While the wholesaling process is pretty straightforward, there are certain techniques you can use to ensure you are able to maximize the profit you’ll get from every deal. While unknown to many, there are 3 different ways you can sell your deals to ensure maximum profit.
In this episode, Mr. TTP himself discussed in detail the 3 options you have when it comes to selling your deals. You’ll surely learn powerful techniques and insights in this episode so you better have a pen and paper handy!
Maximizing Your Profits – The Only 3 Ways to Sell Your Deals
This is exciting because we’re talking about the three different ways for you to sell your deals. That is exciting because you have a deal. You’re taking the instructions. You’re taking action on these instructions, and you’re out there building a healthy pipeline of leads and they start popping one after another. It starts getting exciting. Your momentum is starting to build like a train going down the tracks. I’m going to break down the difference between an assignment of a deal, a double escrow, and a double close. It starts with the three parties.
First, we have the distressed property owner. We’ve got powerful you. Look how powerful you are. That’s because you take action. That’s because you’re being proactive. That’s because you’re not waiting around for business to fall into your lap. You’re going out every single day and having quality conversations with distressed property owners. Then you’ve got your cash buyers. These are the people that are going to end up buying your deals. The three parties. It’s simple.
First, you go out there, you’re having these conversations, you’ve built your lead pipeline, and you have a deal. You work with this distressed property owner and you put together a purchase contract on their property. Now, you have the right to purchase their properties with the price and terms that you agreed on. Now, we’re in the driver’s seat, we’re working on it, and we have the opportunity for many different things.
You could buy this and live in it. You could buy this and flip it. You could buy this and wholesale it in the three different ways I’m going to break down. You’re in the driver’s seat. Once you learn that sourcing real estate opportunities is the foundation of a successful real estate investing business, you win big time because you will always have inventory. You will always have the opportunity to do any one of those exit strategies that you want, which is exciting.
Traditionally, with wholesaling, you’ll assign this contract. You’ll assign your rights to purchase this house to a cash buyer. This cash buyer buys this property. Their cash goes, they buy this property, they get the money, they pay off the seller, and you get paid an assignment fee. That’s exciting. That can be anywhere from $2,000 to $100,000. We’ll break down why I don’t want you to take big assignment fees. I’ll go through all the pros and cons of that. You then have some different options.
Let’s break down what a double escrow is. This is awesome. You have to talk to your title company and see if they do double escrows. Some do and some don’t. Talk to your closing attorney. My suggestion is to make a post in any of the fix and flip groups or investment groups that you belong to, and ask in your markets who are the escrow officers or closing attorneys that do double escrows.
Essentially, a double escrow is you’re going to buy this house. You’re going to perform on this contract that you have, but you’re also going to have another purchase contract with your cash buyer. What a double escrow does is the money comes in and funds your purchase. You don’t have to come out with any funds to be able to purchase. The funds from them funnel through you to them. There are disclosures that are in place. The title company takes care of all of that, but ask them if they do a double escrow and that’s the flow of the money. It’s simple.
For a double close, some places don’t do double escrow. Some title companies aren’t comfortable with it. They want you to come in with your own funds, and that’s fine. That means that you have to bring the money for this transaction, and these guys are going to pay you off on the same day. It can be within the same minute, the same hour, but you have to wire in the funds to purchase this property. That is a double close. That’s when you start hearing about stuff like transactional funding.
Let me explain transactional funding. There are lenders that take all of the different contracts. They look at the deal, make sure that it’s a deal, make sure that you’ve got everything lined up, and make sure that these people have money. What they’ll do is they will give you money for 5 minutes, 10 minutes or 1 day. Typically, it’s no more than 24 hours or 48 hours. It depends. They will give you the money to buy this property. A hundred percent, you don’t have to come out with any money if they believe that it is a deal, and it should be a deal because you’ve already got a cash buyer that’s coming in behind them to pay off the loan that they’re giving you. That’s transactional funding. You can google it.
Find somebody that’s local. I don’t like the big national companies. It’s tough to communicate with them. A tip here is to find somebody that’s local that does transactional funding. The disadvantage of that is there are going to be some costs. Typically, it’s a point or two points for them to give you the money for 5 minutes or 10 minutes. Once you build up a reputation, you can start decreasing the amount of money that they charge you as an origination fee and you can get it down to $1,000, maybe a little bit more. How amazing is that?
Can you imagine? How confident would you be on every single deal if you knew you had an unlimited amount of money that they will give you to buy deals as long as you’ve got a cash buyer buying it the same day, but you can go out and buy all of these properties? This transactional funding is powerful. I want you to look into it. There are some huge benefits to it.
Let’s look at the pros and cons of each. Let’s look at the difference between an assignment and a double escrow. With an assignment, you keep more money. You put a house under contract for $100,000. You can put it out there and sell it for $125,000. You make a $25,000 assignment fee. It’s beautiful and clean. There are no other costs. There’s nothing else chipping away at that. They wire you the $25,000. You get to keep all of it. That’s huge but the cash buyer knows how much you make. They see it on the settlement statement if it’s not already on your assignment agreement, which typically is on the assignment agreement. If it’s not, they’re going to see it at the close.
Sometimes cash buyers start getting a little bit chippy, a little bit mad that you’re making too much on this deal because you negotiated hard, because you’re implementing the things that we talked about getting the price low, and building up your cash buyer database. Sometimes they get a little bit salty, and they start throwing some wrenches in at the end of the transaction that makes you nervous to try to get you to take less for the deal.
