I am not clear as to the difference between rehabbing and house and flipping one. Could it be that when you flip it is for quick profit and you would do a 1031 vs rehabbing which you would live in it and hold on to a home at lease 2 yrs for capital gains?
Please help clarify for me.
Thank you very much,
Barbara
A lot of people use them interchangeably.
I typically think of "rehabbing" as longer term more substantial improvements whereas "flipping" would be more cosmetic and focused on a quicker turn around.
But that's more for positioning in my own mind. Ultimately they're essentially the same for most people.
A lot of people use them interchangeably.
I typically think of "rehabbing" as longer term more substantial improvements whereas "flipping" would be more cosmetic and focused on a quicker turn around.
But that's more for positioning in my own mind. Ultimately they're essentially the same for most people.
Some people use them interchangeably. I am a wholesaler and "flipping" to me is when I either assign or double close a property or even if I sell it without touching it in 30 days from closing. Rehab means I or someone else has to work on it to sell it.
Hey Ryan Webber, I am interested in flipping the property without touching it.. basically being the middleman, you mentioned double-closing, what is the process for getting the property from a wholesaler such as yourself, then selling the contract(purchase agreement to the next investor? would both of us need to sign the purchase agreement, or is their an ammendment done to the purchase agreement to the end-buyer(investor)
Also how would I be paid at the closing, would the cost be on the Hud-1/settlement statement etc. if so what section would it be listed. would my proceeds come from the title/closing attorney?
Sorry for all the questions.. :superman:
I'm sorry, Caesar. I missed your post or I would have answered sooner.
In the situation you described where you would wholesale a property from a wholesaler, the procedure would depend on if it was before closing or not.
If it was before closing and I was double closing, the person I was double closing to could use an assignment of contract to assign the property to someone else (the original contract is not altered).
If it was before closing and I was assigning the contract, the person I assigned it to could double close the property to someone else.
Now I am avoiding the idea of a double assignment (the person I assigned it to assigns it to someone else) only because I have never done one and have never consulted an attorney or title company to find out if that's possible. I have done one deal similar to that and for some reason the person that was doing the second assignment was paid as a consulting fee on the HUD 1. I plead ignorance, though. I don't know what the laws are around a double assignment, but it would seem to me to be doable.
If it is after I have closed on the property then someone purchasing it from me could assign or double close it to someone else as normally done.
Now let me say this, I do not allow an assignment on a property I am selling unless the assignor fully understands that they are still completely liable for the contract (in my eyes atleast) and that I have their $1000 minimum earnest money. I also do not allow any contingencies on my contracts.
On an assignment, the HUD1 will document your fee on the buyers side as an assignment fee. On a double closing you take home the difference between what you owe on the buying HUD1 and what you made on the selling HUD 1. In both instances you are paid by the title company.
That's basically two terms with the same meaning. Some people saying buying and selling, some say rehab, some say flipping. Flipping is the in term that's being used on all those flipping house shows on tv. In some cases you don't need to hardly do anything to a home. All I did on my last flip is install new blinds. Or perhaps all you need to do is mow the lawn, and paint the front. The other thing that most people don't realize is that if you have to do a rehab it can be extremely inexpensive to do if you do the work yourself. There's two inexpensive ways. 1) is that you can go to like Home Depot and get a instore credit card that will allow you to defer payment on your materials for 6 months. That way you get the materials for free at first. Then if you can sell the home within six months you can then pay of that line of credit from the proceeds of the sale. The other way and this honestly is my favorite...call me frugle....but got to Walmart, and look at how cheap they sell paint. You can buy like those 20L large pales of paint for like $50 bucks. So for like say $100 you could do the interior of a whole house. Brushes? and other stuff? Well just go to the dollar store. They just got to work, as long as they work that's all you need. I know this all sounds cheap, but I"m just saying if you're just getting started and you already don't have the money for anything, these are the cheapest ways to pull off a rehab. Again...I just love Walmart paint :lol:
Sirceasar,
I am also from Atlanta. When I did Mortgages, flipping (double closing)
was one of the new laws that would land you in jail . I suggest
you check the laws before you go this route. the new respa (Disclosure)law is one of many that protects sellers and buyers from these double closing. There has been several arrest inreference to this kind of practice.
If the laws have changed in Georgia please let me know. I think Assignments are your best option, Just disclose to the seller up front and
you will be fine and Legal.
