Buying from Wholesaler or Making Cash Offer on MLS - Boston

[Maureen F.]

Hi, I'm trying to buy a three-family (or maybe a two-family) in the crazy-hot market of Dorchester or nearby, and need advice! How would I go about buying from a wholesaler? Do they only accept cash offers? How much time to close? Can my broker be involved? Alternatively I might make a cash offer for a property on MLS. If so, how much lower might a cash offer be than a financing-contingent offer, to be attractive to the seller? If the offer was accepted, could the conveyance actually be to my son if he could get financing in time?

Here's the situation. My son has been trying to buy in Boston or nearby (south of) for seven months. He has been beaten out on many properties by higher offers or cash buyers. (Thus far the offers he submitted had a financing contingency with 5% down.) He's had offers accepted on several properties, but they didn't go through due to issues such as discovering major structural issues during the inspection, seller being in bankruptcy, seller's spouse (in divorce process) refusing to sign P&S, etc. The market is such that it seems a cash offer is the way to go. My only reason to buy a house is to convey it to him. If I actually have to pay cash, I will take title, and then he would buy it from me with a mortgage, and preserve his eligibility for mortgages limited to first time homebuyers.

The other issue being if I actually have to pay cash, where to get it? We can probably come up with half from non-retirement accounts. The other half would either need to be from taking a loan on our home (which has no mortgage), however my husband is opposed to this idea because he's risk averse. Or, I could use funds from my IRA, but there would be a big tax hit unless I can replace the funds within 60 days. The third option would be a Hard Money Lender. The IRA idea would work as long as I could convey the house to my son within 60 days. If that timing didn't work out, then go to the HML? My son has been pre-qualified many times by his lender, and would be putting down 20% (with help from a gift from a family member) because his income went up and he's over the income limit for the ONE Mortgage, and doesn't want to pay PMI. I am fully confident of his ability to get financing, unless the lender has a problem with buying from a family member.

I would greatly appreciate your advice ... thoughts .... ideas ??

[Doreen Chaisson]

You will pay not only taxes if you don't replace the funds within 60 days, you will also pay an early distribution penalty if you are under age 59 1/2. Additionally, keep in mind you can do only one rollover in any 12-month period per tax payer, regardless of how many IRAs you may have. Some people think they can "daisy chain" rollovers - take money from a second IRA to replace rollover money from the first IRA, then money from a third IRA to replace money from the second IRA, to continually extend the amount of time they have to actually replace the originally distributed funds. This is now illegal. With the additional complication of conveying a piece of property and relying on financing and closing dates and so forth to align, you'd have to time your distribution very carefully.