The Closing Process: An Overview

Here’s a very brief overview of the closing process for wholesaling real estate to another investor.

You’ve gone out and found a super great real estate deal from a motivated seller. You have placed the house under contract or under option so that you have rights to buy the property and the right to assign your rights to another buyer.

You then find an investor using various marketing strategies who is willing to purchase your rights to buy the property.

With your help, your buyer has completed their due diligence and is ready to purchase. You complete an assignment of contract to assign your rights in the contract to your buyer for a wholesale fee. The wholesale fee is often paid at the time of closing although you typically get an earnest money deposit when they sign the assignment of contract agreement. You can use this money to reimburse yourself for the earnest money you gave to the seller or you can pay their earnest money directly to the seller.

You can give all your paperwork including the purchase agreement and your assignment to your title company or escrow/closing agent. From here on out I will refer to them as the title company since that is what I use in my state.

The title company will prepare the closing paperwork, get a quote on title insurance, determine the payoff amount for any loans on the properties and help to facilitate the closing process. Expect to have to solve problems to get the deal closed. Something almost always comes up.

Unexpected title issues, challenges with funding, surprises on inspection reports are par for the course on many of these transactions and it is impossible to cover every possible thing that could come up. Part of what you are paid for as a wholesaler is your ability to solve these problems and keep the transaction together dealing with both your buyer and seller.

In this example, I have assumed that you will be doing an assignment of contract, but you could also complete a double closing instead. I will discuss the pros and cons of each in another article.

Until my next post,

James

P.S. Convert deals to cash with our Real Estate Investor Bronze Membership.

Related posts:

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