All Forum Posts by: Ray Eason

Sellers with tenants they don't want to displace will often call the we buy houses ads or any investor marketing they receive.  They are hoping for a retail buyer with no discount AND not have to deal with their tenant.  Unless the seller wants to sell for $150K, they need to list the property and find a retail buyer. The tenant will likely need to move for the new buyer to move in.  The seller can set the terms of the listing to give the tenants more time, say 6 months.

 The seller is in fantasy land with a $270K house and $1100/mo rent.  

Hmm.  A $270K property with an $1100 rent.  That's a terrible, terrible deal.  What am I missing?

Hello everyone!! 

My name is Landon Cobb. I'm 20 years old. I recently moved from Louisiana to California to open my first storefront for my business.

In the process of everything, I have been studying real estate on the side and decided to get started with my journey.

I have particularly been studying wholesaling. I feel as I am ready to make my first deal but want to have a mentor before I begin.

If anyone has any directions to point me in, books to read,  any and all will be greatly appreciated. 

Cheers.

Landon

Ray

You say the title company will be chosen at the close of escrow, seeing as your in California most of your escrows will be handled by the title companies, so cover it up front, the title and escrow company shall be selected by the buyer, after all if title insurance is required the policy covers the buyer and they are the ones expected to pay for it so they should pick the company. your clause doesn't say who is going to do it and pay for it.

Sorry, I should have been more clear...

If you do a double close, you literally have two closings where you a principal in the transaction (buyer in one, seller in the other).  When you assign the contract, you literally have zero closes where you are a principal in the transaction (you are not a buyer or seller in either).  Technically, when you assign, there is still one close -- but you're just an observer in that closing (who gets a check), not a participant.

Ray 

Go back to square one. From now on just make sure to have something about the contract being assignable in your contract. I don't care about the legal argument and you think I would since I started out to be a lawyer before I changed gears. First, it was legal problems that prompted investors to start using and or assigns, so just make it clear up front I have a assignment clause whether other parties here think it is unneeded or not. plus I don't like the seller being taken by surprise when someone else shows up in his deal, that clause eliminates that.

Now the title company deal, if your not going to do a double escrow and the seller is not paying for the title search and escrow, why are you selecting the escrow company in the contract, just put the title or escrow company shall be selected by the the buyers in the contract. Since I pay these fees in my deals I just tell the occasional seller that objects that if he wants to pay the fees then I have no objections to his selecting the title or escrow company, and guess how many sellers have taken me up on that ?

The main reason for a double escrow is to hide your profit in the deal because it appears excessive and that is a good reason because if you think it is excessive it"s likely the seller is going to feel the same way too. Also there are other ways to have the seller avoid seeing your profit but I won't put those into your brain until your more experienced.

The question of when to try and find a buyer, that is easy, I'm thinking of the potential buyer when I'm dealing with the seller before I have even written the contract. As you grow you will have your buyers list getting bigger and have a few key buyers, ones likely to buy your deal now. In my contract I have the right to show the property to potential partners, owners, inspectors, and other people that may be needed in, or may become part of the transaction. And the right to place a key box (you can get at home depot).  

Once you have the property under contract you start contacting buyers, work your list and even maybe post a few free ads at sites like craigslist, first come first serve. Remember wholesaling is really a contract or control game. Once you have control it is go go time. Just remember you are selling contracts and like any other product if it is overpriced it is not likely to sell. 

What's customary is that the assignment fee is paid to you by the title company at the time of the closing.  It's the title company's job to collect all the money from all the parties, and to pay it out as the contract(s) specify.  There is an assignment contract that specifies that the buyer will pay you $X at closing, and it's the title company's job to collect that money from the buyer and pay you at THE SAME TIME as the rest of the transaction is closed.

This way there is no risk to either party.  If the buyer pays you the assignment fee an hour before closing and the deal deal close, he may not get his money back.  If he agrees to pay you an hour after closing, he may not do so.  Letting the title company handle all the monies ensures that everything gets paid as promised, and everyone gets their property as promised.

Your end buyer shouldn't be submitting any "offer" other than the price he's willing to pay for the deal you already have.  He's not making an offer to buy the house -- he's just making an offer to get control of the contract that you already have.  The question is, how much is he willing to pay to get control of that contract and is that enough money for you to relinquish control of the contract?

Yes, that's what I meant. I assume he's going to tell me if he will accept the price I have the contract for, or "negotiate" by submitting a lower offer.

If that is the case, then my assignment fee is what is being negotiated.

You're not selling/assigning the contract instead of using the title company.  The two things are completely separate.  The assignment of the contract is about who the buyer is.  The title company is going to close the deal regardless of which one of you is the buyer.

Yes. That makes sense. Thanks for clarifying.

Yes, you can open escrow now or later...up to you.  Just make sure you do it soon enough that they can get the deal closed by the agreed-upon date.

Yes. I gave myself, and the seller, a 60 day window because they need time to look for a new home and move. It also gives me time to find a buyer if things fall through with the current potential buyer. Thanks for the advice.

As for collecting your assignment fee, that will be handled with a separate contract (the assignment contract) which stipulates the assignment of the purchase agreement from you to the end buyer and for what amount.  That contract will go to the title company along with the purchase agreement, and your assignment fee will be paid to you at closing.  If for some reason the deal doesn't close, you typically don't get any money (unless the assignment contract specifies otherwise).

This brings up the original discussion. You stated "your assignment fee will be paid to you at closing." In a a previous thread, you mentioned "zero closing" for the assignment fee. By this, from what I understand, you meant using the Assignment of Contract directly with the new buyer. Correct? Is the assignment feed paid to me by the new buyer (at or before closing?) or by the title company, at closing. I'm a little confused here.

A double close is completely different.  A double close is when you purchase the property and then turn around -- after you purchase it -- and resell it to the other buyer.  If that's the case, you will remain the buyer on the agreement and you will be responsible for purchasing the house, as agreed.  

That was not my initial understanding of the double closing. I guess to keep things simple, I will not be doing a double closing as I am not purchasing the property. I have not organized funding to purchase directly.