Closing
Before I continue, it’s important to understand what exactly happens during closing. The buyer signs closing documents, including papers that allow the money to be released to the seller (which will happen within a few days). Then, the seller signs the deed over to the buyer. The buyer will get a title insurance policy. This proves that the property title is legal. Finally, the County Recorder’s Office will record the deed and other pertinent documents. One option for wholesaling is assigning the contract. In this process, you never actually buy the property, although you do put down an earnest money deposit. Also, not only is the seller aware that you’re selling the property to someone else, but they will also know who that is and what your profit is. The contract with the seller will state your name; however, it will also say “and/ or assigns” for the buyer. You will also assign the contract with the buyer, which means the buyer assumes all of the contractual obligations, not just the purchase price. This contract states your assignment fee, letting the buyer know your profit as well. One benefit to this process is that your assignment fee isn’t used for closing costs, so your profit will be exactly what is written in the contracts. One possible downside is that you’re relying on the buyer and seller to address any problems along the way and to officially close on the deal. You get paid at or after closing, so it can be stressful waiting for that to happen, especially since sometimes deals do fall through, and you have no legal recourse if that happens. However, if you know your buyers, your risk can be significantly mitigated.
Another wholesaling option is a double closing (a.k.a.
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