contract to close
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By default earnest money is due three days after mutual. Three days is calculated based on the computation of time. Make sure the buyer gets a receipt from escrow.
Send the buyer-signed Inspection Response Addendum (Form 35R). For more details, see our guide to inspection contingencies.
The buyer and seller both need to sign the Rescission of Purchase and Sale Agreement (Form 51).
If the parties do not agree on the release of earnest money,
Yes, after the closing date has passed. However, in order to sell the property to someone else, they will need to disclose there is a pending legal case on the property.
[UPDATE NUMBERS BEFORE PUBLISHING]
From analyzing 13,000 flips in greater Seattle-area since 2002, we find that on average, MLS-purchased flips sell for 1.8x their purchase price compared with 1.6x off-market and 1.4x at foreclosure auctions.
While we do not know the condition of these flips, we think if anything MLS-purchased flips are in better condition, not worse. Furthermore, off-market deals often have an assignment fee and foreclosure deals have a commission paid on top of the purchase price, which makes MLS deals even more favorable than the numbers suggest.
Our guts tell us that this feels off, and to some extent this is true. The opportunity for luck is greater in these markets, and the top 10% of off-market flips perform better than the top 10% of MLS-purchased flips. Nevertheless, the MLS still presents a meaningful buying advantage for rehab investors.
This suggest there is more supply (deals) relative to demand (competing buyers) when shopping for deals on the MLS versus off market or at foreclosure auction.
From a supply perspective, 4_% of historical flips were purchased from the MLS versus 3_% off-market and 2_% at a foreclosure auction. With more supply, the MLS can absorb more demand.
From a demand perspective, we can say there's roughly 87% of the relative demand off-market as measured by the resale multiples (1.4 / 1.6). Because there are 1.25x more deals on the MLS than off-market (4_% / 3_%), we can deduce there is about 1.09x more demand (87% * 1.25).
In other words, there is 1.09x more demand on the MLS, but 1.25x more supply to absorb it.
We can't say for sure, but we have some theories as to why there is less competition on the MLS than it might appear.
For starters, prospective homeowners cannot easily finance properties that need repairs, and when they do compete it is normally for cosmetic flip opportunities. Many sellers also over price their listings and end up accepting a lowball offer—think of it as a hidden supply on the MLS.
The demand for off-market deals is also is also higher than it appear. From intuition and the advice of others, investors gravitate to the idea that buying off-market or at the auction is less-competitive. The problem is that everyone thinks this way.
In many cases, investors are purchasing overlapping mailing listings and calling on the same FSBO directories.
This is not to say you should only pursue MLS-listed opportunities. Rather, we believe the MLS should be an active source of opportunities for serious investors. From analyzing 13,000 flips in greater Seattle-area since 2002, we find that on average, MLS-purchased flips sell for 1.8x their purchase price compared with 1.6x off-market and 1.4x at foreclosure auctions.
No one! If you have been cc'ing us along the way, our team will make the commission disbursement form for you. If you need it sooner, let us know at docs@pellego.com. Please email us instead of doing it yourself, otherwise we get checks in the mail and your payout is delayed.
If you are amazing, we want to know. Here is a list of current openings, and we are always open to unsolicited pitches.
Send the mutual purchase and sale agreement to escrow, and have buyer deposit the earnest money with escrow.
Make sure they get a receipt from escrow.
The standard timeline for EMD (earnest money deposit) is three days after mutual agreement.
If there is an inspection, send the Inspection Response (35R)
If there is a change in buyer name, use a blank form 34.
If there is an issue with financing, either send the appraisal addendum or send a form 90 notice along with your rescission.
Make sure the inspection is getting scheduled. Schedule entry with listing agent on inspections and appraisals.
Make sure the lender is moving quickly and communicating actively with buyer. Ask them to cc you in everything.
Make sure the listing broker is sending any seller obligations on time, e.g. septic tank inspection by county.
As long as you cc docs@pellego.com in your transaction emails (anything with an attachment), our team prepare your commission disbursement form, check with you, and send it to escrow.
This way we can specify that escrow should wire it, and we will know to look out for it, so that you get paid quickly.
From our write up on Purchase and Sale Agreements,
In NWMLS contracts, time starts tomorrow and end at 9:00 PM Pacific Time on whatever day that is. If the last day is a weekend or a holiday, it doesn't count.
If there's a weekend or holiday in the middle that's fine, as long as the time period is more than 5 days. If the time period is 5 days or less, then weekends and holidays don't count towards time.
Example:
The contract goes mutual at 11:00 AM on Tuesday. There's a 2-day inspection, so the Inspection Response (35R) is due Thursday at 9:00 PM.
Example:
The contract goes mutual at 11:00 AM on Tuesday. There's a 4-day inspection, so the 35R is due Monday at 9:00 PM.
Wednesday = day 1
Thursday = day 2
Friday = day 3
Saturday
Sunday
Monday = day 4
Example:
The contract goes mutual at 11:00 AM on Tuesday. There's a 6-day inspection (more than 5 days = weekends count), so the 35R is also due Monday at 9:00 PM.
Wednesday = day 1
Thursday = day 2
Friday = day 3
Saturday = day 4
Sunday = day 5
Monday = day 6
This paragraph allows the buyer to rescind the contract and get their earnest money back if they discover something advertised in the listing is not true.
And this can be anything. For example, if the listing says "close to stores" you can argue that the stores are not close by the buyer's standards.
Be warned that if you use this paragraph, you will most likely forever burn a bridge with that agent. Use this as an absolute last resort.
Title and escrow are normally the same company.
Escrow's job to is hold and disburse funds to the appropriate parties.
After buyer deposits earnest money, escrow should give them a receipt.
At some point in the transaction, escrow will ask you for a commission disbursement form (CDF). When this happens, email us at docs@pellego.com, and our team will prepare the CDF (form 40).
Title's job is to insure ownership (they sell insurance) by researching the full ownership history of the land to this point.
Normally, sellers will have already opened "preliminary title" with a title company, and listing brokers will upload the preliminary title report.
During the transaction, title will conduct further research to create a title report (no longer preliminary report) and send that to the buyer.
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If you have an inspection contingency, you will send a buyer signed Inspection Response Addendum (form 35R) to the listing broker.
If a property has a septic tank, the county will normally require a recent inspection, completed by seller prior to or during the transaction.
The main thing you should do is be aware of financing is falling behind schedule or other financing issues arise. If there is a low appraisal or buyer is unable to obtain financing, see our financing writeup for more info.
Sometimes there's not a form for what you want to specify. The form 34 is a blank form where you can write in whatever, e.g. a change of buyer name
Use this form to send a notice that doesn't need to be signed by all parties, e.g. the buyer is giving notice that they cannot obtain financing.
Whenever there is paperwork signed by all parties, cc the following parties when you deliver documents.
1. Pellego doc delivery: docs@pellego.com
2. Other firm doc delivery
3. Listing broker email
4. Escrow Officer email
As a general rule, cc us on everything, and we will know when your transaction is closing, prepare your commission disbursement, and coordinate with escrow to gather the final settlement statement.
Here are the documents needed for a file to be complete.
1. Purchase and Sale Agreement with all Addenda
2. Earnest Money Deposit Receipt ("EMD")
3. Commission Disbursement Form (we prepare this for you)
4. Final Settlement Statement (last thing escrow sends)
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