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I use buyers money. My seller and buyer go onto contract. I cancel my agreement for the 20K. Of course there are costs involved. Some occasions I get a POA to close the transcations.

 

Hi Jonathan,

 

Can you elaborate what you mean? Thanks!

 

Alan

 

When I get an option on the property I always record a memorandum. Since I have the authority to BUY and SELL I have a contract in place with Seller. When it goes to closing the Memorandum has to be cleared up (released) That is my release fee and it shows up on the seller side of the HUD.

 

Alan,

 

I think he answered that already. His cancellation fee (in this example) is $20K or whatever the final selling price on the home is minus his option price. In this scenario, the home sold at auction for $120K and his option was $100K, therefore, his cancellation fee is $20K and he is out of the picture with seller and the buyer now dealing with each other.

 

Correct me if I am wrong, Jonathan. I want to understand better, too. Thanks.

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When I get an option on the property I always record a memorandum.  Since I have the authority to BUY and SELL I have a contract in place with Seller.  When it goes to closing the Memorandum has to be cleared up (released)  That is my release fee and it shows up on the seller side of the HUD.

 

 

Could we say that you are actually selling (or assigning) your option for $20K ??

 

Is that another way to look at this?

 

Can it be done that way with this auction scenario? Or does the paperwork need to be "cancelled", as you are doing?

 

All you HAVE, really, is the option to purchase, right? You don't have a Purchase and Sales Agreement, right?

 

I would think that there's something in the middle I am probably missing, but it seems like you are, indeed, selling your option for anything over the price on the option agreement.

 

Is this close to being correct? Or, am I way off base here? :lol:

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Rich, assigning and canceling are two different things, even though the objective is the same (to get paid).

 

By canceling his option, Jonathan allows his buyer and seller to sign a new purchase contract between themselves. After everything is said and done, Jonathan's name does NOT appear anywhere, except on the now canceled option.

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Thanks, Doug. That makes sense.

 

But, how does one insure that you'll get paid? I understand what's going on, but WHY, then, couldn't the seller and the new buyer just PROCRASTINATE and drag their feet until the option RUNS OUT? When it does, the guy holding the option is out of the picture anyway.

 

Devil's Advocate

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It is the difference in contract amout between what I am buying it for and selling it for.

 

My title company under the seller side of the HUD executes a release of Memorandum for x amout of money.

 

What it really boils down to is that a SELLER NEEDS to sell. I am here to do that. I am not worried about a seller going around to my buyer. Remember that Memorandum? Sure it could go out and wait until my option expires and so forth...and they could get some title company to close, and maybe they will.

 

We have seller that have one thing in mind. When do I get my check! Pure and simple.

 

The memorandum is like an implied lien. You see different types of memorandums on properties all the time. Especially in commercial leases. Wanna know something else.....what do you think about the idea having the seller sign a purchase agreement with Buyer blank and purchase price blank...... Held by me.

 

Just something next time I am going to pitch with the paperwork.

 

By the way I am leaving for the weekend and will not be able to answer any questions so be paitent if you may. I can always be reached by phone 1-800-213-8414

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Well just before I was getting ready to leave for the weekend I had a BUYER that wanted the house.....So I stopped one of the auctions...Full price. That what happens in a sellers market.

 

Well I did not delete it from website just in case but it looks good. 10K deposit and Mortgage guy says its a go.

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How much was your option for, Jonathan (if I may ask)?

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VERY NICE !

 

You seem to do long auctions. How long usually and why?

 

Thanks,

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10K deposit and Mortgage guy says its a go.

 

So if I understand it correctly, when you get a winning bid you collect a $10k deopsit and when your mortgage broker gets them approved (if they're not already), the seller and buyer go to closing and you get your payday, correct? What happens with the $10k in the meantime? Is that an advance of your payday for you or does it go to the seller, or...........? You're a rockstar, Johnathan! Thanks a lot!

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So after your auction is over and you have a winning bidder, asap you get together with the seller and buyer to sign the purchase agreement. What happens to the 2% that you collect? Do you keep it or does it go into escrow, or...?

 

Where does the seller disclosure form come from? Is it absolutely necessary to get a home inspection before selling/before the auction? What if the house is brand new and never been lived in?

 

 

When you setup a recorded message with the details of the property/auction do you end up speaking with every caller or do you just basically get them the information (via recorded message) and hope they show up to the open house? Do you take all of the calls generated from your advertising prior to the open house?

 

How do you handle your reserve price? Is it undisclosed unless the bid doesn't meet that amount?

 

When someone comes to the open house, they get a bidding packet. Do they leave their starting bid then or do you call everyone that leaves their contact info to see if they'd like to bid? Once the bidding has started on the last day of the open house, you just go down your list calling every bidder until you have the highest bid, right?

 

If you have a recent appraisal, do you include that in the packet to give them an idea of the value of the house?

 

I have a seller that I've spoken to in the past about his house and I think it would be perfect for an auction style sale. How should I bring up that I'd like an option on his house without necessarily saying, "I going to hold an 2 open houses so I can sell it through an auction style sale above the price of my option." I'd like to tell him that I have a group of people that are interested in purchasing his house (not completely a lie), but we need some time to weigh our options and to get financing arranged (60 days). Or should I just tell him about wanting to sell his house via a 14 day auction?

