BiggerPockets

Greg,
This is a problem in Mlps/St Paul, and also in many other markets that have code enforcement and rental license inspections. I had a friend that purchased an apartment building in Mlps this spring that ended up spending more than 100k on code compliance issues to get a provisional rental license reinstated prior to closing on the property. It was a cart before the horse situation, the city revoked the rental license of the previous owner due to so many repairs needed, but the banks wouldn't finance without the license. If it weren't a bank owned property with an established well respected Mlps landlord, the deal could not have been done. In that situation I don't know if there is any way you could have wholesaled the property.

With the really bad properties that need lots of code work, a cash buyer is about the only ones that can touch them unless you have a private money source or short term HML or transaction money where you can provide the proof of cash available to perform and the repairs are not required before closing.

The title company would have troubles if both buyers didn't have the documentation from the city when closing the deal. So yes, the end buyer needs to show proof of funds as well.

I think you would be better off assigning the contract taking your fee, before they close. You the, end buyer and the city should be working together to get the deal done. Transparency is the only way you will be able to do this successfully more than once, because when the city finds out what you have done, you won't likely get another prelim code compliance document for closing.

Unless I'm missing something here your C Buyer doesn't need to provide POF since he will be buying from you, not the bank. Your buying from the bank therefore you need to provide the POF for the A (the bank) to B (You) side of the transaction.

Ideally your B to C side of the transaction will be all cash or HML. I agree with Mike about transparency, but ultimately your buyer is going to be the one to Rehab the home so they need to be the one dealing with code enforcement.

Jeff

That's an interesting point Steve, I think you might be correct because you would have to follow all the rules to close the A to B side of the transaction. That makes it a little more difficult but still do-able.

If it were me I would make sure I had a HML lined up so I could close on it myself in case your buyer backed out....that is if the deal made sense. One positive is that jumping through the extra hoops will score you points with your buyer.

Jeff

It might not be such a bad thing to get rid of the double close. In my area, it has just made banks more sour on investors because there are so many noobs running around calling themselves REIs and giving a bad name to us buy and hold guys that make up the majority of our profession.