How viable is the inverse purchase system?

[Rodney Dawkins]

Hello, I am wondering if anyone has heard of the inverse purchase system of flipping properties? Does it actually work or could this land you in court for operating as a realtor without the proper license?

[Larry Moore]

The Inverse Purchase System isn't much more than getting an option on a move-in condition house and then finding a buyer, generally owner occ. What really made it viable were two things: offering "easy financing" and then having your mortgage broker set up the financing for the buyer (doesn't exist now), and second, using a "special invoice" so that you could get paid on the HUD statement. You generally marketed to buyers with lower credit scores and no or little down payment. If you are in the camp that believes having an option on a property gives you "equitable interest" and the right to market the property, then this system will work for you. But without the easy financing, you would have to option the property at enough of a discount to make a profit and still offer it at a discount to the buyer. Price would have to be the incentive, not financing. A lot tougher to do in this market.