Putting foreclosures under contract for wholesale

[Josh Kercher]

Hello friends,

I'm a part-time investor and my experience up until now has been with buy and hold apartments and landlording... I'm beginning to get people approaching me about finding properties to invest in (for themselves) so I thought I would entertain the idea of wholesaling.

Many properties in my area (southeastern Michigan) are foreclosures and require "proof of funds" to even write an offer on to put under contract. I am currently having an issue with getting a bank's pre-approval for the sake of being a legitimate shopper on these properties.

I wanted to see if anyone can give advice (per experience please) about getting foreclosures under contract for wholesaling when a standard pre-approval is out of your reach?

I, very much, appreciate anyone that can supply good advice. I have a couple investors in particular that have a ton of cash they want to throw at me :D

[John Klahn]

Josh,
In my experience, if you have a relationship with someone who has cash to buy properties you can have that person draft and sign a document that says that you are authorized to use their cash to purchase real estate and that you have a working relationship. That person would also provide you with a bank letter reflecting their account balance or a printout of a recent bank statement. These 2 documents will serve as your POF.

Once you locate a property, have your agent submit a contract and I have done this 2 ways. The first way is my most common. I will have the name on my contract for purchase be an LLC that exists (or will soon exist) for the sole purpose of purchasing this property. If the contract is accepted, I have the end buyers (your investors with a ton of cash) sign a simple purchase agreement with me to buy the LLC that is named on the contract for purchase. Then they pay me and take over the contract and close as the buyer. The second way is to have your personal name as the buyer on the contract for purchase. If the contract is accepted, I have the end buyers (your investors with a ton of cash) sign a simple purchase agreement with me to buy the property in a double close situation. With this method you may or may not need to arrange for transactional funding.

With both methods above, I make the offer a cash offer and do not have a financing contingency. Also, I have the investor pay me a non-refundable deposit that is equal to $500-$1000 more than my earnest money check.

I hope that helps!

Cheers,
John