Granada Hills, CA · Member since 2012 · 22 posts · 0 votes
How does wholesaling work with a distressed seller who is upside down in their mortgage? E.g. I find a seller who is four months behind on their mortgage, they still owe 100k on the mortgage. I pull comps in the area, and they are around 80k. If the maximum offer allowable is around 50k, if I offer that number even if the seller jumps at that, and I try to assign at 65k doesn't the bank have the final say in this situation.?
If he owes 100k on an 80k house, the seller either has to short sale with his bank or let his bank foreclose. You can offer anything you want in that case but you'll never be able to assign the contract or get title until the bank gets the 100k its owed or they agree to the short sale. A mortgage is basically a lien against a property that says "this property is mine until you pay me back all the money you borrowed or this note is somehow satisfied". Unless that mortgage can be satisfied, there are few options. You want people who have equity in their house. You want that 100k house to only have a 50 or 60k mortgage left so the mortgage can be satisfied with your offer.
If you are finding a lot of seller leads that are under water, you may want to find a short sale specialist in your area and establish a relationship. Perhaps you can refer these leads and work out a deal for a finder's fee or percentage of the sale if they are able to convert. This way you can monetize the lead.
You can make your offer - but it will be subject to the lender's approval of the offer price. If you have the cash and are patient then this is a great way to get deals. You need to work with a knowledgeable realtor or a title company that specializes in short sale negotiation in order to be successful. So many investors don't want to be bothered with these leads because they can take 3-6 months to close. But really, if you have the right team in place then you can make your offer and let it sit there until lender approval, so it's not much work on your part. And you can really get good prices.
So Chris, in doing a short sale in the wholesale context, do I just tell my potential endbuyers to wait for three to six months with the promise of a good deal?