Wholesale Homes: Avoid Overpaying Closing Costs
Wholesale homes continue to gain momentum, but many investors remain concerned that they are overpaying in closing costs. So how can wholesalers ensure they aren’t taken advantage of and reduce the fees associated with real estate closings that can eat into profit margins?
There are many new investors on the market today, and few have much experience with closing costs and loan fees. Unfortunately, some ‘professionals’ and vendors will take advantage of this, or at least charge as much as they can.
Therefore, one of the best ways for house flippers to avoid being scammed and keep providers honest is to always get multiple quotes for everything. This doesn’t mean that going with the lowest bid is always best (bait and switch are still rampant today), but it will serve as a good barometer.
Everything in the real estate business is negotiable. Some can give a final result, the lowest they can make quotes in advance, many others already build a cushion to negotiate. You won’t know unless you ask. So ask for discounts. However, also know when to recognize value and valuable service and avoid hitting partners so hard that they will find it more profitable not to close your deal.
Out-of-area investing and wholesaling is also becoming more popular and this can often lead to high closing costs associated with the loan on everything from the origination fee to appraisals, title work and construction fees. real estate agents. Get quotes on all of these.
Look at the agents too. While many adhere to real estate agents’ strict code of ethics, some have been caught charging new investors more than normal. Usually the seller pays the entire commission on a sale. So if an agent asks for additional money, this may be fat that needs to be trimmed. An exception here is cheap foreclosures where agents may not feel worth getting involved or helping, although there are clearly ways to make these acquisitions without their help.
Large or small mortgage loan fees and closing costs continue to represent a large portion of gross receipts and can profoundly reduce profits. Those who watch and are inspired to jump into wholesale houses by reality TV shows like Flip This House are often unaware of this.
A smart solution may be to look into legitimate double-closing methods or simply assign or wholesale contracts that can leave this money in the deal.
