Wholesaling Real Estate Contracts
When it comes to wholesaling real estate contracts, you have a variety of options at your disposal.3 min read
When it comes to wholesaling real estate contracts, you have a variety of options at your disposal. A contract assignment occurs when you find a property that a seller wants to sell far below market value. You may then resell that property to another buyer, which is normally a real estate investor, at a much higher price. First, you must be aware of a key definition:
- Motivated Seller: An individual who wishes to sell a property as soon as possible.
A motivated seller may wish to sell a property as quickly as possible due to an emergency situation. You must know the property category your seller falls under when it comes to handling a property that’s for sale. It’s also worth noting that there’s no timeframe to finalize a sale.
You can spot a motivated seller by searching for the following:
- Need to sell
- Moving out-of-state to care for sick family member
- No other family members in area
On the other hand, a seller who only wishes to sell a property sounds different. For example, such a seller may be curious to see how much his or her home is worth because that person may intend to sell it the following year. A seller who is merely curious is in no hurry to place a property on the market and is merely testing the waters to see how much he or she could get out of selling the property.
You can find motivated sellers through the following methods:
- Newspaper ads
- Internet marketing
- Mail marketing
You should also use a combination of the aforementioned strategies to get the best results.
Real Estate Contract Process
You can find a variety of different contract templates on the Internet, but ensure that an attorney approves the contract before you use it. One reason is because you’ll know for certain that the document is legal, and you can use the services of an attorney in the event of litigation.
When you get the signed contract, you get an interest stake in the property and have some legal authority in the direction of the property.
If a seller inquires about an “and/or assigns” clause, tell them that your organization purchases many houses, and that your organization has funding partners in your network.
The process for submitting a title may vary in each state, but a closing attorney or a title company normally conducts the title search.
Finding an end buyer can be a harrowing task, but once you have a buyer, you can begin to close the transaction. Finding the right buyer and assigning the contract is where marketing is crucial. You should find a buyer through the following means:
- Craigslist ads
- Email marketing
Once you find a buyer, request an earnest money deposit that’s non-refundable. Requesting a deposit brings you one step closer to closing the transaction, and it shows that the potential buyer is serious about the property. The earnest money amount depends on your judgment, but the amount should be within reason.
Telling a client that you would only get paid when the buyer sends over the funds is what many want to hear. The money will cover what you said you were going to purchase from the seller, including your fee for putting together the transaction. For instance, you told a seller you purchased a home for $45,000 and sold your interest in the property to another buy for $50,000. Your assignment fee would be $5,000.
- Note: Standard assignment profits usually amount to $5,000 or below
If you find yourself comfortable with the buyer and seller, you can assign the contract for a higher fee. If you are not comfortable with any party during the transaction, conduct a double or simultaneous close to keep both legs of the transaction anonymous.
Not all title companies will agree to a double close, which is why you should discuss such a scenario in advance. Further, REOs and HUD-based homes may be a barrier when it comes to achieve such a transaction. Contract assignments cannot be completed for all transactions.
To learn more about wholesaling real estate contracts, submit your legal inquiry to our UpCounsel marketplace. UpCounsel’s lawyers will help you in areas pertaining to real estate and drafting a sound contract that a buyer and seller can understand and agree to. Further, our lawyers will ensure that the entire real estate transaction is legal and will safeguard you in the event of litigation.