Good Luck! :violin:
Lenderles, the only RESPA disclosure laws that I am familiar with in reference to double closings is around the disclosure of title insurance premium pass-through. If it is a RESPA law that you are referring to then it would not just be for Georgia as you communicated but for all of the United States since RESPA is a federal law. I have never heard of an arrest around any failures to disclose of this type since it is a civil matter and not a criminal. The disclosure of title insurance premium pass-through is if the seller is paying for title insurance then they will need to sign a disclosure stating that you may be using that premium to partially fund a title insurance premium on a simultaneous closing to a buyer.
I also know of several investors in Atlanta that do double closings on a regular basis, and I would hypothesize that they are not in danger of jail or even civil charges. One of them even uses a respected attorney to do his double closings.
I also would ALWAYS recommend getting sound legal advice from a qualified attorney in your state before doing any type of creative real estate investing.
I also think communicating unverified or misinformed rumors around real estate laws is a destructive practice and should only be done with the utmost caution and reserve.
www.commdocs.house.gov/committees/bank/
best pages 6,7,15,16,17,20,26
And this wasnt the begining of the flipping discussions. Flipping (at the table) also known as one of the top predatorial lending topics in Georgia Has been around for years since GAFLA. buying a house, Rehabing and selling is not the kind of flipping that concerns anyone. I appoligize since I didnt say I was talking about Georgia only. but, I thought I was addressing Sirceasar who Invest in Georgia. You Know Atlanta Investors that still do double closing, I know Investors who have moved on to doing it another way. Im not fimiliar with Texas Law. But I'm sure you guys dont have flipping laws because every texas Investor who's posted has mentioned flipping at the table or another. Which is fantastic and Im jelious, Flip on brother.
lenderles, I couldn't pull up the link you posted. I couldn't find anything on Georgia law searches, but I don't think I am looking in the right place. I emailed the investor that I know does double closings in Atlanta to find out what he knows about it.
I am not sure how you are connecting a double closing with a predatory lending practice. It really has nothing to do with the lender. I am curious what exactly are you referring to as a "double closing" and why do you think it is illegal?
Ryan Webber
My connection is only if a Lender is involved.And you dont disclose to the seller that you are selling his property for a higher sales price to another buyer on the same day After you close. I did mortgage lending for nine years before I started doing Investing. The GAFLA law that passed flipping (double Closings) was one of the top five predatory subjests featured. At that time, (Now they are talking about doing double contracts). If you were in any real estate profession you would have been deeply effected by this law. The real estate market stoped completly. the Georgia Gov had to do special session to fix tihs big screw up. But, Flipping (double closings) wasnt changed. If you are using "CASH"
then no we are talking about two different types of flipping. Some Investors have no idea this exist and are doing double closings because they have a good relationship with the attorney that they use. Remember, this is a double wammy for the Attorney. If Sirceasar is using cash and there are no lenders involved then I stand to be corrected. And you are correct we are talking apples and oranges.
The investor I know that does double closings in Atlanta knows nothing of this law. He does all of his closings through his attorney, also.
I still don't understand how this would be a lending issue. So they require a lender to check the chain of title, and the seller has to be in title for how long? I would like to check out that link you posted but it's still not working.
Now you aren't referring to the new FHA regulations that prohibit flipping, are you?
Add to link
commdocs.house.gov/committees/bank/hba97524.000/hba97524_0.HTM
Also check Inmannews.com
Like I explained earlier, Call These lenders, Wells fargo, Green point
Fremont, WMC.They can explain better then me why they wont do
double closings FHA, CONV etc.
call: Morris & Scnieder, King & Assoc any attorney and let them know you want to do double closing FHA, Conv it doesnt matter.
title: Quickest way is alt 9. will give all ownership 20-50 years if requested. seller is required to own property for 180 days before
they can sell. foreclosures and Inheritance are the only properties
that I've seen get past this.
FHA is the toughest when comes to flipping. But no I'm not referring to only
FHA. this law was Flipping period.
I think there are a couple things that aren't being communicated clearly here. FHA will not do a loan if the seller has owned the property less than 90 days and if its under 180 days then they will require two appraisals and require documentation of any improvements. Conventional lenders are not currently required to do the same, but many have adopted the same procedures to protect themselves from mortgage fraud.
