Signing a transferable contract is a fundamental skill for real estate wholesalers. By following these steps, you can confidently secure properties, find end buyers, and facilitate smooth transactions. With practice and attention to detail, you’ll maximize your profits and build a successful wholesaling business.
An Essential Guide for Real Estate Wholesalers
As a real estate wholesaler, your primary goal is to secure properties under contract and then assign those contracts to end buyers for a profit. One of the essential tools in your arsenal is a transferable contract, also known as an assignable contract. This allows you to transfer your rights and obligations under the contract to another party, typically for a fee. Here’s a step-by-step guide on how to sign a transferable contract successfully.
1. Understand the Basics of a Transferable Contract
Before you dive into signing a transferable contract, it’s crucial to understand what it entails. A transferable or assignable contract allows you, the wholesaler, to transfer your interest in a property contract to an end buyer. The key elements include:
- Assignment Clause: This clause explicitly states that the contract can be assigned to another party.
- Assignor: You, the wholesaler, who holds the original contract.
- Assignee: The end buyer or another party to whom you assign the contract.
2. Use the Right Contract Template
Using a contract template designed for wholesale deals ensures that all necessary clauses, including the assignment clause, are in place. You can find these templates through real estate investment groups, online resources, or by consulting with a real estate attorney.
- Review for Assignment Clause: Ensure the contract includes a clear and explicit assignment clause.
- Consult Legal Counsel: If you’re unsure about any terms, have a real estate attorney review the contract.
3. Negotiate Terms with the Seller
When negotiating the purchase contract with the seller, make sure they understand and agree to the assignment clause. This is crucial for a smooth transaction.
- Transparency: Be upfront with the seller about your intent to assign the contract.
- Flexibility: Some sellers might be hesitant about an assignment clause. Be prepared to explain the benefits and reassure them of the process.
4. Sign the Contract
Once you’ve negotiated the terms and ensured that the assignment clause is included, sign the contract. Pay attention to the following details:
- Contract Execution: Both parties (you and the seller) must sign the contract for it to be legally binding.
- Earnest Money Deposit: Be prepared to put down an earnest money deposit as stipulated in the contract.
5. Find an End Buyer
After securing the property under contract, the next step is to find an end buyer who is willing to take over the contract.
- Marketing the Deal: Use various marketing strategies to find potential buyers. This could include online listings, real estate investment groups, or your network of investors.
- Qualify Your Buyer: Ensure the end buyer has the financial capability to close the deal.
6. Assign the Contract
Once you’ve found an end buyer, you need to draft an Assignment of Contract agreement. This document officially transfers your interest in the original contract to the end buyer.
- Assignment Agreement Details: Include the purchase price, assignment fee, and any other relevant terms.
- Sign the Assignment Agreement: Both you (the assignor) and the end buyer (the assignee) need to sign this document.
7. Notify the Seller
Inform the seller that you have assigned the contract to an end buyer. Provide them with the end buyer’s contact information and ensure a smooth transition.
- Professional Communication: Maintain professionalism and clarity in all communications with the seller.
- Update the Seller: Keep the seller informed about the closing process and any relevant updates.
8. Facilitate the Closing Process
Work closely with all parties involved to ensure a smooth closing process. This includes the seller, the end buyer, and the title company or closing attorney.
- Coordinate with the Title Company: Ensure all documents are in order and facilitate the transfer of ownership.
- Attend the Closing: If possible, attend the closing to address any last-minute issues and to ensure the transaction goes smoothly.
9. Collect Your Assignment Fee
Upon successful closing, you will receive your assignment fee, which is the difference between your contracted purchase price and the price the end buyer pays.
- Verify Payment: Ensure that your assignment fee is correctly calculated and received as per the agreement.
- Complete Documentation: Ensure all necessary documents are signed and filed appropriately.