HELP...What should I do??

Question

Okay, here goes...

I have what I believe to be an excellent investment property:

ARV= $400k
Purchase Price: $240k
Repair Value: $12k

The problem is this,

It is a bank-owned property and the bank needs verification of funds BEFORE signing a purchase contract. I was planning on wholesaling this property (would have preferred to Double Escrow...don't have time), so therefore would need to market it to my buyers. My question is, how do I market such an excellent investment property to my buyers without them trying to go around me and deal, knowing that I don't actually have the property under contract? in other words, I need my buyer to submit a proof of funds to me so that I can give it to the bank. If my buyer knows that I don't have the money, they can cut me out the deal.

Is there anyway for me to market the property without actually telling my buyer that I don't technically have the property under contract?

Please Help! I don't want to pass up this deal.

Ryan Webber · Answer

I would go the Hard Money route.  Get a pre-approval letter from them, put it under contract, and then double close.  Why wouldn't you have time to double close?

As Jim pointed out, every REO I've run into will not let you assign the contract, so its double close, buy it yourself, or take the risk of birddogging it.

Account Closed · Answer

Ryan,

By a double close I am expecting you are indicating that the buyer will take down the property using the hard money. They will pay the points and other fees. That way they close on the deal they agreed to with the lender and then they resell to the end buyer.

To all. With a double close the end buyer's lender could have an issue as they will see the title vested in the name of the bank when they look at the preliminary paperwork. Some lenders will then look back to the prior sale price (1st leg of the double close).

Be prepared for the 2nd leg to fail at the closing table with a late underwriting block if the end buyer is getting a conventional mortgage.

Other lenders will not care but you do need to be prepared to end up with 1/2 of a double close. You will be the owner with carry costs and no exit nailed down.

Eyes open when driving in a dark tunnel.

John Corey

Matthew Giegerich · Answer

Mr/MrsWilliams-
Some points that will help you sell.
1.get proof of under market value - NOD-COMPS at time of purchase
2.document repairs with receipts.

This will be helpful for buyers new mortgage company.
Good luck

N/A N/A · Answer

Great!

Thank you The_Specialist

N/A N/A · Answer

I have decided to get the deal done (hard money), rehab it (advertise the property for sale while this is being done) and then sell it for full market value.

Matthew Giegerich · Answer

You cannot even legally offer the property or make any agreements with potential end buyers without having a"vested interest" in the home. This can vary in terms -a contract is a generally deemed a vested interest. Seasoning is an issue- John is correct,double closings are not such a common practice as they once were- the best I have done is get  the deal done( hard money), and put the buyers on deed for 3 months and then refi them.

Account Closed · Answer

Matthew,

Thanks for the added perspective.

People need to watch out when they assume a double close will work and then they make a binding offer.

Be prepared to walk from the earnest money or have a back up plan.

John Corey

N/A N/A · Answer

Thank you to everyone for your responses. I really appreciate it! I found out yesterday that the bank will not allow assignments of contract, so I decided to birdog this investment.

Again,

Thank you!

Scott Miller · Answer

As John and Ryan have already spoke to, the issue when wholesaling to a buyer using conventional financing will be what's called "chain of title" (a form of title seasoning that is based upon how long the owner has been on title).

Sequential closings are something that are easy in practice but often difficult in execution (for some of the matters already discussed here).

Regards,

Scott Miller

Account Closed · Answer

Ryan,

Thanks for clarifying.

To anyone who wants to use a double close and who is not bringing their own money to close the first leg.

Be very careful about such deals. You need a title company or RE attorney who is comfortable handling a double close. Many have decided to not perform the service for all sorts of reasons that I will not go into. Hence get the escrow agent lined up before you commit to such a deal. Make sure they are on board and will not back out when they realize what you want. There are a few out there who know what a double close is and will perform the service.

Second, you really need to be certain that your end buyer (cash buyer, etc) will perform. You want to know they are ready, willing and able to close on the agreed date. You do not want noise from the seller or penalties from late closes. If you expect to go back to this seller for more deals in the future you want to deliver on your agreement to buy.

John Corey