The link you posted was in reference to mortgage FRAUD in reference to "flipping", in which inflated appraisals are acquired and "straw" buyers are used. This is referring to FRAUD, not necessarily double closings or flipping in general. Now as I said, FHA has put into place procedures that prevent double closings and so have many conventional lenders, but this is not a law. If you are a mortgage broker and falsify documents to put through a FHA loan on a property that has been owned less than 90 days then, yes, you would go to jail for FRAUD, not for flipping. Not all lenders require seasoning of title (seller owning it for a certain period of time). If the lender does not require seasoning and FRAUD isn't committed, then there is no crime and no one is going to jail.
Most banks via their commercial departments, which myself and 95% of the investors I sell to use if they are not paying cash, have absolutely no requirements of seasoning from the seller. Therefore a double closing does not matter to them and affects no one.
Lenderles, I think your extensive experience with mortgage brokering has given you an inaccurate perspective. If the bank/lender doesn't care if you are double closing, then it doesn't matter. If the bank/lender has specifications that seasoning of title is required and the mortgage broker, seller, or whoever commits FRAUD by falsifying documents saying otherwise then, yes, that person would be liable for mortgage FRAUD.
"Flipping" is not illegal in any state that I know of, including Georgia. Committing FRAUD by falsifying documents, appraisals, or anything else when "flipping" is illegal in all 50 states.
Ryan, thanks for clearing that up.. what you have said lines up with what I have researched and what other seasoned investors have said..
on that note, I am looking for some title companies in Atlanta Ga area that allow Double assignments and regular assignments. Ryan please check with your sources and let me know.. I have my 1st deal on the table.. buyer is signing purchase agreements tommorow, and having agreements will seller signed shortly after..
Second question ryan.. since My buyer is dealing with a conventional lender
they probably won't accept a regular assignment. I was told that you could either structure the deal thru a land trust or do a double closing, which do you suggest is the better route.. and if you suggest the land trust, how is the trust actually set up..or structured for the assignement
Well conventional financing and wholesaling are not always the best mix. As we've been discussing above, title seasoning issues can be required by the lender. If there are seasoning requirements then a double closing won't work. If the lender won't accept an assignment then you are going to have issues wholesaling it to your buyer. I would find out what their lenders requirements are on these issues.
"Wholesaling" is selling to another investor not a retail buyer. Most investors that I wholesale to either use hard money or have developed relationships with banks and utilize commercial funding or cash and not conventional financing. I sell very few of my properties to investor who utilize conventional financing, mostly because it takes too long to close (usually 30+ days). If you can't close in less than two weeks, then I normally won't sell a wholesale property to you.
I've emailed the investor in Atlanta to find out where he closes. Also, you said you are having your buyer sign first and then your seller. I would HIGHLY recommend doing the opposite. Not having a contract on the property can pose some sticky legal issues. Everything doesn't always go as planned and if your seller backs out and doesn't sign, you're stuck with a contract with the buyer.
In reference to the land trust, I have no idea. I have studied them moderately but have never used one and have no experience with them.
ryan, a realtor in NC told me that assignments are illegal in that state.
i never verified that because it's not my thing.
i'm sure he's thinking along the lines of what you said about FRAUD.
or is it true that NC has made assignment contracts illegal. i know they passed some screwy laws down there. overreactionary legislating and such. nothing new there.
Noob, I haven't heard of any laws like that in NC. I also did a google search and found several NC companies that do assignments.
I would agree with you that it's probably something on the same lines as the fraud argument.
I wouldn't recommend to anyone to accept non-qualified sources of information. If you want to know what is what for any state contact a qualified attorney for your state.
so in order to wholesale properties i was thinking of marketing something along the lines of distinguishing the differences between realtors (who market 100's of properties) and a smaller wholesaler (who focuses on 1, 2, or 3 houses at a time).
i see the main differences being:
1. a wholesaler pays alot more close attention to moving the property.
2. the seller receives earnest money
3. the wholesaler, if they're good, have buyers, financing and marketing all set up ahead of time
4. the wholesaler doesn't charge a % commission.
