All Forum Posts by: Ted Akers

@Keith Goodwine

I am not aware of any law that made double closings illegal, per se.  Reality is that most, if not all by now, national title underwriters will no longer allow it.  I think it is for three reasons 1) from a business perspective they see many more deals fail to close versus their traditional business, 2) there is some argument that if you are not bringing your own funds, or borrowed funds, are you as the buyer really legally able to close the purchase, and 3) the question arises as to whether you are brokering without a license.  Title companies have continued to be more conservative if there are any legal questions.  I do not see them reversing this trend and loosening the reins in the near future.

Hello @Larry N.

Yes, the Seller can dictate their terms and can refuse to close when they realize the deal is being assigned; BUT Subject To whatever the contract says.  If they refuse because they are angry about just hearing about the assignment how likely is it that you are going to force them, or sue them, to compel them to close?  Most people say that a contract is assignable, UNLESS it specifically precludes assignment.  I have never had an attorney give an opinion on that.  However, if the Seller tells title they are not going to close the title company is not going to hold their feet to the fire and argue contracts are assignable unless assignment is prohibited.  Title is rarely going to get involved when a dispute arises.  So, that leaves it to you to either convince or compel the Seller to close.

Most wholesalers I have experienced do not disclose that they must find a buyer in order for them to purchase from the Seller. I personally think it is not good business to tie up the seller's property unless you have a strong chance of closing on it. HOWEVER, I am a transactional funder so have seen many deals and can say that the most experienced and successful wholesalers I have dealt with are straight forward with the Seller. Obviously they must have a good pitch to the Seller such as "I do this full time - it is how I make my living", "I have a substantial list of investors who can pay cash", "this structure avoids realtor fees and the many showings you will have to accommodate if you list your property on the MLS", "this allows you to sell without making repairs".

Most experienced wholesalers put in the additional provisions section of the contract "Buyer intends to resale this property for a profit".  Will these types of disclosures lose you some deals? - likely yes.  Are  these disclosures more likely to protect your backside and avoid sellers bailing when they realize the deal is being assigned? - absolutely.  The resale for a profit language should be in all Short Sale transactions.  More and more states are also taking a position that wholesaling (via assignment) is brokering real estate without a license.  Check with a competent real estate attorney in your state.  If it is an issue in your state you can purchase with your own or transactional funds and avoid the selling without a license question, and avoid assignment and disclosure of your spread or assignment fee.  If this is your preferred route the obvious downside is that there are fees involved with transactional funding or opportunity cost if you are using your own funds.

@Wade Stahle

If you assign the buyer knows what you are making because you are assigning your rights under your purchase contract to them.  Thus, you are showing them the actual purchase contract and disclosing what the spread, or your fee, is to them.

Hello @Karen Tinley

@David Dachtera post is right on regarding short sales.  The short sale bank will not allow assignments so you will need private or transactional funds to purchase it before selling it.  You will likely see restrictions in the short sale approval precluding you from reselling it for 30 days, or if you resell for more than 120% of your purchase price then for 90 days.  This holding period does pose an issue for most transactional funders.  Title companies will also not allow use of the end-buyers funds to close on your purchase.

The short sale bank will require that the property be listed and you will need a realtor to represent you as buyer.  Try to find one very experienced in short sale negotiations and willing to work negotiating a discount.

Transactional Funding could have avoided this situation.  The fees can be a bit of a bullet to bite when the wholesale fee is small, as in this scenario; but the seller would have seen you going into title and need not be aware that you are reselling the property.  You have a great attitude about learning from this situation and continuing to educate yourself.  Push forward and best of luck.

@Nicole Martin

I am also in Denver. We all know this market is red hot and difficult to get discounts. That said, you seem to have a good handle on your numbers. Congratulations on finding this one off market. A hard money lender is going to look for you to have some "skin in the game" and the lenient deals out there are around 70% of ARV so possibly around $90K from you. Wholesaling using transactional funding could be an option. Experienced rehabbers would like more of a discount but also can likely reduce your estimated renovation costs and are having to work at lower margins in this market.

Feel free to PM me if you would like to discuss transactional funding.

@Ken Reed,

I have funded several transactional deals in Georgia.  I am at 1.75 pts. + $495 for back-to-back deals.  For smaller deals you will see minimum fees.

@Jay Hinrichs

That is a good business model and process to provide you the ultimate protection, and to avoid the time and expense of foreclosing.

@Isaac Blocher,

Sorry, I do not mean to be hijacking your thread here.  Jay's question started in another thread and I should have responded to it there.

Hey @Jay Hinrichs,

Yes, you did fast forward; but in doing so provided yourself the ultimate protection.  Nice job protecting yourself.  From a transactional funding standpoint one consideration is avoiding transfer taxes where they are charged and if they are significant at all or not.  So the Deed in escrow avoids some costs but also takes another step to be as protected as you were.

I was in the mortgage business for about 15 years, and multiple title transfers do catch the attention of underwriters - from back in the days of fraudulent flips with inflated appraisals.  A larger consideration for me when mortgages are required for the end-buyer is the general requirement for at least 90 days of title seasoning.  I used to do more deals with mortgages involved, but they are more challenging these days.