Purchase Contract and Settlement Sheet for a WholeTail Deal

[Patrick Milia]

Hello, those with experience wholetailing please chime in, as I have not completed this type of deal before. I'm trying to wrap my mind around what the purchase contract and settlement sheet will look like on a wholetail deal with the end buyer getting a conventional mortgage. 

Here's the hypothetical scenario; house under contract with the owner for $200k. Once the purchase contract (with assignment clause) is signed between the seller and my investment company, I'm going to immediately list it in the MLS (I'm also a licensed agent) for $260k in it's current condition. The house needs a little updating, but nothing too crazy, and I have comps that would support a $280k to $285k ARV.

The end buyer is NOT going to be an investor, it will most likely be an owner occupant getting a conventional mortgage. Do I, now being the equitable owner, sign a new purchase agreement with the end buyer at the $260k sale price? Or am I just signing an assignment agreement with the end buyer that includes my approximate $60k fee?  What would that even look like on the settlement sheet? I feel like the buyers mortgage company would red flag that and not let the loan go through.

Alternatively, is a double close the only way to wholetail a deal to a buyer getting a conventional mortgage?

Your responses are greatly appreciated.

[Brent Hill]

yes, you will have 2 contracts:  a "front end" beweeen you and the orginal seller and a "back end" between you and the new buyer IF you want to do a double-close with 2 separate HUDs.  I double close all my wholetail deals...closing costs are a little bit more but it is made up in the extra money earned by wholetailing it.

Your brokerage may not want you doing an assignement where there would only be 1 closing and 1 HUD and especially if no commissions are going to be paid.

If you do double-close you may have to hold the property 60-90 days to get around any possible lender seasoning requirements.