When And Why It’s Helpful To Use A Gator Lender
As real estate wholesalers are looking to assign or double close on properties found listed on the MLS, they have to work with standard realtor purchase contracts. Often this means that an earnest money deposit (EMD) is due almost immediately after the offer gets accepted. Wholesalers can’t quite manipulate the terms with on-market deals like they can with a purchase contract for an off-market deal. There just isn't much time to get the end-buyer to submit the EMD on their behave. On top of that, wholesalers can’t even begin to talk about a property to buyers until the deal is under contract. This can make wholesalers hold back on making offers for on-market deals found listed on the MLS with realtors. But there’s a solution.
Question: How do you get a real estate deal under contract without paying the EMD with your own money?
Answer: Use a Gator Lender.
Here's how it works. A gator lender sends in the earnest money deposit on your behalf along with instructions for the title company on how to pay them back at closing. The term Gator Lender was first coined by real estate investor and coach Pace Morby, who has also trained a tribe of gators to be able to execute this process using legal documents written by a real estate attorney. Pace Morby is better known as the Sub-to guy in creative financing for real estate. Gator lending is just another brain child of his in the creative financing world.
Gator lenders get paid with a portion of the wholesalers assignment fee at closing, directly through the title company, making the whole process very streamlined and convenient for the wholesaler. The amount the gator is to be paid is negotiated according to the deal and how much EMD is needed. The process is quite similar to a Joint Venture which wholesalers tend to do when working with another person who helped in the process of either acquisition or disposition of the deal. Luckily for most, Gator Lenders know how to execute the paperwork and work with the title company so that the wholesaler needing the service doesn't need to join another course or spend 10 hours on Youtube to figure it out. And if they're extra lucky, their Gator Lender can help with dispositions too (finding a buyer), if needed.
If you haven’t already started seeing the term Gator Lender in REI Facebook groups and other places online where real estate investors mingle, you probably will now. With a Gator on speed dial, you can feel confident submitting offers through realtors. Especially if you’re wholesaling in a state that doesn’t require mutual release of EMD. But if you are, there are solutions that a gator can provide. Mutual release means the seller has to sign-off on the release of your EMD even if you cancel before inspection period ends. Without the proper paperwork, it can make it very risky for a Gator Lender to lend in a mutual-release state. If you’re wholesaling in a mutual-release state, or not sure, the best thing to do is to speak with a Gator lender about the process before getting anything under contract. Working with a Gator may still be possible with the right documents presented to and agreed upon by the seller. Your gator will be able to explain in further detail.
So now that EMD is no longer an issue for wholesalers, are there any more excuses holding them back from taking action? (Yep, there always is another excuse! Share yours in the comments.)
NOTE: Gators can also help with off-market wholesale deals. But again, it is preferred you use the purchase contract a Gator Lender will provide designed to protect the earnest money deposit. You can grab a gator-approved purchase contract here.