The Ugly Side Of Wholesaling Real Estate And How To Avoid It | Blind HUD | Double Close
#WholesaleRealEstate #DoubleClose #AssignmentFee
Mondays with Daniel - Daniel Moore
Daniel explains how to mitigate assignment fee issues in wholesaling real estate. Outlining the different wholesale transaction options, he covers the pros and cons, the funding sources and the additional documentation necessary with each transaction type.
QUIZ
1.As a wholesaler, what are two types of “closes” you can do to separate the seller information and buyer information?
2.As a wholesaler, what should you do if you are going to receive a huge assignment fee?
3.What is another term used for Double Close?
4.What is one benefit of using an Assignment versus a Double Close?
5.If you are receiving a huge assignment fee, what is the best course of action?
6.What are 4 ways to fund a double close?
7.When doing a double close, how can the investor avoid getting “stuck” with the property is the end buyer backs out?
Daniel discusses how to mitigate any issues of the seller and buyer knowing the assignment fee. As a wholesaler, explain how you do business, you do not have to disclose your profit. Grocery stores don’t list their profit on your receipt.
Wholesale Transaction Options: Daniel discusses the pros and cons, the best funding sources and the additional documentation needed with each of these transaction options.
-Assignment of Contract
-Double Close
-Purchase Outright
Assignment of Contract: The wholesaler secures a contract with the seller, then finds an end buyer to purchase the property. The wholesaler gets an assignment fee for finding the property.
Pros: You are never part of the title, therefore not subject to future recourse
Cons: Seller or Final Buyer knowing your profit (assignment fee) could kill the deal.
Funding: Funding is not necessary for this type of transaction.
Additional Documentation: Blind Side HUD, Blind HUD, Split HUD
Double Close: This type of transaction involves the wholesaler buying the property from the seller in one transaction, then selling to the end buyer in a separate transaction, usually all within 48 hours. Also called an ABBC Transaction.
Pros: Avoids seller or buyer knowing your profit (assignment fee)
Cons: Transaction costs double, you are now part of the title and are subject to future recourse.
Funding: Dry Funding, Transactional Funding, Double Close Full Disclosure, 48 Hour Loan from Seller.
Additional Documentation: Addendum with multiple acknowledgements.
Purchase Outright: Buy the property, then sell it. This would be the best option if you would be receiving a huge assignment fee or profit.
Pros: Do not have to disclose your profit.
Cons: You are part of the title and are subject to future recourse. Must have funding to purchase the property.
Funding: JV, partner up with someone. Always do proper due diligence and have your interest protected before partnering.
Additional Documentation: Any legal documents for partnership, tax liability, etc.
***HUGE TIP: To avoid getting “stuck” with a property in a double close transaction, have the seller close first, buyer to close an hour later, then you, the wholesaler come in last and sign. Never sign until the buyer and seller have signed their contracts and the account is funded.
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