Ordering a home inspection and closing process in wholesaling

[Armand Farr]

Hey guys,

I'm gearing up for my first wholesale and I've been trying to understand the home inspection/closing process. A few questions:

1. Would the buyer order the home inspection to ensure that there are no major structural defects in the property (ie: plumbing)?

2. Further - if the buyer backs out after I've initiated the double-close, how would this affect me? Would I get the contract back or would the entire deal not go through?

3. When doing an assignment or double-close, do I take the deal to the title and escrow company or is that the buyer's job?

Thanks BP!

[Andrew Brannick]

@Armand Farr 

You want to set yourself up to succeed! You want to put yourself in a situation that you are not put on the spot or hung out to dry. It is important to make sure that you structure your contract to help you out in all these scenarios. 

1. If you were buying a property, would you want to get a home inspection? I go in assuming that the buyer is going to want to do a home inspection, and have his contractor come look at the property as well. When you are negotiating with the homeowner you need to look to do 3 things; Access, Time, and Price. Access- You will need to make sure that you will be able to have your buyers come through the house. You need to tell the homeowner that you will have partners on this purchase and they will need to see they property before they make the investment and commitment. (This ties in a little with your second question) Time- You will need to make sure that you have an inspection period! Let the homeowner know that you will need to have this inspection period in order to do more research on the comps and have your partners look into the deal. Try not to have an inspection period for less than 10 days. The ideal amount of time for an inspection period is 15 days, or longer if you can get it. During this time you will need to secure a buyer, have all inspections completed and be ready to coast to the closing. If you are unable to find a buyer during your inspection period you should cancel the contract. The homeowner will be a little upset but they will usually be pretty reasonable because you set the expectation that you could cancel during this timeframe. If you cancel outside the inspection period, watch out! People can get pissed! Price- get a good price! You can try to renegotiate during the inspection period and cancel if you can't get the price that you need to sell the property.

2. When you have a buyer set and ready to buy the house, you need to make sure that they put in a non-refundable earnest deposit. This deposit is usually between 3k and 5k to make sure they don't back out of the purchase. If the buyer backs out and doesn't follow through with the purchase, you will keep the earnest deposit, it does not go to the homeowner! If you are unable to find a replacement buyer in time, you will have to cancel the purchase of the house. The homeowner will likely be super pissed. Let the homeowner know that your partner backed out and you are unable to move forward. You will lose your earnest money, but that will be that. I have had a few people say that they were going to sue and whatnot but it never happens, like ever! After the contract expires you are no longer obligated to purchase the house.

3. Immediately when you have a completed contract take the contract to the title company and let them know that you will be working with them on this property. Do it right away, do not wait till you have a buyer. As far as earnest money goes to open escrow, you should do what I do with the wording; Earnest money due before the end of the inspection period. This way you will be able to have the end buyer's earnest money in to cover your earnest money as well. If you don't find a buyer, you will cancel in the inspection period and not have to worry about putting the earnest money in.

*Make sure you know that your title company can do a double-close and assignments. Some title companies won't do it. Also, make sure you know a title agent that you will likely be working with. I use an app that will scan the contract and put it into PDF format, you can then send the file to title and you will be done!