All Forum Posts by: Jesse LeBlanc

 Not quite sure what you mean by wholesale dealer, but chances are no one is going to connect you to their seller that they are under contract with.  I suggest you read the book "If you can't wholesaler after this, i've got nothing for you" by Todd Fleming   He's a great friend of mine but it's the #1 wholesale and likely real estate book on amazon.  that will really help answer so many questions you have and understand the terminology real quick. :)

Re reading your question, If your wholesalers has a deal under contract and selling to you, IF they want to double close then you will only pay for your purchase closing costs. If you have a buyer and you want to joint venture with that wholesaler who is direct with the seller, then you guys can do an assignment of contract from the wholesaler to you, then from you to your end buyer and there is only 1 closing your end buyer will pay closing costs on. But if your wholesaler wants to double close, then they will pay for their closing, then you can assign your contract to your end buyer and the end buyer pays their closing costs while you are merely a line item on the HUD and collect your spread without having to go through a separate closing.

@Maddy Lakshmanan a double closing generally isn’t required. One could assign their contract to their end buyer.  But if you do, then generally you would pay for your side of the closing costs, when you buy the property.

It’s easiest to find a good referral for a title company or closing attorney from other local Facebook groups. Simply ask “who is an investor or wholesale friends closing company” and you’ll have a lot of ppl reply with their favorites and why.  

Very well said @Doug Smith

Only thing I'd like to add to the above is a little more basic info @Tim Murray:
-depending on your lender (% fee you'll pay to them for buy down, % rate drop, & prepayment penalty) and how long you plan on keeping a property will help to determine if the buy down is a good option or not

-Granted right now with higher rates than a year ago and the unknowns of where rates will be always make it more difficult to guess, so we often have to make some guesstimates and factor in how long we plan on holding the property you're getting a loan on.

-You'll have to do the math.  You'll want to figure out your "break even" point.  For example, no buy down might be at 7.5% interest 1% origination fee with 3, 2, 1 prepayment penalty.  Buy down might cost you something like 1.5% to get .5% lower rate.  So if you had a $100,000 30 year loan, you'd have $1,000 origination and monthly PI payments would be $699.21/month.  With the buyer down, you now have $2,500 in upfront costs but your interest rate is now 7% with monthly PI at $665.30.
-So you now have a $33.91 lower monthly costs, which means $33.91 more cashflow per month.
-it cost you $1,500 more for the buy down and it will take you 44 1/4 months or just over 3.5 years to make up the difference you paid before you break even

SO, if you plan on refinancing or selling the house in less time, then a buy down won't be beneficial FROM THIS STANDPOINT.  From a tax standpoint, interest paid is deductible, so it technically MIGHT (depending on your own business and taxes) could really be less than 3.5 year if you factored in the write off, but that's on another level. :)  Just stick with the breakeven part above generally to make your decision on if you want a buy down or not.  

AGAIN, each lender will have different rates and terms along with fees,  DO NOT just accept the lowest rate when they could have higher fees.

DO THE MATH

Friggen nailed it!  And I love the reminder about the miners, forgot about that, SO TRUE!  Gotta respect the wise as long as they aren't cheating, lying, stealing or have malice intention.

I concur @Jay Hinrichs!  I've been trying not to reply to so many posts about this, but also need to watch out for rookies to save them from losses.

The other thing I don't like is that so many folks interested in this usually have very little extra capital and could lose some or all of their "extra" capital on a bad wholesale deal if they made one mistake.  Super risky for an unexperienced person then nearly a waste of time for an experienced lender.

MOST wholesalers (my assumption) won't care about someone else's $ especially if there was no relationship before with one of these EMD lenders. They will be more focused on finding a buyer for a deal vs what date the DD ends and EMD is owed to the seller and most likely not be cancelling the contract or extending the DD to protect the lenders EMD funds. But that is another issue I have, finding a buyer AFTER you go binding vs having a buyer lined up first...but that's for another post.

Let's also face it, if someone doesn't have 500-5,000 in the bank as a wholesaler for EMD on their deals for their own business, another red flag.  I get the purpose, I understand how it can help some newer folks earn extra side money, BUT I feel like there should be way more discussion on how to protect the lender, how much time it will take, what all is involved, nuances, hurdles etc and discuss those more.  Unfortunately, this is generally catered more towards folks that don't know, don't care or too focused on a few bucks. 

Many I have seen have more of a Reward over Risk thought process, get $ quick mindset basically but don't realize the risk, time constantly following up and sleepless nights wondering and waiting all for a small fee. 

They could work with an existing lender, do some marketing to help broker, get a cut and make FARRRR more $ with zero risk vs this EMD lending.  Probably less time spent too and more educated borrowers over a wholesaler.

@Adam Macias Yes, both of my original long posts stated exactly what you just said in your last post. I agree, hints why I was trying to help others have the smoothest and easiest closing without double closing while explaining many what if's that could happen and ways around those hurdles.  You're still stuck on me being a lender for some reason and not respecting the entire educational post for others.  Oh yah, 100% agree about the end buyer, I also stated that in my original posts, don't work with someone like this.  Find folks you can have a mutually beneficial and long term relationship with.

@Adam Macias you clearly misunderstood and making assumptions now.

1) I never said you were a newbie nor would I care if you were.  Facts are facts
2) I specifically stated NOT to double close and methods to get around it
3) I also specifically stated that someone should be very transparent so there should never be any concern with your buyer or seller and not to double close, especially in this scenario (for MOST cases, especially if you didn't talk with the buyers lender ahead of time)
4) Everyone who reads this post SHOULD review both of my longer posts above, new or experienced, to understand the process more and step by step vs just your comment without explanation stating "biggest thing people need to understand is that 99% of the time a seller is not concerned, cares or even knows what an assignment fee is"  as there is more to that especially for a rookie.  They don't know what that means.  That also doesn't help or answer the question to the original post, may have nothing to do with the seller but 100% will potentially have an issue with the end buyers lender and losing the deal completely. 

