Assigning To Other Wholesalers
By: Matt G.
Submitted: 12:12PM on Friday 15 August 2008
The author has permitted the reprinting and redistribution of this article.
ASSIGNING TO WHOLESALERS
As someone who has completed over 250 transactions in four states here is the rule on assigning to another wholesaler.
As a corporation we assigned approximately 20% of our properties to other wholesalers.
To answer your question as to whether you are selling the property too cheap, it depends. If you have twelve other buyers interested, maybe, but selling to other wholesalers gives you access to buyers on their list that you may not have access to.
Their buyer may live in the neighborhood or have a relative that they are trying to move into the neighborhood. They are willing to pay a sub-retail more than wholesale price for the property.
As long as your wholesaler fits a G.R.E.A.T. buyer description they will often be much easier to work with than the 'Rehabber'. See description of G.R.E.A.T.
There are three critical elements that you need to have in place in order to do this.
1. As much money as humanly possible up front. Their greed glands will usually put all of the assignment fee in your pocket if they truly have a buyer. Your assignment makes all deposits non-refundable.
2. An 'Escrow Agreement' that makes any monies put into escrow fully earned unless you cannot provide clear title.
3. An 'Affidavit of Interest' which prevents the title of the property from changing hands without you notarizing a specific release form at closing.
In addition to these three items the secondary wholesaler is given the option of giving you all of the 'Assignment Fee' up front or closing with your title company. Regardless of who you are selling to...you always want to use your title company. There are just too many things that can go wrong when you are using a company (and individuals) that you are unfamiliar with.
Talk to your title company about drafting an Escrow Agreement for you. It should run less than $400. One or two of the people selling info out there offer them as bonuses. We developed ours out of necessity having been burned for $5k deposits three or four times.
How can you get burned by another wholesaler?
1. They go directly to the seller and negotiate a price that is $3k above your contract price. If your assignment fee is $20k they will leave their $5k in escrow and fight you in court over it. You might be thinking, "they will lose, they circumvented my deal". True, if it is them that circumvents. Usually it will be a business partner or an end buyer that does the dirty work for them.
2. They can't find a buyer to take it off their hands. They got excited because the deal looked good and when they blasted it to their list their was zero takers.
3. Their buyer cannot close, for whatever reason. Generally they will carry the closing out to the very last day and then drop the property back in your lap. Unless you are really well financed AND the property can absorb a double closing.
If you need help putting together a buyers list, please search for the post for Finding G.R.E.A.T. Buyers
Hope this helps,
"THE ARCHITECT OF YOUR DESTINY IS YOURSELF"
"SUCCESS WALKS HAND IN HAND WITH FAILURE"