BiggerPockets

How To Wholesale Short Sale Properties

Saturday, January 29

Selling a property to another real estate investor at a discounted price is called flipping properties, or wholesaling properties.  It also the quickest and easiest way to make money in real estate investing.

 So can you flip a property negotiated in a short sale with banks to another real estate investor?
This article explores the possibilities of wholesaling a short sale property.

 Successful wholesale real estate investing must allow you to make a profit between your buying price and your selling price.

Wholesale real estate investing involves finding greatly discounted properties, then finding a buyer, usually a real estate investor to buy it.

 You sell it at a wholesale price because your buyer has to do any repair work needed.

 You can make profits from $3000 - $15,000 per deal this way.
 If the equity is not enough, you can negotiate with the bank to accept less than the mortgage balance. This is called a short sale.

 Short sale properties usually have to be closed within 30 days after lender's approval.

Let us explore different scenarios:
1)    Assigning a contract
 To wholesale a property, you can assign the contract so that your real estate investor buyer closes the purchase.
 You contract needs to have "and or assigns" to assign a contract.  Bank do not allow this clause, so you cannot use this method to wholesale properties.

2)    Simultaneous closing
 Alternatively, you can buy and sell the property on the same table in a simultaneous closing, also called double closing.

 Your profit is the difference between your buying price and your selling price.
 You can use the money from your buyer to close the first transaction, then use it to close the second transaction.  A lot of hard money lenders did not mind this.   Most of them do not accept this any more.

In addition, if you negotiate a short sale, the bank will not allow you to use the buyer's funds to close the first transaction.   You therefore need the cash to close the transaction.
Hard money lenders also offer transactional funding, used for just closing the first transaction, making this transaction possible.

3)    Seasoning issues
Lately, if you negotiate a short sale, more and more banks are now requiring that you hold the property for at least 30 days before you sell it.
 So you can finance the first transaction with a hard money loan, then flip the property 30 days later.  Of course you must consider your closing and holding costs in this transaction.

 Lots of deals will be eliminated by this clause unfortunately.  A deal making you a profit of $3000 - $5000 is most likely eliminated.  Properties that make you more money are better for this type of transaction.

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Comments

1. 

   Bobby Dorgan Reply
   11 months ago

   No Money Down and No Credit Checks! If you need Private Funding for your short sale flips go to:

   http://www.transactionalfunds.com