Wholesale A ShortSale Property

[Shawn Taylor]

1. Can you wholesale a shortsale property?
2. Can the owner sell her ownership to me for a contract to sell to an investor?

I know shortsale transactions can take a couple of months, but I have heard that they can be very lucrative once the bank and all the paperwork is completed.

I have a motivated seller who wants to sell her vacant house, this house has been vacant for over 3 years, she wants to sell her ownership to the house to me.

My exit strategy is to sell the contract to an investor, the house is upside down, she owes a lot on the house, I figure the bank wants to sell the house quickly to avoid a foreclosure.

What is the best way to approach this to get this under contract, legally?

This house is a 4 bed; 2 bath; 2,211 sqft; it was built in 1952. She lives in another state, I have had many dialogues with her to get the numbers on the property:

1st mortgage: $523K - Adj rate - about $2600 monthly payment

2nd mortgage: $45K - Adj rate - about $204/mo.

The bank told her they just want to get the house off their books, but they have not said what they are asking for the house, the bank did a recent appraisal (12/2013) of $250K which I think is very conservative, the 2012 taxes were $6,219.

I did a rough comparative market analysis which came out to $325K, a good ARV would be $330K on the low end and $425K on the high end. A repair value I estimate around $45-50K

[Wendell De Guzman]

@Shawn Taylor ,

1) Yes - you can wholesale a shortsale deal. However, the bank will NOT allow you to do a simultaneous close. You need to BUY the property and actually CLOSE on it FIRST. You need to bring MONEY to the table. You need a private lender on your team to allow you to buy shortsales - close on them first before you can wholesale them.

Also, some banks impose deed restrictions on shortsales - meaning you cannot resell the house in 6 months. Read the shortsale payoff letter.

I agree with @Eric Black : the deal has to be good for you to wholesale this deal. At $425K ARV x 0.7 - $50K repairs - $20K profit = $227.5K (this should be your total payoff - meaning, both banks have to agree to a reduced pay off such that the total is no more than this amount).

At $330K ARV x 0.7 - $50K repairs - $20K profit = $161K should be your target acquisition price

Question: why are you getting such a wide range of ARV? Which one is closer to the truth?

2) Yes - that's possible but if you're the new owner - you're liable for the house (say a squatter lives there and slipped and fell - you will be the one named on the lawsuit). Also, be aware of the foreclosure rescue laws or regulations in your state. Some states do NOT allow that you get ownership of a house in preforeclosure prior to you paying off the loan(s) on it.