In this section, we'll discuss the four different contracts that are standard in traditional wholesaling. They are the purchase agreement, assignment contract, the option to purchase, and the JV agreement (aka the marketing agreement.
You must be comfortable filling out these forms because all the information must be correct... They're legally binding documents, and the last thing you want to do is make a mistake on them.
Sitting at the kitchen table with your first seller while your heart is beating fast and your hands are sweating from excitement would not be the perfect time to practice filling out your first purchase agreement... So please do yourself a favor, print a few off, and practice filling them out before your big day!
In each section below, I briefly describe the document and provide a download link so you can print off a few copies of each. Once you have them printed, follow along with each video and practice filling them out. I want you to be extremely comfortable with them so the first time you're filling out with a seller or buyer, you don't screw up...
Because you don't want the situation to arise where you have to go back and have someone re-sign a contract (it makes you seem like an amateur, and it's a little embarrassing, too). Alright, go print your copies and let's get started!
Purchase Agreement: Also known as the "purchase and sales agreement," this is the document you'll use to place a property "under contract.
Once you've placed a property under contract with the seller, you will have "equitable rights" in the property. This allows you the right to "assign" the purchase agreement to another buyer, preferably a cash investor.
Remember, the price, closing date, inspection period, and any terms and conditions will be assumed by your end-buyer(investor). So the cleaner and more simplistic the deal, the easier to find a buyer.
Now take a few minutes to watch the video, and I'll explain the purchase agreement to you and walk you through filling it out.
The "assignment contract" is the document that transfers your contractual rights to a third party (aka, your cash buyer)
In other words, once you have a property under contract, you'll send it
to your cash buyers list. When one of your cash buyers agrees to buy the property, you'll use the assignment contract to transfer the purchase agreement from you to them, making them the buyer of the property.
In exchange for assigning your contractual rights to a buyer, they will agree to pay you an "Assignment Fee." The fee amount will be written on the assignment contract so the title company knows to write you a check for that amount at the real estate closing.
Watch the video, and I'll walk you through filling out the contract.
This form is meant to be used in place of the purchase agreement when you're uncertain if you can find a buyer for the property.
Often you'll come across properties that might not be as desirable to your buyers because of pricing, condition, location, or some other factor. You'd use the "option to purchase" contract in that situation.
However, you need to use the right approach when asking a seller to sign an option to purchase.
In this video, I show you how to fill out the form and explain how I present it to a homeowner... Take a few minutes and check it out.
Need to partner up with another wholesaler? The JV agreement (aka, marketing agreement) is the document you'll use.
Let's say you have a buyer, and another wholesaler has a great property under contract. Before showing your buyer that property, you'd want to sign a JV agreement with the other wholesaler to ensure you both get paid.
You would send this form to the title company along with the purchase agreement and the assignment contract. Then on the day of closing, the title company would know you're a partner in the deal and will be getting half the assignment fee.
Watch the video, and I'll explain everything in detail...
As a real estate wholesaler, it's crucial to have an exit strategy planned just in case you cannot find a buyer for your property.
The most common is the "Inspection Period," as I covered in the first video (Filing out the purchase agreement.) If you don't remember it, go back and watch the video again.
I am bringing it up again because it will save your butt from being in breach of contract if you ever need to walk away from a deal.
So one last time... Always Have An Exit Strategy written into your contract, and if you can't find a buyer, notify the seller by writing you are withdrawing from the deal. (it's also a good idea to call them too)
Buyers Notice of Cancellation of Real Estate Purchase Contract
Seller: John Homeowner
Buyer: Joe Wholesaler
Property Address: 1008 Maple Lane Anytown, USA 80090
Notice of Cancellation of Contract. Buyer hereby gives notice of cancellation of the real estate purchase contract with an offer reference date of 1/20/2020 between Buyer and Seller regarding the above-described property. The cancellation of the contract is based on the following.
[ ]Due Diligence Findings
[ ]Appraisal Findings
[X]Property Inspection Findings
[ ]Partner Denial Upon Review
(use this additional verbiage if you have given an earnest money deposit)
Release of Earnest Money Deposit. By signing below, the buyer acknowledges that the real estate purchase contract is canceled and hereby directs ___________________ Title Company to release, per the terms of the purchase and sales contract, the earnest money deposit of $_____________________
to [ ]Buyer [ ]Seller
Buyer Signature Date
Seller Signature Date