 

Thanks a lot! I'm sure there will be other questions, but I find this topic fascinating. It makes me want to kick myself for deals that I've probably missed in the past because they didn't want to do a LO!

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I am going to answer your questions after each question.

 

So after your auction is over and you have a winning bidder, asap you get together with the seller and buyer to sign the purchase agreement. What happens to the 2% that you collect?

 

IT GOES TO MY TITLE COMPANY

 

Do you keep it or does it go into escrow, or...?

IF IT WAS A DOWN PAYMENT AUCTION I KEEP IT.

 

Where does the seller disclosure form come from?

PART OF MY OPTION PACKAGE I GET THE SELLER TO SIGN A SELLERS DISCLOSURE AGREEMENT

Is it absolutely necessary to get a home inspection before selling/before the auction?

 

KNOW ITS NOT NECESSARY BUT IT HELPS TO TAKE THE WHAT IFS OUT OF A BIDDERS MIND.

 

What if the house is brand new and never been lived in?

SAME THING AS ABOVE.

 

 

When you setup a recorded message with the details of the property/auction do you end up speaking with every caller or do you just basically get them the information (via recorded message) and hope they show up to the open house?

 

I HAVE TWO SET UPS. ONE IS A DIRECT CONNECT. IF THEY WANT TO CHAT THEY CAN DO SO BY DIALING "0" OR THEY CAN LEAVE A MESSAGE AND WE WILL CALL THEM BACK. I RUN A PHONE LOG ON EACH PROPERTY. I TRY TO CALL BACK FOR THE ONES THAT HAVE HANGED UP BUT MOST OF THE TIME I DO NOT.

 

 

Do you take all of the calls generated from your advertising prior to the open house?

 

SAME AS ABOVE. MY GOAL IS TO GET THEM REGISTERED TO BID ON WEBSITE THE DAY THEY CALL....EVEN IF THEY NEVER BID.

 

How do you handle your reserve price?

 

I START 60-75% OF ARV.

 

Is it undisclosed unless the bid doesn't meet that amount?

UNDISCLOSED

 

When someone comes to the open house, they get a bidding packet. Do they leave their starting bid then or do you call everyone that leaves their contact info to see if they'd like to bid?

 

ONE OF THE BIDDING RULES IS THAT THEY MUST PREVIEW THE HOME...EITHER BY ONLINE OR OPEN HOUSE. THEY CAN BID ONLINE ANYTIME PRIOR TO THE OPEN HOUSE. I AM WORKING ON A LINK THAT THEY CAN DOWNLOAD THE BIDDER PACK ONLINE.

 

Once the bidding has started on the last day of the open house, you just go down your list calling every bidder until you have the highest bid, right?

 

IF ITS ONLINE THE COMPUTER DOES IT FOR ME. THAT IS IF KNOW ONE LEFT A BID AT THE OPEN HOUSE. THE LAST HOME I DID I HAD ONE BIDDER AT THE OPEN HOUSE. I HAD LOGGED HER INTO THE COMPUTER AND I CALLED HER AND SAID THAT THE HIGH BID WAS 180k HER BID AT THE TIME WAS 176k I ASKED WOULD SHE LIKE TO ADVANCE HER BID AND SHE DECLINED SO SHE WAS OUT OF THE GAME. THE REST OF THE NIGHT I JUST WAITED UNTIL 9PM AND IT WAS OVER.

 

If you have a recent appraisal, do you include that in the packet to give them an idea of the value of the house?

 

I WOULD INCLUDE IT IN THE BIDDER PACK IF IT JUSTIFIED MY END VALUE.

 

I have a seller that I've spoken to in the past about his house and I think it would be perfect for an auction style sale. How should I bring up that I'd like an option on his house without necessarily saying, "I going to hold an 2 open houses so I can sell it through an auction style sale above the price of my option." I'd like to tell him that I have a group of people that are interested in purchasing his house (not completely a lie), but we need some time to weigh our options and to get financing arranged (60 days). Or should I just tell him about wanting to sell his house via a 14 day auction?

 

MR. SELLER, YOU HAVE NOT SOLD YOUR HOME YET. AS YOU KNOW MARKETING IS THE BIGGEST KEY IN SELLING HOMES. THAT IS WHAT I DO BEST. WHAT I WOULD LIKE TO DO IS HOLD A MARKETING EVENT TO MOVE THIS HOME. I HAVE SPECIAL FINANCING PROGRAMS AVAILABLE THAT CAN HELP ME TO DO THIS. I WOULD TWO DAYS ABOUT 2 HRS A PIECE. WOULD THAT WORK FOR YOU.

 

 

 

Thanks a lot! I'm sure there will be other questions, but I find this topic fascinating. It makes me want to kick myself for deals that I've probably missed in the past because they didn't want to do a LO

 

IF YOU JUST TAKE ONE THING FROM THIS......EVERY LEAD FITS IN A TOOL BOX SOMEWHERE.

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