All Forum Posts by: Tim Silvers

I am new to wholesaling and still educating myself, so please bear with me.

With respect to a wholesale transaction, I understand that it only makes sense to contract to buy properties which have enough equity for an end buyer. Obviously, properties with negative equity aren't going to work for the wholesale flip business model.

That being said, how likely would it be to locate such deals in declining markets such as mine (Las Vegas) in which the only apparent opportunities to profit at enough of a discount are dominated by short sales and REOs, as the majority of owners motivated to sell are those who are severely underwater (75% of every mortgage holder in Vegas).

My assumption is this: When it comes to wholesaling, it's not so much about the specific market and the sellers in it; it's all about the numbers, like what Carol stated about putting out 400 offers. There's always that white elephant or motivated seller out there, clueless as to how to pro-act.

The question then is: As time is money, does the amount of downtime trying to prospect for those few wholesale flips with enough spread exceed the time spent finding and putting together other types of flips, i.e., short sales and REOs???

Better yet, is anyone out there wholesaling successfully (or not) in Las Vegas or in similarly-distressed markets (Miami, Detroit, Phoenix, Sacramento)?

I also heard that you could do a quit claim from the seller to you or your LLC similar to doing it with a LT, but was told it doesn't get recorded. Not really sure how that works.

If they want more black and white than that, it'd have to be from the man upstairs!

And for that to be public record, I'm assuming it's a true arm's length wet close with real funds - whether it's 1-day dough or private $ or whatever, correct?

Excellent! This clarifies much.

Last (I hope) question: I realize that there's a general disclosure stating your intent is to profit to all parties on both sides on the deal, but is it necessary to disclose to both exactly what you paid and sold it for (the spread)???

Justin, thanks for the quick reply.

Question: Do you disclose that you are reselling the property at a profit to the end buyer and his or her lender (if there is one) as well???

Here's another issue: Wouldn't it be looked upon as possible a disservice and conflict of interest for a seller who does not qualify for relief under the debt forgiveness act to be subject to a larger tax liability on a short sale through an investor (as a result of a lower payoff to the bank) as opposed to through a realtor or other mitigator (resulting in a higher payoff)???

More on short sale flips taking a hit:

http://homeequitytheft.blogspot.com/2009/06/atif-refuses-to-issue-title-insurance.html

http://www2.tbo.com/content/2009/jun/11/title-insurance-groups-move-could-stymie-short-sal/news-realestate/

I wonder how many short sale flippers do actually disclose in writing their intent to resell at a profit to the short sale lender.

So, bottom line - are we sure disclosing to the lender (and seller) make the transaction 100% legal???

I would think most do not disclose to the end buyer or their lender that because it isn't any of their business, but how do we know that wouldn't be considered fraud as well?

Another thing: If you read the comments section of the 2nd link, even the so-called gurus soliciting their short sale programs are accused of using tactics
to make the appraisals come in where he needed them to.

Who is doing short sale flips and doing them successfuly, but with full disclosure? Is it even possible?

I mean, as soon as the lender on the A-B part is fully aware of the investor profiting, doesn't that KILL THE DEAL???

I think what the first link is talking about is what's commonly referred to as a dry close in which the funds from the end buyer are used to purchase the property for the investor. Therefore, not an arm's length transaction. That and the fact the intent to resell weren't disclosed to either the seller or the seller's lender. That's where the line is drawn.

The second link has nothing to do with short sales and is outright appraisal fraud. That was going on rampantly when the market was in an upswing.

What I'm concerned about is that the title companies/feds would start scrutinizing any deal that's back-to-back wherein the investor makes an immediate spread or profit. I've seen too many times that what's legal today is suddenly illegal tomorrow and no one tells you until it's too late.

I'm not defending these guys' actions, but how do we know whether the properties weren't already underwater and the owners already in default? It didn't state that. And the BPO, you're right. Why didn't the bank send their own agent to do the BPO?

Like the other 2 posters pointed out, the article is vague as to what really happened. I had assumed that the home was already underwater. What you're suggesting is akin to appraisal fraud and inducing the seller to sell which is possible if a short sale would have otherwise been completely avoided and unnecessary - but in this market it's unlikely, as a good many homes with mortgages are underwater.

Excellent points, guys. I hope that's the case!