OfflineI was browsing some real estate sites and found what lookes to be really good information. A couple investors posed some questions to this person (named Matt) who does a lot of real estate deals. Here is the questions and great answers he gave them....
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Question: At what point do you ask the buyer or investor to sign a non-refudable check over to you?
Answer:
How to Take Deposits
When selling your contract what is the best way to take assignment fees? Okay, you have to realize that the business of selling contracts is all a negotiation. You want all of your money up front and let them hold all of the risk to make sure it closes on time or they lose their deposit. On the other hand they want to give you nothing at the time of the assignment, hold any money with their attorney and have the entire risk lie with you that they end up closing on time and don’t blow the deal with the seller during their inspections.
The next question is how much of the assignment fee do you ask for up front? Again, I like to get all of it but for several reasons maybe you cannot. Your price, property or location may not be that good. A good analogy is if you purchased dollar bills at $0.50 and were selling them at $0.60 it wouldn’t matter if you were in the middle of the worst neighborhood you would still have takers. However, if you had the same $1 for sale at $.85 and there was significant risk involved in picking them up you would have to sweeten the deal in some way to attract buyers.
A good rule of thumb is “He who controls the money controls the deal.”
Often times it is better to give the property back or renegotiate the deal than to accept an offer that you feel is not going to work.
On a decent assignment form, all deposits are non-refundable. Well, that’s fine if they are willing to write you the deposit in advance but what if they insist that all of the money go into escrow. Putting money into escrow really isn’t putting any money up on the property. If both parties do not agree to release the money, it is never released. If you feel the money should be released to your company and they do not, duh…duh…duh…dah. It is off to court you go.
By using an Escrow Release form (consult your attorney) they are agreeing that at the time of the assignment the assignment fee placed in escrow is fully earned and unless we cannot produce clear title, the money will be released without any further signatures. Our attorney drafted the one we use and it contains all of the proper legalism.
Matt
Question: So is it a good idea to have the non refundable check put into an escrow account ?
Answer:
If possible the non-refundable check should always go into your bank account.
If they refuse, it can then go into an escrow account.
With an Escrow Agreement, that money is yours...so long as you provide clear title.
Get this document in place and your life will be happier and less stressful.
Don't put it in place and you will always be stressed about the closing.
HE WHO CONTROLS THE MONEY CONTROLS THE DEAL...don't ever forget that.
Matt
"THE ARCHITECT OF YOUR DESTINY IS YOURSELF"
"SUCCESS WALKS HAND IN HAND WITH FAILURE"
Good information there sister. Thanks for sharing it with us. I did my assignment without a non-refundable down payment, I guess that's why the investor went for it so quickly... LOL! I didn't have any problems at closing either. It went smoothly and in within the time frame agreed to. But it's good to know you can also get a non-refundable deposit as a security measure. But it also may turn buyers away to, ya think? I know I've stayed away from those deals for that very same reason. So it's a two edged sword I guess. What do you think? Would you feel right about keeping someone's deposit if they couldn't close? Something to ponder... LOL!
Thanks for sharing, you're doing great... POWER!
Psalms 118:23 "This is the LORD's doing; it is marvelous in our eyes."
I don't know..maybe he does it that way because you give yourself XX amount of days with the seller (on the contract) to sell the house...and by the time you find a possible buyer some of your days to sell are already gone.
You have already invested time finding the buyer so you need the non refundable to cover your time you have invested to this point.
If they back out or for some reason it doesn't close at least you have some money for your time invested...and hopefully enought days left to find another buyer.
I do understand too about feeling bad about keeping someone's money if for some reason it doesn't close...but then I would think of the time I had invested. Kinda a double edge sword huh? So I don't know. LOL! I know I will come to that very situation doing this line of business.
"THE ARCHITECT OF YOUR DESTINY IS YOURSELF"
"SUCCESS WALKS HAND IN HAND WITH FAILURE"