Wholesale Flipping Question - Posted by Russ, IL


#1

Posted by ScottE on February 23, 1999 at 07:45:31:

EH,
I did file a memorandum, but since they waited until after the scheduled closing on the contract, the memo had expired commensurate with the expected closing date.
As a former police officer, I can tell you that if some bad guy wants to get/ambush you, then they can. Even if you try your best to be careful and alert, they have an agenda and the element of surprise. This was somewhat the case, but I will not let it happen again (by getting my fee up front, etc.).
Thanks for your response.

Scott


#2

Wholesale Flipping Question - Posted by Russ, IL

Posted by Russ, IL on February 21, 1999 at 09:38:38:

I am a relatively new investor compared to many who post here. My experience thus far has been in rental properties. In fact I have a closing tomorrow on a 3 unit that I got nothing down. (hooray for me!). I am now interested in trying to flip to other investors or rehabbers. I have been reading and studying everything I can get my hands on and I understand the general concepts and theories behind it. I seem to be getting snagged up in some of the details. For instance: What prevents the investor I’m flipping to from going to my seller behind my back and getting the property for what I’m paying the seller? Do the investor and I have another real estate contract between us or do I simply assign the first contract to the investor that I’m flipping to? If the later is true than where does my “mark up” or “finders fee” get worked in?
Anyway, I’m sorry to ramble on. I’m probably over analizing this whole thing. Any help or advice is greatly appreciated. This site is fantastic!

Thank You,
Russ


#3

Take a lesson from me…please! - Posted by ScottE

Posted by ScottE on February 22, 1999 at 11:45:06:

Russ,
I just had some bozos circumvent me on a deal and do exactly what you said. The people I flipped to gave me a story that they were pre-approved and everything. We had 45 days to close so, it seemed like plenty of time. My investors I flipped to had contact with the original sellers. To make a VERY long story short, we had a Friday closing and my investors dragged their feet saying that they had last minute lender requirements that needed to be met and wouldn’t be able to close on Friday, however, they said they contacted the sellers and Monday would be alright. These guys assured me up and down that they wouldn’t cut me out of the deal, even up through Monday morning. It turns out that they signed a contract with the sellers on the previous Friday(the day we were all supposed to close). They closed with the sellers on Monday and when I finally got a hold of them on THURSDAY, they said “Oh, we closed on Monday”. I asked where my $4,500 fee was and they said “Our contract with you was up on Friday” and cut me out of the deal. I had already handed them $30k in equity ($98k appraisal - $66.5k sales price), but they felt compelled to take another $4,500. When I talked to the title company’s attorney where the closing took place, he was astonished that I had not been paid, as apparently he was led to believe. The long and the short is that we have a small claims case pending and every attorney I talk to says my case is strong. Next time, if I can’t get all of the assignment up front, I will either 1)stipulate that it is paid when the title clears by having the investor place ALL of the fee in escrow subject only to clear title or, 2)stay in control of a simultaneous closing. In either case, until you find someone you have built a trust in, YOU have to keep the wheels in the deal cranking. If getting paid is subject to the title being clear, light a fire under the closing company’s butt and get it doen pronto! Classically, the closing/title company will wait until the last minute to finish everything & write a title policy.
I hope this helps keep you from the same disappointment and frustration I have endured.

Scott


#4

Re: Wholesale Flipping Question - Posted by Bob-Tx

Posted by Bob-Tx on February 22, 1999 at 09:37:03:

Good questions all. First, go to the how to articles this site and read Jackie’s 2 articles on flipping.
Just a couple of points - I have never had an investor try to go around me on a flip. If it is someone I have not done business with I require of them a full blown earnest money contract offer on the deal along with real earnest money…don’t let them use escape clauses like you used on your contract and be sure they are for real. Once I’ve flipped a few to an investor I then use my Assignment Agreement and don’t require the contract from them. Always control by using your stipulated title company. The assignment agreement stipulates the “fee” - obviously a presumed disadvantage here is that the investor will know exactly what you are making on the deal whereas with a double closing they will not.
Bob


#5

Re: Take a lesson from me…please! - Posted by EH

Posted by EH on February 22, 1999 at 19:39:39:

To prevent this from happening once you have a signed contract you need to file an affidavit of notice to purchase real estate down at the court house. Recording this says you have an interest in the property and it can not be sold w/o your knowing. When the title company does their last minute search they will find this cloud on the title and the owner will not be able to sell until you have removed this affidavit.