Wholesale #14, Danvers – Under Agreement

I received a seller lead from my direct mail back in September. It was from an older couple who hadn’t been able to pay their mortgage in several months so they were going to be foreclosed on. The husband was in poor health and they wanted to get the process moving along ASAP. Unfortunately, they were under water so they had to pursue a short sale. I hooked them up with the short sale negotiating company that I use regularly to start the paperwork and to see if they would be eligible. About a week later, I visited the property for a walk-through and to see if it was something I’d be interested in purchasing. It was immediately clear that the house needed a lot of work and on top of that, the layout was very awkward (see below for pictures and the floor plan). In any case, it was overall a nice house in a good neighborhood so I decided that I would submit an offer once the house came on the market.

Side note – For those who aren’t familiar with short sales, you need to list the property on the MLS before the seller can accept an offer. Once the seller accepts, the bank still needs to review the homeowners file and then hopefully agree to do a short sale.

The property came on the market in October for $165,000 and I immediately submitted an offer for $150,000. The homeowners accepted my offer but I then had to wait for the bank to get back to me.

Fast forward to the end of January and I finally received a counter from the bank for $180,000. So I went back to the property with my contractor to get a good estimate of repairs. Once completed, I countered at $155,000 and included my contractor’s estimates and pictures of all the repairs that needed to be made. A month went by before I finally got the bank’s acceptance in the middle of February and I’m closing on this property today!

From the time I got this property under contract through February, when the offer was accepted, I purchased a number of other properties and, unfortunately, don’t have time for this one now. But because I was able to lock this property up at a good price, I decided to wholesale it. I sent out an email to the investors in my network and within an hour I received a full price offer, sight unseen. Now, this isn’t a typical scenario, but these investors happened to know the house because they looked into buying it the year before. We signed a contract last week and are scheduled to close on Friday. With short sales, you generally aren’t allowed to assign the contract so I had no choice but to do a double closing.

I’m sure you’re wondering what I sold it for, right? Well, you’ll have to wait!! I want to review the miscellaneous closing expenses before I give you an accurate profit amount. Remember, with a double closing, it isn’t as simple as buying for X and selling for Y and the difference between X and Y is your profit. I still have to pay closing costs, prorated taxes, property insurance, etc. when I buy it and more closing costs and transfer taxes when I sell it.

Stay tuned…