They say sequels often suck, and most of the time it’s true. Sequels can pale in comparison to the original, but this oh-so-awesome blog post breaks that mold.
Welcome to Part 2 of my Wholesaling Basics series. In Part 1, we introduced the concept of wholesaling with little cash. I know, I know… you were skeptical at first, because it seemed too good to be true.
But now you know it’s not. You also know the importance of equity and motivation, and you’re now an expert (or at least on your way to becoming one) in marketing, scripting, negotiating and contracting. And to that I say, g’on whicha bad self!
But, now it’s time to talk escrow, paperwork, and some other key house flipping terms that may sound like a snooze fest at first… but understanding these words, what they mean and why they’re crucial to your investing success will definitely be worth the next few minutes.
Promise.
Opening Escrow
Remember where we left off in Part 1... you just put a measly $10 bucks down, and now it’s time to open escrow. But what the heck does “opening escrow” mean and how do you do it?
It’s a simple process, really… Take your contract plus your $10 earnest deposit check to your closing agent. Did I mention that your closing agent should be an investor-friendly closing agent? Once your investor-friendly closing agent has the contract and check in hand, you’ve got open escrow. (Note that in some states closing agents are attorneys, and in other states they’re actual escrow officers.)
Once you have a house under contract, the contract gives you what’s called equity interest in that property. Here in the United States, you control equity interest when you have a house under contract.
Right about now, I bet most of you are concerned about the big “what if.” What if you can’t come up with the cash last minute and you need to back out of the deal? I used to freak out about that too! If I had a dime for every time I thought, “No way am I signing anything that says I have to pay $65,000 when I barely have $65!”
But let me let you off the hook by sharing with you one very important, game-changing phrase…
Master your paperwork to master your financial destiny.
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Too Good to Be True?
Too Good to Be True?Is it me or are you having déjà vu too? Look, my friends, we’ve been down this road... I know you’re skeptical, and when you’re just starting out it’s tough to wrap your brain around the importance of paperwork when you’re liked a caged tiger ready to make your first kill.
I get it.
But as real estate investors, we control our contracts. That’s another key phrase that you need to burn into your brain… We control the paperwork, because the paperwork is more valuable than the house.
And here’s yet another: Always have an escape clause.
You’re going to be sure you build into your contract a 14-day inspection period AND a 15-day window to pay the $65,000, for example. That means you have 15 days to back out of the deal if need be. And that means you walk away with your earnest money deposit having spent not a penny more.
Light Bulb!
So you get it now, right? You understand how important it is to master your paperwork, and you know how to open escrow. You’re well on your way to flipping houses with little or no money like it’s your J-O-B (oh wait, it is!).
Always open escrow with an investor-friendly agent, properly complete your contracts by knowing what to include (escape clause) so you cover your butt in case you need to bail. Master the paperwork… master your financial future.
Stay tuned for Part 3 of this series, coming soon.
As always, keep it classy!
More Questions?
Have any escrow or paperwork questions? Hit me up in the comments section below.