there enough equity you could have them sign a lien against the home for 2-3x as much as you “borrow” to them?

    Can You move the closing up and then hold back $10-20k and give them a couple weeks to move out at zero rent. And then the rent becomes very expensive after that to prevent holdover?

    3Reply
  • Mary M.
    Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    4y

    crazy idea, but can their agent give them some funds and have it repaid at closing? 

    3Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    4y

    I'm with the  others about not giving them money before you close.  They can put the moving van on a credit card.  

    2Reply
  • Niklas Hilmoe
    OP
    Akron, OH · Member since 2020 · 14 posts · 12 votes
    4y

    @Joe S.@Brendon Pishny@Bill B.@Mary M.@Theresa Harris Thanks for the input everyone. I can't do seller rent back with a hold back because this is a wholesale deal and my buyer wants the property vacant at closing. The only thing I can think of is to give him cash after my buyer gives me the green light on the deal and file a memorandum.

    I'll elect not to do so and stand firm on no money before closing. I do not trust this guy at all. Thanks everyone.

    2Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    4y

    If your buyer wants it vacant on closing, then tell him to put a larger down payment and treat the owner like a tenant and offer cash for keys-ie pay the owner/occupant to move and ensure the house is empty. Add a clause that if the home is not vacant at possession there is a heavy penalty.

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  • Michael Noto
    Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
    4y

    Thanks for clarifying this is a wholesale deal. I think it will help people with their responses. Have them borrow money from someone else, it doesn't have to be you. Right now they think you have infinite money because you contacted them out of the blue to buy their home, that is probably why they are asking. If they want to sell the home that bad they will figure something out that doesn't involve you. 

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  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    4y

    It depends on how good the deal is. Many times we've seen advances for seller moving expenses to be paid back on the settlement statement. The day of settlement the buyer does a walk through, confirms that the seller has vacated, changes the locks and proceeds to the settlement table. You can secure the $ with a confessed judgment promissory note. Killing a deal over a modest seller advance is short-sighted.

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  • Don Gouge
    Specialist · Johnson City, TN · Member since 2021 · 139 posts · 146 votes
    4y

    So what happens if you give them money and they don't move and refuse to sell? Are you prepared to go to court? How much would your legal costs be and how long would it take to get them out? Unless you and/or your assignee stand to make a massive profit on this deal, I would either flat out refuse or just move on. Some of the best deals you will ever make are the ones that you don't make.

    0Reply
  • Todor Ialamov
    Real Estate Agent · Burlington MA · Member since 2018 · 113 posts · 142 votes
    4y

    @Niklas Hilmoe

    I would may be do something like this only if it was part of the negotiations and helps get a great deal. If property is under contract already - no way!!!

    0Reply
  • Mary M.
    Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    4y

    wow, some of these responses are interesting. so I guess the question is - how much money is the OP taking to do this deal? I mean,  I am anti wholesaling (I think it skims equity from owners) but are you really going to lose this deal for a few hundred bucks?  I can tell you I have not blinked at 10k "gives" because  the sale was that good.  

    1Reply
  • John Teachout
    Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
    4y

    It would be a hard no for me. Too many uncertainties.

    0Reply
  • Account Closed
    Member since 2020 · 983 posts · 1k+ votes
    4y

    I gave the sellers money before closing, ended up going to court and it took exactly 5 years to the last day the court case was going to expire to settle the case. Their financial situation is not your problem and business should only be treated like you are doing business and not solving people's financial problems. You are not a bank and if they don't have a job they can get cash from, or friends, or relative, or get a payday loan, or can't get a loan against their car, or don't have a priest to turn to then why should you think you have to be their savior. 

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  • Niklas Hilmoe
    OP
    Akron, OH · Member since 2020 · 14 posts · 12 votes
    4y

    @Mary M. I understand your sentiment about wholesaling but I have to disagree. Wolesalers bring a valuable service to the marketplace by serving the portion not covered by realtors. This particualr property I posted about needs a wholesaler. It's completely trashed and full of junk and the as-is value is so low a realtor would not touch it because the commisions would not be worth it. A lot of sellers in distressed situations, how easy or difficult it may be, do not know how to connect their beat uo property with the right end buyer. Or, regardless of condition, they could be in pre-foreclosure and with an auction date a few days away because they were in denial and waiting to do something about it (very common). They're so many situations where a wholesaler is the best fit. Most people won't sell with a wholesaler, but the small amount that do get value by having their problem solved conveniently. The cash buyer also gets value because they get a good deal without having to spend the money and time to find it. Seller and buyer each get value which is why the wholesaler gets to make money.

    2Reply
  • Mary M.
    Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    4y

    I disagree with wholesaling for one reason only - its not on the open market where the price can be as high as possible. a seller will always make more if it is listed where everyone can see it.   wholesalers have no reason to make sure the seller gets as much as possible because  you want to sell it to one of your clients ....  its basically equity stripping and unfair and wrong.   

