How do I give the seller the buyers loan guarantee when it's going to be me who puts it under contract?

Question

How do we give the seller the buyers loan guarantee when it's going to be us who put it under contract? (Dealing with a 22 Unit apartment)

Curt Smith · Answer

Just adding that its not been mentioned in this thread that for commercial deals because of all the complexity wholesalers work differently than with SFR wholesaling between naive sellers and investor buyers.  In commercial the wholesaler gets an NCND signed by the buyer and a fee agreement.  The fee agreement percent is mentioned during the negotiations so both buyer and seller know your X% is being added to the sale price.  Then you get out of the way and the seller works directly with the buyer.

Bradley White · Answer

@K.

Kristine Marie Poe undefined

Thanks for your reply! This is what the seller said:
	
	
		"It is good that you drove by the property. I can work on a T-12 or a Pro-Forma package over the weekend. I think a Pro-Forma package would be more helpful. It would show your financial impact of a purchase more clearly. However, it would require that I know the approach your funding partners would take for a purchase."
	
	
		How would we know the funding approach of our "partners" (end buyers) if we haven't received the rental rolls and P&L to verify the numbers?

Thanks for your reply! This is what the seller said:

"It is good that you drove by the property. I can work on a T-12 or a Pro-Forma package over the weekend. I think a Pro-Forma package would be more helpful. It would show your financial impact of a purchase more clearly. However, it would require that I know the approach your funding partners would take for a purchase."

How would we know the funding approach of our "partners" (end buyers) if we haven't received the rental rolls and P&L to verify the numbers?

Michael Moikeha · Answer

In commercial, it is typically understood that actual numbers are going to be expected before an offer is given. In SFH you can determine market value through comps, but in MF properties, the value of the property is based on the numbers.

There must be some disconnect between what she is asking for, and what you are asking for.

Wayne Brooks · Answer

Since the seller is asking for this, and the fact he owns a 22 unit rental property, he's not the typical uninformed target of most wholesalers.  He's probably already sniffed out that the OP can't/isn't buying the property.

@Bradley White

My best advice is to just be straight forward with the seller as to what you're doing, and see if he cooperates.

Account Closed · Answer

Gathered the same, but was wondering what the seller actually asked for.  Sounds like they sent loan commitment paperwork. Not sure how a wholesaler can work with a seller that requires pre approval unless they can provide it. Earnest money and actual ability to borrow (or close) go a long way in situations like this.  I've seen some $1M+ assignments of contract, but the buyers selling their contracts have the ability to close and can prove it.

So, what can the OP do to satisfy the seller, if he can't provide a loan approval or proof of funds?

Bradley White · Answer

@Joel Owens How much earnest money would be the standard to put up for this type of deal?

Joel Owens · Answer

Bradley do you have any non-refundable earnest money to put up on this property??

Sounds like to me just from what you have posted that the seller is asking for a loan commitment. You can't really have a loan commitment without seeing the financials of a property in commercial. You can qualify the buyers with net worth versus liquidity and assets owned but the property itself also has to be evaluated  along with location to see if the lender wants to fund.

Have you told the seller you are a wholesaler and intend to sell this off and make a fee to a third party buyers who is unknown at this time?? I would imagine the answer would be a no. Full transparency is needed on both ends upfront from the start or both sides get unrealistic expectations and everyone wastes time.

Is the apartment 100% vacant, semi-performing ( say 30 to 70% occupancy ), or is it fully performing ( typically 85% or higher ). The TRAILING occupancy is key. Example if it has only been 90% for 2 months but the 12 month average is 65% then you would use that for evaluation instead of the 90%. The reason is the 90% is unproven for stability and the seasoning of those tenants paying on time.

Any type of vacant building or semi-performing the debt a buyer can get will be much higher as they try to turn it around which will affect ongoing carrying costs. This will affect what they can pay for a property.

Bradley White · Answer

@Wayne Brooks

@K. Marie Poe

Thanks for your reply! This is what the seller said:

"It is good that you drove by the property.  I can work on a T-12 or a Pro-Forma package over the weekend.  I think a Pro-Forma package would be more helpful.  It would show your financial impact of a purchase more clearly. However, it would require that I know the approach your funding partners would take for a purchase."

How would we know the funding approach of our "partners" (end buyers) if we haven't received the rental rolls and P&L to verify the numbers?

Wayne Brooks · Answer

I assume the seller is looking for a loan preapproval, thinks the OP is the actual buyer and has no idea OP is trying to wholesale it.

Account Closed · Answer

What do you mean by loan guarantee.  What does the seller want?

How do I give the seller the buyers loan guarantee when it's going to be me who puts it under contract?

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