Wholesale deal with out of state seller


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  • This thread is about the same lead I posted last week about a possible seller financing deal in the Subject-To and Seller Financing forum. The seller did not agree to the seller financing offers and instead opted for the cash offer.

    Recap
    ———

    ARV ~ 168K
    Repairs ~ 25K
    My profit = 10K – will sell my option

    My original offer was going to be for $81K cash but I changed the offer to $77K before I sent it to the seller. Glad I did that as he agreed without much resistance. He just said he was hoping to get more but I explained the property needs more work than what he had described to me.

    Questions
    ————-

    1. Property is in a Trust, should I ask the seller for the Trust documents and give them to the title company where the closing will take place or will the title company get the documents straight from the seller?
    2. How much earnest money should I enter into the agreement? I am in Florida.
    3. The seller is out of state, how do I give him the earnest money or is this money transferred at closing?
    4. We agreed that I will get a 60-day option and an additional 30-day extension if needed to give me more than enough time to find a buyer. How do I get the option money to the seller since he’s out of state?
    5. Since I will try and collect a $10K profit, is a double closing the best way to go?
    6. Is a double closing necessary if I am just selling the option to my buyer?
    7. Do I sign the agreement before I send it to the seller or do the seller signs first? Does it make any difference?

    I will call the title company that will do the closing and they will know about all these questions but just wanted to get some feedback here in the forums.

    Thanks,
    Rafael

    HI Rafael

    Good job to go with the lower price. Answers to your questions:

    1. The title company will ask the seller for a copy of the trust documents to verify that he has the authority to sell the property.

    2. Earnest money is paid to the title company and should not be sent to the seller. Pay as little as possible to the seller. Less than $100 should be more than enough. You should collect as much earnest money as possible from the buyer.

    3. Earnest money is paid to the title company. Check is made out to the title company.

    4. Option money goes to the title company; they will hold it.

    5 and 6. A simultaneous close is the best way to go. Make sure the title company you use is ok with that. Don’t get stuck on a $10k profit. You may be able to make more. It is best to tell potential buyers to make you an offer and that you will go with the highest offer. You can also call back to tell them what the high offer is to ask if they want to increase their offer.

    7. It shows the seller that you are serious if you sign the agreement first.

    How do you get access to the house to show it??? Did you get permission to enter the property
    Are the utilities on?
    Does your contract say and/or assigns? Does the seller know that YOU may not be the person buying the house?
    What are your plans for marketing to your buyer’s list?

    Congratulations on the deal!!! I look forward to hearing that you closed this one in a few weeks.

    Jackie

    Hi Jackie,

    Thanks for the quick response.

    There are tenants in the property and I have talked to them several times and made arrangements to get in the property. One of the tenants was there to look at the house the first time and we build a good rapport. Actually, he told me a few things about the seller I didn’t know. Is not going to be as easy as if the house was vacant to show it to potential buyer but I think we will work something out.

    I am using your contract from the RE Profits in Steroids so there’s a Right To Assign clause there. Also, I explained to the seller that I will not be buying the property. Told him I belong to a group of investors with cash on hand..blah blah blah.

    As for my buyers list, to be honest, is not all that great but I have a couple of investors that I will contact first. I will also present the deal to the REIA club meeting next week, send an email to the few buyers I have in my list, not sure if I should use craigslist….. do you have any suggestions?

    Thanks,
    Rafael

    Jackie,

    Talking about tenants, in a wholesale deal like this one, what’s the best approach in these situations? Do we ask the seller to get rid of the tenants, do we let the end buyer decide what to do? Do I need to be involved?

    This particular tenants, I hate to say it, but I would not want in my properties. The place is trashed. The question is really, do I need to worry about this or is it the seller or end buyer problem to deal with?

    Any feedback is appreciated.

    Thanks,
    Rafael

    Hi Rafael,

    Your end buyer would be bound by the terms of the seller’s lease with his tenants.
    If the tenants’ lease is month-to-month, your end buyer would give them
    the number of days (typically 30-60 days) notice to terminate as specified in their lease agreement.
    If the tenants have a one-year lease or longer, your end buyer would then inherit those tenants for that
    period of time. In that situation, to entice them to voluntarily move, your end buyer could offer the tenants
    a cash incentive and/or some moving assistance like a u-haul truck, boxes, packing supplies, etc.

    Best of luck!

    Kathy

    Update,

    Finally closed on this deal today. Everything went smoothly as planned. It took a while longer because of the situation with the tenants. I just contacted one fellow investor that I had dealt with years ago and that was it. He jumped on it right away and we have been ready to close for several weeks now but we had to wait for the tenants to leave. The reason we wanted them out first is that they were not under a rental agreement with the seller. They were his acquaintances so they never signed a lease or anything. We wanted to be sure they were out before closing, that way if they did not leave for any reason, the seller would had to deal with that problem. They left without issues.

    As for the closing, the title company was great. The seller is out of state so they sent a “mail away” package to him and also apparently, they sent a mobile notary or someone else so he signed all the paperwork right at his house. My buyer had already signed the paperwork a few days ago and I didn’t even have to attend the closing. Got my $10K wired to my account today 🙂

    Just need this happening more often. I have to spend more time and a bit more money on my marketing.

    Thanks you all for all the help and feedback.
    Rafael

    Great Job!!

    Congratulations Rafael!

    You did the right thing to hold off on closing until the tenant was out.

    Time to get get another one!

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