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Hi this is Randall Miller from Louisiana. I have a couple of questions on the highest bidder sales / options. I just completed Jack Miller’s Option course. When I have an option on a property and I find a buyer is it better to do simultaneous closings or does the profit show up on the HUD 1 as a satisfaction of lien? If I allow the option to act as a lien wouldn’t I need a contract to be signed between the buyer and seller? Also, if it is a simultaneous close does the property actually go into my name and how will that show up on the HUD 1 statement. Sorry for asking so much in one post, I am just not clear on how this works especially if the buyer is getting a mortgage on a property that does not need any major repairs. thanks
Randall
These are all great questions. I know the whole option thing can be confusing. Let me try to clear things up.
You start with getting a purchase contract with a contingency clause. This is the option contract.
If your buyer needs to be bank financing, it will be better if the seller and the buyer go to contact. Because the bank will want to see that the seller has “seasoning” or that they have owned the house for awhile. For you to get paid, you will need to sign an agreement with the seller that you will “release” your option for a fee so they can get a contract with the buyer. The release of option document is turned in to the title company or escrow office along with the contract between the buyer and the seller. The title company will treat your release of option contract just like a lien on the HUD-1
If it is a cash sale (wholesale flip), then you have two ways you can go:
1. Your buyer pays you a flat fee to assign your option contract to them. then they close the deal. The assignment agreement is turned in to the title company who is closing the deal Your assignment fee will show up as a lien on the HUD-1 (cons- the seller and buyer will know what your profit it)
2. You can do a simultaneous close – meaning you have a contract to buy from the seller. Then you have a separate contract to sell to your buyer. Your profit is the spread between the two. Both contracts are turned in to the title company. They will usually close your buyer first because they are bring the cash to the table, then a few minutes later, in a different room, close with the seller. (pros – neither the seller or the buyer will know what your profit is)
In the simultaneous close, yes you will take title for a few minutes but it does not need to be in your name or even your entity name. You can use a Land trust. But that will be extra documents to prepare.
Hope this clears it up. Let me know if you have any other questions
Jackie
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