Tentatively, it looks like I've lined up a good buyer for a property that I won't actually close on myself (for my purchase) for another few weeks. I have the funds to close the purchase transaction, and I'd rather not disclose my purchase price to the end buyer prior to their closing. Plus, my purchase agreement with the current owner/seller is silent on assignability, in that it doesn't say I can do it, doesn't say I can't, and if I wanted to assign it, it doesn't say how that would work (i.e. is it my sole discretion, or would the seller have some say in the matter, etc.).
Based on all the above, I'm intending to do a double closing (same day). My buyer understands the situation and has verbally agreed to do a double closing, as well. So I wondered what the experienced investors have to say about the right contract document for me to use with my buyer? I'm not assigning, so I presume it would be some type of purchase and sale agreement, as opposed to an assignment of contract. In others' experience, does it need to include any particular language under these circumstances - for instance, since I don't actually own the property I'm selling them, yet?
I'm planning on following up with the local title company I already have working on this deal to get their input, on Monday, and I fully understand that anyone responding here is not a lawyer (or not my lawyer, anyway), so I'm just looking for some general input, not any kind of legal advice.
In Florida, when I do a double closing I use the same contract as I did for the purchase but with myself/entity as the seller and your new buyer as the buyer. As either an addendum or in an area where you can add additional terms you need to include the following "contract is contingent upon seller successfully purchasing the property." Several years ago I had a deal where the owner was a small community bank and right before closing they tried to back out of the deal. I was doing a double closing and my buyer told me he might have to sue me if I didn't perform. Once I pointed out the language in the contract he backed off and was a lot more patient, we eventually got the deal done.
Thanks @BradenC. I appreciate the input, and that certainly makes logical sense that a basic contingency like that should suffice. This particular deal of mine also happens to be in Florida.
Out of curiosity, do you adjust any other terms between the purchase vs. sale contract? For instance, if your purchase contract gives Buyer the right to cancel for any reason, do you dial that back on your sale contract? Also, do you take an earnest money deposit from your Buyer in a double close scenario (even though you might not have paid one)? I assume one can still do so, but just wondering.
@dl7573 Great questions. Yes, when I purchase I usually have a 7-10 day inspection, or right to cancel, period. On the resell, I give 0 days and no other ways for the buyer to back out without losing their deposit. You can still take a deposit even if your A-B transaction doesn't. I make it a "Non-refundable deposit", not an earnest money deposit and let the buyer know that if they back out they will lose it. Obviously they can get the deposit back if there are unresolvable title issues or if I don't successfully purchase the property.
Thanks again, @BradenC. My buyer is fine with all of the terms and is going to drop off the signed contract and deposit with the local title company on Monday, so it's looking good.
I also wanted to send big thanks to @karljames whose RETipster podcast episodes gave me the idea of reaching out to local custom builders, which is how I found this buyer. I'm sure it would still be possible to line up a double-closing and take a deposit from a retail buyer found through Facebook, etc., on a lot one hasn't actually purchase yet, but based on my past experience working with those types of buyers, I expect there would have been a lot more headaches in a situation like this one. On the other hand, this builder knows what this property is actually worth, knows he's getting a good deal (as am I), and has been very professional to deal with. Definitely beats the endless stream of "Is this still available" tire kickers, under the particular circumstances. :-)
As either an addendum or in an area where you can add additional terms you need to include the following "contract is contingent upon seller successfully purchasing the property."
How detailed do you get when finding a buyer and letting them know that you do not yet own the property? Do you just tell them that you have it under contract, and let them figure out the specifics once they receive the PA from you or do you go further to explain that you are in the process of purchasing the property to resell?
@suitedconnector That's a good question. I really only work with the same 3-5 buyers so I don't have recent experience to give you advice on. However, most experienced investors know what wholesaling is and you can just tell them you have the property locked up and you're flipping the contract. When you say "let them figure out the specifics once they receive the PA..." what do you mean? What are the specifics you're talking about?