At last, today (May 24th) we closed on our first wholesale deal and received our first assignment fee.
Two months ago today (March 24th), we got the property under contract from a motivated seller and quickly followed the steps of finding a cash buyer. Our relative had helped connect us with the motivated seller, since it was his coworker who needed to get rid of his inherited property. We set the contract to close within 7-10 days after we made contract agreements with the seller, gave him a EMD of $5,000, but did not fulfill the task.
We agreed to contact cash buyers from cities that were closest to the property and then if there was no bite we would add the property on BP and market to other investors near us in LA. Perhaps we were too eager, since two days prior to the original closing date, we found a buyer from out of town that was eager to get the property from us. He was 1 out of 3 buyers we had called and was an experienced investor from Fresno. Over the phone, he seemed like a cool guy, but was unclear on his intentions for the property I was offering. He quickly got the assignment of contract from us and I was transparent on being a newbie wholesaler, perhaps a rookie mistake, but so be it. The seller and I had originally agreed to close at Chicago Title Company, but then the buyer insisted we close with his preferred title company. With little experience, I did not hesitate and agreed to change title companies. Unfortunately, there was a cancellation fee and out of courtesy, I told the seller I would pay the cancellation fee plus any additional costs he acquired for not having set up the transaction correctly. Fortunately, the seller just wanted to close and was willing to work out challenges to make the sale. The buyer set the date to close April 26th or sooner if he received all title info quickly to close the deal. April 28th came around and the original buyer told me his "partner" would need to close the deal, so I revised the assignment of contract and changed it to the new end buyer.
This is when my suspicion began to rise on whether he ever had intentions to close or if he was just another wholesaler. Weeks into May, still no deal had closed, which left the seller and myself growing weary if the sale would ever close. There was a lot of back and forth between, myself, seller, title company, 2nd wholesaler, and end buyer. I never had direct contact with the end buyer, but decided to just let the 2nd wholesaler deal with him since he had claimed to be his partner. I was doing my best to be patient but also push for the deal to close, since it seemed like time was just passing by with no action being done. I later found out the original buyer was a indeed a 2nd wholesaler, when the seller notified me he was signing documents and the final price had been set at 5K more than I had originally assigned the contract for. Though the original buyer/2nd wholesaler was not discreet on his intentions to wholesale the property himself, he still helped find an end buyer which I could not have much argument with, but still full disclosure would have been much appreciated. At that point, I just wanted the deal to close, especially since I was concerned mostly about the seller getting his funds.
There were a lot of lessons I learned throughout this wholesale process and many things I could have done differently, such as having more control of the sale or avoiding that 2nd wholesaler. None the less, these lessons will help me for future deals and I am just very thankful that the seller is happy and the end buyer will have a nice deal to flip. The 2nd wholesaler was not entirely honest, but he was not so bad to work with, after all the deal is complete. Many more deals to go!
*Property Details:
-3bd/2ba Single Family Home (1,821 sq ft. on 11,349 sq ft lot)
-ARV: $185,000+
-Rehab Cost: $50,000
-Small farm town in Central California (Lindsay, CA)
-Moderately distressed and ready for a rehab
-Located in a quiet and desirable neighborhood
*The Numbers:
-Under contract for: $80,000 (seller's profit)
-Assignment Fee: $10,000 (my profit)
-2nd Assignment Fee: $5,000 (2nd wholesaler's profit)
-Purchased from end buyer for: $95,000
*My Wholesale Costs/Fees:
-Cancellation Fee: $500
-Termite Inspection: $90
-Junk Removal: $200
*My final Wholesale Profit: $9,210
I also got my EMD of $5,000 back from the seller since he received full payment from the end buyer!
*Lessons Learned:
-Have more control of the sale
-Verify your cash buyers
-Be firm on closing dates
-Several other lessons
-Remain positive!
Happy Investing!
