I was browsing some real estate sites and found what lookes to be really good information. A couple investors posed some questions to this person (named Matt) who does a lot of real estate deals. Here is the questions and great answers he gave them....
Question: At what point do you ask the buyer or investor to sign a non-refudable check over to you?
How to Take Deposits
When selling your contract what is the best way to take assignment fees? Okay, you have to realize that the business of selling contracts is all a negotiation. You want all of your money up front and let them hold all of the risk to make sure it closes on time or they lose their deposit. On the other hand they want to give you nothing at the time of the assignment, hold any money with their attorney and have the entire risk lie with you that they end up closing on time and don’t blow the deal with the seller during their inspections.
The next question is how much of the assignment fee do you ask for up front? Again, I like to get all of it but for several reasons maybe you cannot. Your price, property or location may not be that good. A good analogy is if you purchased dollar bills at $0.50 and were selling them at $0.60 it wouldn’t matter if you were in the middle of the worst neighborhood you would still have takers. However, if you had the same $1 for sale at $.85 and there was significant risk involved in picking them up you would have to sweeten the deal in some way to attract buyers.
A good rule of thumb is “He who controls the money controls the deal.”
Often times it is better to give the property back or renegotiate the deal than to accept an offer that you feel is not going to work.
On a decent assignment form, all deposits are non-refundable. Well, that’s fine if they are willing to write you the deposit in advance but what if they insist that all of the money go into escrow. Putting money into escrow really isn’t putting any money up on the property. If both parties do not agree to release the money, it is never released. If you feel the money should be released to your company and they do not, duh…duh…duh…dah. It is off to court you go.
By using an Escrow Release form (consult your attorney) they are agreeing that at the time of the assignment the assignment fee placed in escrow is fully earned and unless we cannot produce clear title, the money will be released without any further signatures. Our attorney drafted the one we use and it contains all of the proper legalism.
Question: So is it a good idea to have the non refundable check put into an escrow account ?
If possible the non-refundable check should always go into your bank account.
If they refuse, it can then go into an escrow account.
With an Escrow Agreement, that money is yours...so long as you provide clear title.
Get this document in place and your life will be happier and less stressful.
Don't put it in place and you will always be stressed about the closing.
HE WHO CONTROLS THE MONEY CONTROLS THE DEAL...don't ever forget that.
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