Have any of you heard of John Alexander? Inverse Purchase?

[gt5323b]

Does this program still work?  I heard that mortgage companies are tightening up and not giving out subprime loans anymore?  Also, what's the marketing that you use to find the buyers?

[My2Cents]

Well as far as I know the way it works is you go to contract with a seller for X price disclosing that you are an investor. You the find a buyer and go to contract with them for Y amount and the spread is the profit. You then see about getting him set up with a subprime loan if possible. Then you invoice the original seller a fee for an amount up to the amount of the spread in order for you to Release him from the original contract so the seller and buyer can then go into contract for the purchase amount. Sounds like the seller is technically buying you out or paying you to let him out of the contract. So basically a 3rd contract is written up between the seller and buyer you found and  this is submitted to the title company along with your investor disclosure form, the invoice/release form and all other necessary documents for closing. At closing presumably the title company will come across your invoice/release and cut you a check. That is how I understand it.

[AlexLock85]

I think people are missing the fact that the inverse purchase method is DIFFERENT than simply assigning a contract. It allows those with lower credit scores the ability to purchase...therefore you don't have to sell fixer uppers, but rather can sell nice houses and make a nice spread after the discount the note buying company takes.

Would still like to hear if anyone has used this method and if so, could share a personal experience? Thanks guys..and I know this topic is a little old

[thebuzz909]

hello everyone i know this is old but i myself stumbled across this program too, i went ahead and read all the info they provided me with and it seems something i can pull off im not a negative person but dont want to be naive at the same time. so far some have made money and some haven't and some got sued. now that worry's me because i don't want to put a great deal of effort to then be sued for something i wasn't aware of. how can i be sure this is legal in California. thanks

ps i'm new to this site and to real estate investing in general.

Carlos.

[christopher w]

Carlos,

In 2007 I worked with a wholesaler that utilized the inverse purchase and she closed quite a few deals. However with all of the new guidelines in place It is very difficult to utilize the inverse purchase. The main problem being that once the lender for your end buyer sees your large commission being paid out by the seller on the HUD they will not fund the loan. Most if not all if the large national banks (Wells Fargo, Bank of America, Citi, etc...) have started requiring the seller's side of the HUD to be disclosed before HUD approval to be sure that large marketing fees are not being paid out to unlicensed third party persons like the wholesaler.

The main reason is because the sales price for the house is being inflated to encompass the marketing fee. If the end buyer and the initial seller were to get together the sales price would be thousands of dollars less.

And sellers are not likely to pay the full marketing fee out side of closing because they will be responsible for the taxes on the full amount of profit on the property listed on the HUD.

So in short... there is way to much risk that you are not going to get paid on the deal once it gets to closing for you to put in any amount of time and energy using this type of creative financing.

[usamts]

This program has been around for a while.

Unfortunately it is frowned upon by the authorities.

(Word to the wise).


Mike