Assign or Wholesale

Ok this part is tricky as well, but here goes. There are two ways to sell a house to your buyer in a wholesale transaction;Either assign or double close.Basically, on an assignment you are assigning your right to purchase a property to another investor for a fee. This is a way to go with your transactions, but I think there is a little catch in there personally. I have always tried to be open with investors when selling properties, but it can come back to bite you. Ask yourself what amount would you be upset about seeing on the HUD if you were purchasing a property from a wholesaler. The concept behind this part of the wholesale business goes back to the relationship part I talked about yesterday. If you have built relationships with your buyers, you will know what they want and they will know how much you work to get them the deals that they are looking for, which justifies your fee. But human nature is to ponder on what if’s. if you had not charged them 5k and only charged them 3k they would have made 25k instead of 23k. Woulda’, shoulda’, coulda’ syndrome right? Your goal as a wholesale is for your clients to appreciate what you bring to the table and not care about how much your fee is. This is done by only giving deals in the price range that they are looking for. If they are buying from you on the first few deals at 70% consistently, then they will expect that LTV, and at some point they will not worry about your fee, because they know where to come to get a house. Eventually their rationale will be if it is 70% who cares what you make. This is a building situation, and will not happen in most cases on the first deal. A lot of investors must be conditioned to deal with wholesalers, because it is not sexy to talk about and the gurus don’t preach to buy from a wholesaler to get your feet wet and get in the business. So here is my personal guideline on assigning fees, if my fee is under 5k on a house worth less than 80k then I assign the property. One clear cut advantage to assignments is the lack of costs to you the wholesaler. You will place your assignment fee on the HUD directly and that is what you will receive at the closing. No extras or hidden costs. Neat and clean, except for the part where you will sweat your butt off until the closing is over and you actually have the check in your hand.On double closings, which is how we close most of our deals, you will close with the seller first and then the buyer next. This is normally done around the same time and in two different closing rooms to make it suspenseful. I actually prefer to do one of a couple of things; first I like to close my deals opposite from normal and make my buyer come in first and put his money on the table and then I bring in the seller later in the day. I do this because now the funds are liquid and my closing attorney does not make me bring in a cashier’s check for my part of the closing (I really like that part the best). Next, I use a little trick my friend Scott Britton taught me and use a flying deed. No I don’t make it into a paper airplane, but I have the seller deed the property directly to the buyer! Think of it this way, if would like I can add anyone in the world to a deed of a property that I purchase, for no reason, and without explanation. That being said what is different from just putting it straight into someone else’s name instead of mine, even though I am technically paying for the house. I have found that there is no need to go on title of a property unless you have to. Nothing good comes out of owning a property for an hour or two, except confusing tax situations and bills, etc. Now what about costs though? Well you will increase your costs by double closing. You will have at least two closing fees, and deed fees etc. however there will not be a disclosure on the HUD of what was paid for the property like there is in an assignment. If you are in a disclosure state your client will eventually be able to find out what was paid, but at that point it will be over. Also unlike in an assignment, your seller will not know what you are making off of their house either. Sometimes that can be a barrier to completing a deal, when a seller sees that you are making a certain amount of money off of a property but told them you could not give them over a certain amount of money, you could have a problem. Remember, they don’t have to sign in the assignment closing, but they don’t know any better in the double closing. Your margin takes a hit, but it is easier to mark it up to a level that is better for you. To let you know how these transactions go down, let me give you a little timeline illustration of what is possible. First you get the lead and run the comps on the property. You check your database of investors to see which ones like a particular area, and you now have an idea of who may be interested before you even go out to the property. You go out and negotiate with the seller, and make a deal with them. While backing out of the driveway you call one of your guys that you know will buy in the area and has liquid funds and he says that he is interested and would like to see it the next day. You then call the seller and let them know that you would like to show the house to your paint contractor to get a bid(that is my personal little trick that I use) and set a time for you and your potential buyer to get in. When the buyer and you show up he will look around and after it is all over he wants the house. You can talk to him later on or meet him down the road and sign the contract for them to purchase the house. That means that you have an accepted contract on both fronts, time to make some money. This investor happens to be liquid so he sets the closing about 4 or 5 days out. On the day before the scheduled closing you get a copy of the proposed HUD. If you do not get a copy the day before that is a whole other conversation for another day, but shame on you. You look over both of the HUDS, and figure out that you will be making 12k on the deal and start figuring out what you are going to buy with the money. The next day the buyer comes in the closing attorney’s office about 10 am and brings a cashier’s check. Our seller comes in at 1 pm and signs off on the HUD and the deed, and you ask for a referral, what they are going to do with the money and do they want to be a private lender, and you get a testimonial, all at the same time. More importantly you collect a check with 3 zeros on it. total time from call to $$$$’s in the bank, my personal record 3 days, my average is about 2 weeks on good deals and 3-4 on marginal ones. They key to your time frame is the property the price and the buyers closing ability. You MUST know how your buyer gets his money BEFORE you call him and WAY before you accept a contract from him. I wrote about eliminating the no’s and this is one of them. If you help them get approved by taking them to your bank or your hard money lender, then you know when and if they can close, and how long it will take. Without going to deep into financing, you need to start at the easiest version of financing and work your way down the pecking order with each of your new clients that you are helping. Take them to your banker and help them get a commercial line of credit, which is the best place to be, you use it like cash. If that doesn’t work then you should try for an equity line on their home, next down the list is a guidance line of credit, then you will be relegated to using a hard money lender. If all that doesn’t work, they aren’t a buyer, get another new best friend (ha).