Wholesaling to a new homeowner

[robdedgar]

Might be selling a property for 599,000 or slightly less, the current homeowner is willing to take 525,000 for the property.  What is the best way to wholesale to a new homeowner?  Would it be wise to use transactional funding or would the closing costs eat up most of the profits in case the new homeowners negotiate the price lower?  Is it possible to assign the contract to the new homeowner for a fee?

Any help here would be greatly appreciated.

Rob

[robdedgar]

Sorry forgot to add; at what point should I get the transactional funding if used? 

[naqueen]

Hi Rob,

I would just assign the contract to the new owner for $599,000 and you keep the difference of that and $525,000.

I don't know if you were going to pay the c/c but if so that is just a difference of $15,000 the most.

You are still looking at a profit of $59,000 which is a great deal!!

Good luck!

[robdedgar]

Thanks for the info. 

[robdedgar]

I am under the assumption that when you assign the contract you simply sell it to the new buyer.  How will this process work in this case?

[ReCoachDennis]

You can simply assign the contract to your new buyer.

You will sign a contract to buy the property for $525k and then sign an 'assignment of contract' stipulating your fee of $70k and that you are assigning them the right to purchase at $525k.

Here's the deal. Always protect yourself from tire kickers. Make sure you get some of that assignment fee up front (usually after title comes in). The title company will handle the rest at closing.

The title company may want the seller to sign an assignment acknowledgment so use their form.

Dennis

[naqueen]

Ok now I'm a bit lost..

To REcoach,

How will he get assignment money upfront? You mean in the end buyer's downpayment?

[xpandergt]

So let me see if I understand this right rob, you are thinking about using transactional funding to buy a $ 600k house in order to sell to another homebuyer? A wholesaler by definition doesn't deal with the public when it comes to selling. Let's say that you do buy the house from the current seller. have you really thought through your exit strategy with this? Banks have a problem with a person being on the deed for such a short period of time. Transactional Funding is very short term financing. The name implies it all "TRANSACTION"al. So the seasoning issue is your first big problem. Unless you have a retail buyer in the wings that has $600k in cash, the person you find is going to have to get financed through the banks. You can't sit on the  property with transactional funding while waiting and hoping you can find a retail buyer that will not only pay your price but is able to get financed in the first place. Let me ask you a question rob, what will you do if you don't have a retail buyer ready by time of the closing?

[robdedgar]

Exactly, that was why I asked my second question.  I was just wondering if it would be neccessary to use transactional funding.  I know it is only supposed to be used in a 24hr time frame.

[robdedgar]

I got the lead from a mortgage broker who has already qualified thier client. 

[xpandergt]

I got the lead from a mortgage broker who has already qualified thier client. 

To me, a mortgage broker's word is as good as a politicians. Take it with a grain of salt. Did you already right up the contract rob? Do you have any escape clauses in the contract in case the financing falls through? This is what is running through my mind. I usually like to deal with the mortgage company directly so I can get a decision directly from the people lending their money. All your eggs are in one basket with this buyer your mortgage broker said is approved right? When I wholesale a property, I always have at least three people in reserve in case the buyer can't come through prior to closing. This way I don't have to scramble for another buyer and have to close on the property. If you get a phone call from your mortgage broker giving you some bad news prior to closing, your heart is literally going to sink. At the very least in your contract, you should allow for an extension of closing in case this happens.

[robdedgar]

I have not written up the contract yet.  I was going to wait to make sure that they were interested in talking before I wrote up the contract.  Was thinking the longer it took to sell the lower the Homeowner would keep going on it.

[ReCoachDennis]

You can wholesale to a first time homeowner.

Just to be clear, is this an REO you are trying to flip or from a private seller?
With private sellers, you can simply do an assignment of contract and ask for a non refundable deposit up front.

Now if you're dealing with REOs and such, that's when your transactional funding comes in.
also, you want to look for a loan commitment not just a prequal.

Dennis

[robdedgar]

This one is a very motivated home owner.

[ReCoachDennis]

Hey rob,

I wouldn't wait too long. If they are as motivated as you say, you should be able to sign it up.

do it asap and make sure you leave plenty of room in the deal for your wholesale fee. If you haven't started  lining up buyers, you have to do so asap. Don't rely on just one buyer. That's a big mistake and can blow your deal.

have several lined up and take the best.

Dennis