BiggerPockets

This has probably been answered in a few different posts but by the time I dig and real through all the forum topics I think it's a little easier to ask away instead:

I have a Fannie Mae REO under contract for $70k and there is the usual almighty deed restriction limiting the next sale within 90 days to $84k. A local wholesaler has found a buyer willing to pay 88,000 for the property so that he can get 4k out of it himself as well. If you follow me up to this point than I'm sure you know where my question is going...is there a simple and easy way to structure the deal so that the property goes under contract for the allowable 84k and we can include the wholesaler's fee as some sort of closing cost that won't effect the purchase price? An assignment fee maybe?

I've been wholesaling and rehabbing for a while now, but mainly dealing with my own properties from the Trustee's sale. I'm usually turned off by the REO because of all the parties and limitations involved but this is a great deal that I couldn't pass up. Normally we would just sign up the end-buyer at the higher price and call it a day but that's not an option here.

Any help on how to properly structure this without going over the 84k max selling price and still allowing for my wholesaler to get paid out of escrow would be greatly appreciated.

Would that work though? The sale price cant be more than $84k for the deed restriction right?

The other ways around are for him to be paid outside closing by the buyer (assuming this is a cash buyer).

Or you can just make less and give the end buyer a better price, and pay the wholesaler 2k so he can still make something?

You are absolutely correct, Jimmy, and I'm trying to figure out what I was thinking when I wrote that response... :oops:

The middle-seller can sell for up to $84K and pay the wholesaler on the HUD, but that would net the middle-seller $4K less than he wants.

Or, like you said, the buyer could pay another $4K outside of closing to the wholesaler, though there may be legal issues with this...

As for Marco's suggestion that the $4K be listed on the HUD as a "closing cost", I'm fairly certain that won't fly. And legally, the buyer can't pay a referral fee or commission to an unlicensed person (the wholesaler, in this case).

So long as it is legal and allowable to pay referral fee's to an unlicensed individual in your state you would still be able to include the 4K at escrow...

The purchase price can still be $84K ---

Would simply increase the end buyers closing cost which he would have to bring to the table at close

Let's Assume 20% Down & 3% Closing Costs for your End Buyer

$84,000 Purchase Price
$2,520 Closing Costs
$4,000 Commissions / Referral Fees (Buyer Side of HUD)
$90,520 Total Due from End Buyer @ Close

$67,200 Loan Amount

$23,320 CASH TO CLOSE for End Buyer

Hope that helps...

Went straight to our escrow officer and asked the same question. We wrote up the contract between the buyer and our LLC directly, and wrote in the comments "Buyer hereby agrees to pay "wholesaler x" an assignment fee of $$$". Just as I thought, this now goes as a debit under the buyer side of the HUD and doesn't effect the purchase price.

Thanks for all the comments, I'm glad we were able to get this figured out in the end.

Glad you were able to get it done.

But for the record - at least here in AZ - unlicensed buyers can and do pay assignment fees to unlicensed wholesalers all the time. That's how wholesaling works.

I'd imagine that unlicensed sellers can too, but I've only ever gotten paid from one seller, and that was outside of escrow for unrelated reasons.

Chuck Prime