ABC deal. I'm C. Do lenders typically finance the wholesaler fee?

[Joshua King]

Hey guys,

I'm close to closing on a deal (tried to close Friday but this issue moved us to Wednesday) and have a question.

The house in question is a single family rental with a tenant in place. Good payment history, slightly below market rent, but not bad. Immediate cash flow and the tenant is a handyman, so that's a plus. 

A: Owns the house, lives out of state

B: Wholesaler

C: Me, local buy and hold rental investor

Here's the deal. I'm buying the house for $125k from B who agreed to buy it for $115k from A. The $10k difference is his wholesaler fee and my realtor's commission. 

My bank initially approved the deal at $125k, but the closing attorney said we didnt have a purchase agreement that stated the price at $125k, so we couldnt close on that price. I am having to close on the Price of $115k and pay the $10k out of pocket instead of rolling it into the financing. 

The bank could finance it at $125k because the apprasial came back great, but its this legal technicality that is costing me $8k ($10k less the $2k decrease in the 20% down payment).

I already tried getting A and B to change the sale contract to $125k including fees, but A didn't want to change anything. 

As it stands I'm set to close Wednesday, then will refi in 6 months to get that $8k plus hopefully some extra back out. 

My lender has really been flummoxed by this purchase assignment thing. They do 1000 loans a year but most of them are primary residences. Havent seen an assignment in 4 years. 

Anyone ever run into this? Any different experiences or strategies for dealing with it? 

[Aaron K.]

Yes you can incur more closing costs this way which is why a lot of lenders want to work with cash buyers, but do the math and see if it makes enough of a difference on your return for it to be worth it instead of having a higher initial cash outlay.