Whose name goes on the seller contract in a JV wholesale

Question

Underwriting a partnership is the same problem as underwriting a deal. Look for where the value goes when things break. In a JV wholesale, the contract with the seller is where it goes, and the room tends to argue this four different ways. Case for the acquisition partner holding it: they built the seller relationship, they are the one the seller will call at day 20, and if the disposition partner disappears, they still control the asset and can bring in someone else. Their downside is capped at their own earnest money. Case for the more experienced partner holding it: they know what their state requires of them, their title company already knows them, and a newcomer holding a contract they cannot perform on is the fastest way to a seller complaint. In several states the question of who can market a contract they hold, and how, turns on local licensing law, so this genuinely varies and needs a lawyer in the relevant state rather than a forum consensus. Case for whoever funds the close: if a double close is likely, the entity putting up the money usually wants to be on the paper it is funding. Case for a single purpose entity both parties sign into: clean on paper, slower to form, and it leaves both parties owning an entity together after the deal ends. The newcomer in a partnership like this usually gets the least say in this decision, which is worth going in expecting.

devon_pierce · Answer

From an outside view, the acquisition partner holding the seller contract seems obviously right until you ask what happens if they cannot perform. Then the seller is the one paying for the arrangement, and the seller had no idea there were two parties involved in the first place.

wendy_park48 · Answer

The name on the contract matters less than the assignment language and the default language, and almost nobody reads either closely. It's common to see JV agreements that carefully split a fee 50/50 and say nothing about who has authority to grant an extension. That gap is where the argument usually starts. The stronger structure: acquisition partner on the seller contract, with a written side agreement giving the disposition partner a defined interest in the fee, a stated deadline for producing a buyer, and one named person with authority to sign extensions. @dpatel_re, a single purpose entity is the cleanest option on paper, though it can slow a signing by a week, which on a motivated seller can matter.

diane_kowalski · Answer

I voted for the acquisition partner because of my own bad month. Mine was on my paper and the only reason I could go hunting for another buyer at day 45 was that the contract was mine. If my partner had held it I'd have had no asset and no leverage, just a claim on a fee that never existed.

aaron_fitz10 · Answer

Reading through this thread, the split is not actually the main term, and it took the room's back and forth to see that. @wendypark48 the extension authority point is the kind of detail that is cheap to catch here and expensive to learn on a live deal. The stronger position is the acquisition partner holding the seller contract, largely for the reasoning @dianekowalski laid out.

luis_carrera · Answer

It comes down to what a newcomer is actually able to do at day 20 when the seller calls upset. If the answer is nothing, the contract sitting in their name is a comfort more than a control. The stronger case still leans toward the experienced partner holding it, though it isn't an easy call either way.

Whose name goes on the seller contract in a JV wholesale

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