Wholesale Real Estate 101: Real Estate Wholesale
Contracts Non Refundable Deposits Hi it’s Neva at timeforinvesting.com and today
I’m answering a question from Mark Evans and he wants to know does he go to deposits and
having the cash buyer give him a non- refundable deposit. So stay tune.
So okay, I’m going to take my time today and really answer this question because people
lose thousands of dollars doing this the wrong way. So it’s for the wholesaler as well I’m
answering this question and also for the investor, the cash buyer why the things that they should
look for before they put down a non-refundable deposit. So I’m going to go through seven
steps. So the first one is, as a wholesaler you need
to make sure that you have a binding contract with the property owner and the three things
you need to have a binding contract: You need to have an offer, acceptance, consideration,
a consideration is price so the contract needs to state the price that you guys agree that
you’re going to buy the house for. So I have my contract here as an example. So you make
sure you have a contract and the deposit is well shows commitments, so in my contract
with the property owner, I also put down a deposit.
So my deposit is usually $10 sometimes I’ll go with as much as a $100 it’s not really
much because we close really quickly. So there’s no need to put a large deposit down. So that’s
two right? It shows commitment for me to put a deposit down and it also when you go to
your cash buyer and ask for your deposit, the same thing it shows commitment. You do
not want to take your property off the market or stop marketing it to a cash buyer without
collecting a non-refundable deposit okay? So three, what I want to talk about is you
then need your assignment contract and the thing is these two go together. So anytime
when people lose money for the cash buyer it’s because the cash buyer signs the assignment
contract without actually seeing the contract that the wholesaler has with the property
owner. And that makes absolutely no sense because when you sign an assignment contract,
you agree to do everything that’s in this contract.
So how can you sign and agree to something and you haven’t even read this contract that
the wholesaler has. So the wholesaler should present both of them as a package to the cash
buyer and the cash buyer has to read both and be comfortable agreeing to the terms in
the contract with the property owner okay? So I just want to make that really, really
clear. So the other thing I wanted to point out is
that before I even start marketing for a cash buyer, I put my deposit down with the closing
company. So before I even start marketing I make sure that my commitment deposit is
already with the Settlement Company because you can actually during that time if your
property owner comes back and says, Hey you didn’t put the deposit in. You can actually
lose your contract and have your contact fall apart because you didn’t do what you said
you were going to do. So I just put it down as soon as I get my contract back. I usually
go to Settlement Company the next day and I give them my deposit okay? So you have these
two. Now, this is just how I do it okay. So in
my assignment contract, once the cash buyer agrees to it, my assignment contract actually
gives them 2 days to forward all the money to Settlement Company. So if like for instance,
this one my wholesale fee was $47,000. So my cash buyer when they signed this they has
to agree to forward to the Settlement Company $47,000 within 2 days okay? And then I have
a note, there’s another note on my contract that says $5,000 of that wholesale fee is
now refundable. And that’s if what it actually reads is If the assignee does not perform
or they default to the terms of this agreement. So if the contract falls apart because the
property owner doesn’t want to sell or something like that, then the cash buyer just get all
his money back. But if the contract falls apart because the cash buyer just decided
he doesn’t want the property anymore, then I keep the non-refundable deposit. So that’s
why you want to get that deposit because you don’t want to take your property off the market
and you don’t have a commitment from someone okay?
So that’s how I do it. So then so five was I give them 2 days to get the funds to the
settlement company. And then six was the non-refundable deposit of $5,000. And then seven was the
tip I want to point out is that I never personally collect any funds from real estate investors
or cash buyers. I always tell them to give the money directly to the Settlement Company.
That’s just the safest way because you have to remember that whoever holds the money is
the person that determines if you’ll get your money back. So you always want that to be
the lawyer. So never give your money to a wholesaler,
there’s no reason to get your deposit or to give the wholesale fee directly to the wholesaler.
I’ve never ever collected a check and then you know drove it to settlement company. I
always have with Settlement Company, we are going to use listed in my assignment contract
and I usually when we agree on a price I give them they have the address, they have the
contact and I also let the Settlement Companies contact person know who to expect as known
to be the cash buyer that will be forwarding this funds.
So that way, there’s no way for you to lose your money because if you just give your money
to a wholesaler it could be someone you’ve done 10 deals with. But maybe to 11th time
you don’t know maybe this person disappears, maybe you just don’t know what might happen.
You don’t want to be tracking down someone. Trying to find them to get your money, it’s
just like I just think that’s unacceptable. Like the Settlement Company we pay the amount
of money is lawyers. Like I always say let the lawyer do their job.
So if you follow this steps it’s really, really easy for you to collect a non-refundable deposit
because you’re doing everything by the rules and I think on both sides the wholesaler and
the cash buyer are protected. So that’s my tip for this week. So I’ll see you next video.