One of the absolute biggest mistakes I see wholesalers make these days is demanding your buyer write his deposit check out to you, personally.
The deposit from your buyer is mandatory. No check… no deal. It shows us that he’s serious. And, it insures that we make some money, if this guy flakes out and walks away.
[HINT] If a buyer says he wants the house but won’t give you a non-refundable deposit…he doesn’t really want it… and won’t be buying it. He’s most likely a fellow wholesaler, who is looking to shop your deal to real buyers. No good.
Years back, having your buyer give you a deposit check made out directly to you was common. In fact, that’s how it was done. But, things are different today. Lots of guys are shopping deals that they don’t have under contract, and the game is a bit trickier. And, thus, buyers are a bit skeptical.
So, how do you solve this little challenge?
You simply have your buyer write out the check to the title company. As long as you state in your assignment or purchase contract with him that his deposit is non-refundable, to be held in escrow by the title company and goes toward the overall purchase price at closing… it’s yours! And, if he flakes out and fails to close, the title company scratches you a check equal to the deposit. You put that cash in your bank account… and go look for another buyer.
So, don’t make the huge mistake of demanding your buyer write out his earnest money directly to you, especially if this is the first time you’ve done business together. Nothing will turn him off quicker… and kill the deal faster. It’s your money, anyway. Just send it to the title company and get the deal done.