I'm focused on adding value and explaining the process, the why and the what if. :)

@Lydia R. completely understand your concern, and as I said before it's case by case depending on ones relationship with each party.  At the end of the day, there should be no reason lie or deceive anyone to get a deal closed, and not saying you or I am but I know so many others intentionally lie to sellers to get a deal under contract. 

There are a few ways to protect yourself and make sure you still collect your fee, one is as simple as being the one facilitating the contract to both seller and buyer.  In the special stipulations BEFORE you send to your seller and buyer is that you write in that X amount is owed to you and to be shown on the sellers side.  It's as simple as that.  Then when both your buyer and seller sign the contract and you send to the closing company, there are no questions asked, you're protected and you get your money at closing and the end buyers lender can't say anything about it plus they won't know what the actual contract said anyway.  @Adam Macias the above paragraph answers your question about security and making sure you get your $

If your seller has a problem with your fee, then you clearly didn't have a good relationship or not transparent with the seller and you didn't set proper expectations from the start, thus causing a potential surprise later.  I know what you're thinking right now, what if the spread was such a huge amount.  If you then feel that to be the case, no need to lie, just find a 2nd option to still be able to close the deal, which might be to buy the property with your own capital, with private money or hard money then as soon as you own it and on the deed get an UPDATED contract with the end buyer now that you are legally the owner and have the right to sell and there won't be a problem with the conventional lender.

ALSO, i'm NOT saying that this is for EVERY lender either.  Hints why my original message stated to communicate with the buyer and their lender as MANY of them don't have a problem still lending once they know what you're doing and that you will legally be the owner at the time of the BC closing.  Once they understand that, then you should be perfectly find double closing without a hitch, BUT you want to know that first vs waiting until the day of closing and the underwriter realizes you aren't the owner and they stop the transaction until further notice.

I 100% agree that its so much easier with a cash buyer, buyer with private funds followed by hard money then conventional.

No, I don't offer any short term loans but do have friends that do.  They are still treated like normal loan and must be underwritten because there is no "guarantee" like a transactional loan because the buyer could easily backout or something happen after the first closing if both are simultaneous.  I've done this a few times and got burnt, waiting 3 weeks to 2 months to finally get the 2nd one closed out again after it was expected to just be 2-5 days after the first closing...THINGS HAPPEN

@Adam Macias about your next statement, you're talking about a BLIND HUD, thus not disclosing and otherwise hiding your fee from someone. That means you weren't transparent and afraid of losing the deal because of the money you're making. I've been there, I get it, but there shouldn't be any shame in creating a profit from SOLVING a sellers problem. They clearly were ok with the price you paid, it solved their issue and you're a for profit business. BUT I also get that in some scenarios it is best to simply double close (or in your market do a blind HUD/Settlement Statement and assign) to keep the deal alive and this could also be that your seller is fine with what you made but you have a buyer that is greedy and upset with your profit and could walk away (i'd never sell to a buyer like this anyway) so that would also be a great time to double close or blind hud as you do. and BTW, more and more states are stopping this from happening, so be careful not to only do wholesale deals one way or you may cause yourself some major problems down the road.

@Paul Ketchens ASSUMING you mean that the end buyer has a conventional loan, here is what I've done a LOT, and yes, it's more work but completely doable:

1) Since you should already be transparent with your seller and buyer, this process should be easy.  DO NOT DOUBLE CLOSE OR ASSIGN (in our world, you still are assigning, but continue following along and i'll be more clear).  Allow your buyer to go direct with the seller and on then either on the contract or on an amendment (or on an email with the seller and the closing team) you add your fee.  This way your fee goes on the seller side.  

So for example, you planned on buying the property from the seller for 100k and selling to end buyer at 115k.  You would draft up the contract for the end buyer in their name as the buyer for 115k, then on an amendment (or email with seller and closing team) 15k to be added to the sellers side as your fee, this way the seller still gets their 100k and buyer paid 115k.  What this does is STOP the end buyers lender from questioning anything.  

By anything, I mean DEPENDING on the lender, they will look at the current owner of the property and if you were double closing, they'd see the seller on the contract is the current owner and stop their loan.  Then if that didn't happen but they saw an assignment fee on the buyers side, they may not approve the loan to cover the assignment fee.  They DO NOT care what is owed from the seller, so your fee is like a lien basically and the end buyers lender doesn't care about that, they only care about the property and what the buyer (their client) is paying for it.

2) IF you tried to double close or assign the contract vs the way I explained above, then you MUST have the end buyer talk with their lender.  Explain what all you're doing and get approval from them first.  Sure, you could be opening up a can of worms BUT it MIGHT be better to find out they won't approve and they'd find out later anyway then stop the loan SOMETIMES on the day of closing!!!  Ask me how I know :)    Hints, for me I go with my first suggestion above so that A) I don't open up a can of worms B) waste time and cause extra work when it could have been solved day 1.

@Lydia R.This too will also solve your concerns so you don't have to pass up on a potential solid buyer, although it's case by case as you know!  You might have a conventional buyer but very very difficult seller, and even though this buyer might pay more, it's just not worth the headache so take less money and go with a different buyer. But yes, another way is to double close and use transactional lending which I offer, BUT I think it will be unnecessary expense and then too much risk in the event the end buyers lender reviews RIGHT BEFORE they send the wire and notice then backout and you're stuck with the property to find another buyer when it all could have been resolved from the start.

Greatly appreciated sir. :)  Have a GREAT week @Isaiah Garcia