Who pays closing when working with Wholesaler?

Question

The last several Wholesalers I’ve worked with had the buyer pays all closing cost in their canned contract as though it’s a given rather than negotiable.

So my question is, is it common practice to just assume buyer pays closing when working with a wholesaler?

JC Wu · Answer

I just sold my rental in Jacksonville FL to a local wholesaler (closed yesterday). The buyer/wholesaler paid all the closing costs. The only thing deducted from the gross sale price for the seller/me is the prorated property tax of this year. What I learned from my experience is that you gotta be extremely careful with the wording of the provision regarding closing costs in the purchase and sale agreement. In my case, the original wording in the PSA was "Buyer and seller agree to pay customary closing costs." I caught it and brought it to the buyer's attention. The buyer assured me he'll pay all the closing costs and their company website also states they'll pay all costs. So he changed the provision to "Buyer will pay customary closing costs." During closing, the closer from the title company sent me the ALTA Settlement Statement and I was shocked to see ~2K in closing costs deducted from the gross sale price, including over $600 of the title insurance premium. I called the closer and told her she must have made a mistake in the calculations or misread the PSA. She said the wording was vague and subject to misinterpretation. She interpreted it as since buyer pays customary closing costs, and it's customary in Jacksonville for buyers to pay part of the closing costs, so that means the seller should cover the rest of the closing costs. I then contacted the buyer/wholesaler in panic, thinking it must be a contract trap, to which he said he'll fix the situation right away and let the closer know he'll pay all the closing costs. Luckily, this is a legitimate wholesaler and it closed as expected. So in conclusion, if the buyer agrees to pay the closing costs, make sure it says "Buyer will pay ALL closing costs" on the PSA. Don't leave any room for misinterpretation.

Jason D. · Answer

@Mareno Rathell everything is negotiable, but the reason for that is that they dont own the property and simply assigning a contract. They have already agreed to a contracted price with their seller so that is why you end up paying all of the closing costs. And it's likely that the wholesaler has no money to their name.

Ned Carey · Answer

Legally, yes you can, IF your buyer agrees. But most buyers won't agree. Some wholesalers suggest you get at least as large an EMD from the end buyer as you paid the Seller. That is not necessarily the full amount of your fee. Of course a smart buyer wouldn't do that either. They would give it to the title company. Keep in mind that even if you get money before settlement you better not spend it. You may need to give it back if the deal blows up.

Ned Carey · Answer

@Jay HinrichsI have to disagree with you on this one. The board of Realtor contracts that I am familiar with are poorly written an extremely verbose. It takes a paragraph to say what can be said in a sentence and a page to say what can be said in a paragraph. Few actually read the thing, and fewer understand it. That would include a substantial number of agents. (the 80/20 rule. I am not talking about the top 20% here)Yes you or I can understand them but they have no less legalese than my two or three page contract. Those contracts are NOT consumer friendly. I look forward to the day when a judge says "I am sorry Mr businessman, your 50 page disclosure is not valid. It did not disclose anything to the consumer because you know nobody has ever read it.

Yannik Cudjoe-Virgil · Answer

Negotiable. I tell the seller i will be all closing when I want a lower price. Hope this helps

LaRaye Alderman · Answer

I would like to know as a new wholesaler, when I assign a contract and the proof of funds are presented, can I collect my fee then or should I wait and go to settlement to collect? Please help me with this, I am hearing different answers.

LaRaye Alderman · Answer

Thanks BP family, I am a new wholesaler in the Baltimore, MD area and the information given was well appreciated.

Jack Bobeck · Answer

@Jay Hinrichs I've seen some wholesalers write the deal on a napkin. Often times a wholesaler is the least knowledgeable one in the room, so whenever I buy from a wholesaler, its worth having a professional review and cover my rear.

Jay Hinrichs · Answer

ya if your not using standard board of realtor Purchase and sale agreements. you need to read through them this is not that complicated.in the real estate board contracts these are clearly spelled out and are check the box items..

Jack Bobeck · Answer

If you do not have a Real Estate Attorney working for your team, then Buyer/Seller beware, its worth it to have them read over the agreements and make sure they are done right.