Negotiating a Wholesale Assignment Transaction

[Alexandra King]

Hi "Savvier-then-me" Investors,

I'm a SoCal investor (wholesaler - only cash sales, no double closes) and have a question about the assignment steps in a wholesale deal, as I have conflicting data about how the procedure is negotiated during the assignment. One school of thought says that you don't have to put down a EMD to put the property under contract for an end buyer; that the ends buyer does this. This means you need an end buyer ready-willing-and able as soon as the property is found. As far as I am concerned this makes me just a Bird Dog, not a wholesaler. Another says you do have to put the property under contract with an EMD and you have 36 hours to do this and to get it to title where the property will be checked for liens and all financials clarified. Then, you search for the end buyer and, once found, get the EMD back + your fee. Which is true? Thank you, Laurie

[Belinda Lopez]

If the deal is good enough, you should be willing to put in $50 or even more depending on what you're willing to lose and what the Seller will accept for earnest money. If you do have an end buyer in place quickly, then you can use their earnest money to secure the contract.

In most cases, I negotiate as low an amount acceptable to the Seller, then immediately get it to my 'investor-friendly' Title company to start working on the policy. I've also done as much research on any potential road blocks like outstanding liens, back taxes, inheritance issues, etc. then I start blasting to my buyers and everywhere else.

One thing I've also added to my updated Assignment of Contract contract is that if the Buyer cannot close on the property for any reason, they must Assign the contract back to me at the cost of $1.00. This helps cut off any attempt by the Seller or buyer to try to go around me. I've only had this happen to me once but seen others go through it. I also make the Buyer pay me at least $2k not as earnest money but as a partial payment of the total assignment fee. I get this upfront when they sign the Assignment and it's only refundable if a clear title cannot be provided. The balance is due at Closing. This vets your buyers very quickly. Good luck!