If you’re feeling that, if you’re new and you feel like these cash buyers know more or you’re uncomfortable, I highly suggest you do a double escrow or a double close if it’s a deal over $15,000. Typically, under $15,000, you’re not going to run into too many issues but maybe sometimes you are. Let me explain to you why this is better if you’re feeling nervous. One, they don’t know how much you make. You can be making $150,000. They don’t know how much you make because you put a purchase contract on with them. You’re not assigning the deal to them. You’re buying a property and selling it the same day, and that makes you a real investor.
Wholesaling is not real investing. It is sourcing real estate opportunities. Being a real estate investor is owning, selling, or holding property.
Wholesaling is not real investing. Let’s not get it twisted here. Wholesaling is sourcing real estate opportunities. Being a real estate investor is owning and selling, or owning and holding property. That’s the definition. It makes you a real investor, which is awesome. It protects your earnings. They don’t know how much that you’re making or closing on it. The deal is the deal. There’s no way to get salty because they don’t know what price you locked it up at. It’s proof for your business.
If you do a double escrow or double close, it proves to those other distressed property owners, “Look at these 5, 10, 20 properties that I’ve bought. This shows you that I do close deals, Mr. and Mrs. Seller.” It shows because you are on the title. You go on the title for fifteen seconds but you’re recorded on the title, but you’ll net less. Let me explain why.
Remember, when we’re talking to distressed property owners, we tell them, “We’ll pay all the closing costs. We’ll pay all the title and escrow fees or attorney fees.” When you agree to that on your purchase contract, you have to pay those fees when you purchase. Your cash buyer will pay it when you sell that deal but when you purchase it, it’s going to eat up about $2,500 to $4,000 of your profits.
Remember, we talked about transactional funding. If you do a double close, you have an origination fee for the transactional lender, and that could add another 1% to 2% of your purchase price and that’s going to reduce the amount that you make. That’s why you have to decide, “Do I want to protect my earnings or do I want to net more?” This is a big distinction.
Once you build a great reputation, once you have cash buyers that you work with a lot and they’re not going to bring emotions into how much you make, they’re not going to count your money, then you can feel more comfortable doing assignments. In the beginning, you can start doing some double escrow, double close if your title companies will do it. They’ll do double closes because you’re buying and selling it the same day. For the double escrow, check with them.
You net less and the title company makes more because there are two transactions happening on the same day. They get paid on the 1st and 2nd, “The title company is making too much money.” That’s fine. If the title company is making money, they love you. They will bend over backward for you. They will help you out with anything. You can call on any favor you want because you are bringing them so much business. This is a positive. The recordings show the buyer’s actual price.
Let me explain something to you. When you give that $100,000 deal and you assign it for $25,000, it records at $100,000 because that’s the purchase contract that you assigned to them. It doesn’t record $125,000. If it’s at $100,000, your cash buyer, if they flip that deal, they have to explain to an appraiser if they have a traditional buyer why there’s such a big spread from what they bought it at to what they sell it at. They have to convince them and say, “Look at my closing statement. I paid $125,000 for this, not $100,000.” They have to make a case for it on the appraisal.
If you do a double escrow, it shows that you bought it at $100,000 and it shows that they bought it at $125,000. It will show what they paid for it, which is a benefit to your cash buyers because it reduces the chance that the appraiser will think that they’re making too much money on a deal, which sometimes happens. Not often but sometimes it happens.
With an assignment, there’s less paperwork because you’re not closing on the deal. You’re not signing all of the closing documents with the title company. It’s a lot simpler and easier. If you’re starting out, if it’s under $15,000, do an assignment. If it’s over, do a double escrow, double close. Make sure that the costs aren’t chewing into all of your profits.
Look at every single situation differently. If you’ve got a deal and you know the cash buyer doesn’t care, you know this cash buyer has got a good reputation, or they were referred to you, you’ve done business with them before, if you feel comfortable, do the assignment. You keep more money. This is a great way to protect yourself and to make sure that your deal doesn’t blow up on the last day because of the emotions of a salty cash buyer.
I always want to protect you. I always want to keep you rolling forward. Remember, when all the drama comes up or all these things come up in a transaction that prevents us from going out and hunting for more opportunities. I never want that to happen. I want things to be smooth for you. Determine which one you want to go with, which strategy you want to go with when you lock up a deal. Rock and roll. I love you.
If you’re interested in joining the most proactive group in real estate investing, go to WholesalingInc.com/ttp. Check out the TTP Program. Check out all the testimonials. Check out what it’s about. If it feels good in your gut, sign up for a call. It will either be with me or my right-hand guy. I look forward to working with you. I love you. Get out there. Talk to people. See you.
About Brent Daniels
Brent Daniels is a multi-million dollar wholesaler in Phoenix, Arizona… and the creator of “Talk To People” — a simple, low cost, and incredibly effective telephone marketing program…
Also known as “TTP”… it helps wholesalers do more, bigger, and more profitable deals by replacing traditional paid advertising (postcards, yellow letters, bandit signs, and PPC) with being proactive and taking action every single day!
Brent has personally coached over 1,000 wholesalers enrolled in his “Cold Calling Mastery” training, and helped 10,000’s of others who listen to him host the Wholesaling Inc. podcast, watch his YouTube channel, and attend his live events…
A natural leader, Brent combines his passion for helping others with his high energy, “don’t-wait-around-for-business” attitude to help you CRUSH your wholesaling goals as quickly and easily as possible!