BiggerPockets

Hey guys, so I have a cash buyer on one of my short sales that wants to close with the bank in his name. We already agreed to a price and he showed me his POF so I know he is serious. Now the bank is asking me to submit a final contract and I am wondering what is the best way to do this....Should I ask him to pay me the difference in price now and hold it in escrow until we close? That way I will continue to negotiate but it will be in his name. Or should I just add him to my own contract and then back once we have an approval letter.

Thanks for any help...

Well, the property is need of rehab. He is a contractor and wants to fix and flip it himself and he said too many transactions showing up on title would raise red flags to his end buyers lender.

Honestly I don't have any other buyers at this time and his offer is very close to asking price. He owns around three properties in the neighborhood so he is willing to pay a little more.

Doing the double close would likely cause him to back out. I don't mind submitting the contract in his name I just want to do it legally without getting screwed by this guy. I figured a non-refundable "referral" for the difference would be the best way to do it so he can't back out.

Justin you said by doing it this way it would make me an agent, does that mean I can't do it b/c it's illegal?

James,

The property is listed with a realtor that works for me. However I found the property through my own marketing and have full control of the deal including negotiations. The realtor only listed it on the mls for me but is not really involved in showings or anything else. The buyer I found doesn't have a realtor either.

He is a contractor that saw my for sale sign and made a cash offer.

Everyone received full disclosure. The buyer simply wants to close directly with the bank (A-C) and pay me on the side so he can fix it and flip it on his own. That way the title companies won't raise any red flags for his end buyer.

So instead of... A-B B-C then C-D
it will look like A-C, then C-D with (B) getting paid on the side.

Now I am at the point where the bank is asking for a final contract to be submitted. The buyer has already agreed to pay me the difference of what his offer is and what I get it for...so my question is.....how should I proceed?

Do I ask him to pay me the difference now and hold it in escrow until he closes? Or is there a better way

Usually, the realtor is working for the seller even if you brought the property to the realtor unless the seller already has a realtor who represents him/her. In this case your realtor could not list it on the MLS since he/she doesn't have a contract with the seller. You can do what I do. I have several buyers whom I have a separate consulting contract signed and witnessed which make my buyer oblige to pay me the agreed sum at closing. I let them buy it directly without the double closing. I do, though have them sign the contract prior of showing them any property. I work with an agent who set up the deal and so far I didn't have any problem. If you go with contract like this, make sure that you have a clause allowing you to put a lien on the property should your end of the bargain is not fulfilled.

When using a loss mitigation charge on the HUD 1, the seller's lender may question the charge when going A to C.

Some lender's will not care if you charge the fee, but others may be unable to accept this fee. Some lenders work with an preapproved list of acceptable HUD 1 fees with some capping the amounts.

It might be wise to have a conversation with the negotiator before making a decision. Also, get the loss mitigation fee itemized on the approval letter. If thye give you a hard time about it, tell them you will sweeten the pot by increasing their net proceeds.

Also, loss mitigation fees will most often be called into question when they exceed agent commissions. If you are expecting to charge a fee greater then 3%, then I would definetly get this approved by submitting a new HUD to the negotiator and get the loss mitigation fee on the approval letter.

Lastly, when submitting the title company submits the HUD 1, have them do it several days prior to the scheduled close. I have had the transaction halted because the negotiator I was been dealing with was not the same person who approves the final HUD 1.

Additionally, find out how much more your end-buyer is willing to pay to have a clearer title. Generally, this would net the contractor more on the flipside and I would then negotiate a slight increase to the offer price.

Good Luck!

Thanks for clarifying. If that fee is going on the buyer's side, then only disclosure is necessary.

Thanks James, I called my attorney and he agreed to hold it in escrow. I am taking Eddie's advice about putting a lien on the property if he doesn't pay but at the same time holding it in escrow would make it safer for me even though I don't really have to. I haven't closed a deal like this before so I think playing it safe is more important even if it will cost me a bit more.

Another interesting point...thanks I will double check with the title company, hopefully the agreement alone should be enough than