Tried 'Wholetailing'. Didn't Work.

[Jonathan C.]

Wanted to post my experience in trying to 'wholetail' a property last month in case it's helpful for others.  Also ask for any tips from people who have done this successfully.

So wholetailing is when you buy a beat up property that isn't too beat up- it's in decent condition- and instead of rehabbing it and selling it renovated, you try to sell it in the same condition you bought it in to an end buyer.  In my case, since I'm a Realtor, I bought a property in Southern MD for a good price and it happened to be in livable condition with major systems working OK.  

I bought it 149k. Didn't touch it and immediately listed it for $219k. Got some low investor offers which I couldn't do anything with, but then got an end buyer offer that would have netted me 189k. Would make solid profit (around 27k after closing costs, realtor commission, etc) at that price so accepted it, however the buyer was an FHA buyer.

I had only owned the house about 3-4 weeks at that point, and due to the 90 day flip rule, you have to have documentation on repairs/improvements you made to the property to justify the increase in purchase price.  Usually I have this, but in this case since I didn't do anything to it I didn't.

The buyer's lender, due to short time home was owned, also required a home inspection and (despite attempting to sell the house in 'as is' condition) ended up having 2-5k in home inspection repairs to do.  That would have been fine, but just doing that wouldn't have worked, according to 2 lenders I talked to, to justify increase in purchase price.

I considered doing a very minor amount of work- just painting the house, putting new floor in kitchen or swapping out existing countertop for cheap granite- something like that. But the buyers lender couldn't give me firm guidance on how much needed to be done on the house to be able to justify the increase in value for them to be able to get the loan done, so there was a chance that 30 days down the road before we close they'd have told me- 'nope, cant do the loan'- because what I did wasn't enough to support increase in value.

So, ditched the buyers and rehabbing house myself- wasn't worth the hassle for the ~20k or so quick profit (after inspection repairs) I could have possibly made.

Anyone who has done this successfully have tips to share?  Guessing there wouldn't be any issues if buyer had a conventional loan?

Jon