    1Reply
  • Joe S.Pro Member
    Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
    4y
    Originally posted by @Tom Gimer:

    It depends on how good the deal is. Many times we've seen advances for seller moving expenses to be paid back on the settlement statement. The day of settlement the buyer does a walk through, confirms that the seller has vacated, changes the locks and proceeds to the settlement table. You can secure the $ with a confessed judgment promissory note. Killing a deal over a modest seller advance is short-sighted.

    That’s is the first time I’ve heard of a confessed judgment promissory note. 

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  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    4y

    @Joe S. It's a promissory note which contains a confession of judgment provision. Judgment gets entered upon the filing of the suit for non-payment, so you get your lien immediately. Borrower has to work to vacate the judgment lien... if they have any defense.

    Perhaps this is not available everywhere, but it is where we do business.

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  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    4y
    Originally posted by @Mary M.:

    I disagree with wholesaling for one reason only - its not on the open market where the price can be as high as possible. a seller will always make more if it is listed where everyone can see it.   wholesalers have no reason to make sure the seller gets as much as possible because  you want to sell it to one of your clients ....  its basically equity stripping and unfair and wrong.   

    If a property has condition, occupancy or title issues such that that no reasonable REALTOR will list it... do you approve of it being wholesaled?

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  • Niklas Hilmoe
    OP
    Akron, OH · Member since 2020 · 14 posts · 12 votes
    4y

    @Mary M. Listing it on the market is the opposite of what sellers who work with wholesalers want or need: quick and convenient. "Why don't you list it with a realtor" is a question every single whoesaler who is worth anything asks the seller. I always explain that working with me won't get them the most money but I will make it very quick and easy. Mary, these people aren't stupid. they know they can get more listing it. But there's always a specific reason why they don't. You're applying your value system, i.e. get the most amount of money, to their situation. Again, most people will want the most amount of money and they should get the most, but sometimes they can't or don't want to.

    0Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    4y
    Originally posted by @Niklas Hilmoe:

    @Mary M. Listing it on the market is the opposite of what sellers who work with wholesalers want or need: quick and convenient. "Why don't you list it with a realtor" is a question every single whoesaler who is worth anything asks the seller. I always explain that working with me won't get them the most money but I will make it very quick and easy. Mary, these people aren't stupid. they know they can get more listing it. But there's always a specific reason why they don't. You're applying your value system, i.e. get the most amount of money, to their situation. Again, most people will want the most amount of money and they should get the most, but sometimes they can't or don't want to.

     I will take a stab at this, Mary can give her own answer:

    I hear it all the time, the wholesaler can make the deal happen fast and easy so that is why the seller wants to go that ave. and knowingly (supposedly) leave $ on the table. To this I call BS. Any agent worth their salt can list the property, price it under market, hold a 1 day open house and get multiple all cash offers into bidding wars, counter the best (or all) on day two/three, and go into escrow on day 5 for all cash. This process exposes the deal to the public and not just the one wholesaler's buyers network (which is miniscule in comparison to the public). I don't know anyone who would want to sell their home or any belonging for less than what they know/think they can get on the open marketplace. Any "emergency situation" by the seller can be handled be a legit and excellent agent just as fast as any wholesaler.

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  • Mary M.
    Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    4y

    @Tom Gimer  I dont know....  are realtors that opposed to working? I am in favor of the owner  understanding all their options and choosing which works best for them - *but* they need to know what the options are and how much it will cost them for each option. 

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  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    4y

    I've done this before. You don't give them anything before closing; you give them a few days/week/whatever to stay in the house after closing to move, with a significant hold-back of their funds due going into third-party escrow until they move. Last guy I think we were charging him $100/day to rent the house back, which ensured he got his butt in gear and got moving. He was broke as a joke and couldn't move until closing, so we had $5k of his funds held in escrow until we got the house back cleaned and undamaged. Worked out well. 

    If they don't have anything coming back at closing, this won't work well. They need to have decent cash coming to them for it to work because you need something to hold as collateral. 

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  • Yoann Dorat
    Investor · Boca Raton FL · Member since 2017 · 255 posts · 188 votes
    4y

    @Niklas Hilmoe I'm not going to jump into the debate value of a Wholesaler vs Realtor as this has been fought over too many times in the forums. 

    In regards to your main topic: I would do my best to avoid putting any cash upfront prior to closing, however, as a wholesaler, you're dealing with people in high financial distress and sometimes they won't be able to move before closing... simply because they can't afford it. We tried many different solutions over the years here are the 2 main options we provide within my company: 

    Option1: Give your seller 7 days to move after closing, this will give plenty of time for the proceeds to clear the bank. But in some rare cases, it can backfire if the seller refuses to leave. So I would discuss that with your end buyer and let him decide if it's worth the risk. there's no cost in doing that so it's probably the best option for all parties involved.

    Option2: I would never give a seller a lump sum of cash before closing (I'll be afraid they'll blow it off the same night) but we have a corporate account at U-haul and they can pick up a truck and get storage for up to 10 days free of charge (we take it out of our assignment fee). 

    Hope this helps,
    Yoann

    3Reply
  • Niklas Hilmoe
    OP
    Akron, OH · Member since 2020 · 14 posts · 12 votes
    4y

    Thanks for your input!

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