5. the wholesaler works to SELL in 30 days or 45 days at the most.
i know that alot of talk is going around about how a wholesalers assignment fee is like a realtors commission - but i mean, that's just downright ridiculous.
a wholesaler signs a CONTRACT TO BUY...whereas the realtor signs listing agreement. the argument by realtors is just ridiculous.
funny thing - there are alot of people who've had their house on the market since december 05 here on LI. the average house has dropped in price about 40 to 60k over the past year.
a house that started at 405 in february 06 is now at around 339 or 349 in november06...
chances are, these houses will sit until spring and then they will only get 319 if they're lucky! and the realtor is STILL going to take their commission. meanwhile, the seller has been stuck for over a year and a half trying to sell and many are vacant houses, cuz about 250,000 people have moved to NC or FL over the past year and a half.
my point...this sounds like prime time for wholesalers to move in and market to sell NOW. am i off in my thinking?
problems - this market has been RUN BY REALTORS AND LAWYERS for the past 10 years HEAVILY.
how do i get sellers to give their no good realtors the BOOT?
Realtors can't help atleast 70% of the sellers I buy from. They can't help them because the sellers I deal with usually can't or don't want to even wait 3 months to sell their house, or the seller can't afford or doesn't want the hassle of repairing the house in order to sell it on the retail market.
See as a wholesaler or as a rehabber, I am always looking for one of two things. The motivated seller or the distressed property. The motivated seller NEEDS to sell NOW. For one reason or another they have to get rid of that property as quickly as possible. The distressed property owner either can not afford the remodeling necessary to sell the house or just does not want to deal with the hassle of remodeling the house.
I would say that normally a deal is not going to be found in a house that is listed or was listed recently. Only about 5% of the houses I have bought were currently listed or had been listed recently before I bought them. The deals are found before a realtor ever even gets a call. The key is to proactively find your sellers.
I have also always tried to dramatically distinguish myself as someone very different than a realtor. I am not offering to TRY and sell someone's house. There is no variable in my offer. I will BUY your house, not LIST it. One of my phonebook ads in the real estate section reads something like, "Why wait 6 -12 months to sell your house? We'll BUY it today." Even as a new wholesaler with a contract full of contingencies, I would highly recommend that your mentality with a seller be that you are buying their house not selling it for them. The main difference between you and a realtor is that you BUY houses and realtors list houses.
As a budding wholesaler, I would also recommend one of your first goals be to establish yourself in a way that you can purchase a property quickly with your own financing if necessary. There will be times when closing quickly is the major selling point in a deal, and a wholesaler needs to have that capability in their arsenal. Establish your hard money relationships or establish a commercial type credit line or whatever you need to do to be able to get the deal done quickly if you need to. I've run across deals that have 50%+ equity in them and frankly I felt like it wasn't a good business decision to let it hang out there. I closed as quickly as possible (normally in a matter of days) and then started marketing the property after I closed.
I am new and trying to comment here on what I have seen on this forum regarding legal concerns. I can't recall where and the expert at the moment but, one man to avoid these and similar issues forms an LLC for each property, puts it under contract and then sells the LLC. It avoids seasoning isuues,title issues but problem is most lenders require an Personal Gaurantor or an LLC with good credit standing which you wouldn't have if it was brand new. So the only draw back is yo wuld have to have a PG with good credit qualifying for the loan.
on that note, I am looking for some title companies in Atlanta Ga area that allow Double assignments and regular assignments. Ryan please check with your sources and let me know.. I have my 1st deal on the table.. buyer is signing purchase agreements tommorow, and having agreements will seller signed shortly after..
Second question ryan.. since My buyer is dealing with a conventional lender
they probably won't accept a regular assignment. I was told that you could either structure the deal thru a land trust or do a double closing, which do you suggest is the better route.. and if you suggest the land trust, how is the trust actually set up..or structured for the assignement
i see the main differences being:
1. a wholesaler pays alot more close attention to moving the property.
2. the seller receives earnest money
3. the wholesaler, if they're good, have buyers, financing and marketing all set up ahead of time
4. the wholesaler doesn't charge a % commission.
5. the wholesaler works to SELL in 30 days or 45 days at the most.
i know that alot of talk is going around about how a wholesalers assignment fee is like a realtors commission - but i mean, that's just downright ridiculous.....
how do i get sellers to give their no good realtors the BOOT?
You are comparing apples to oranges. You can't compare MLS homes to wholesaling because there's a price difference. Most sellers want full market value for their property. A wholesaler will usually want to acquire the property 50-80% below market value. If the home that's worth 100k is purchased for 50k. Of course a wholesaler can sell it faster for 70k. On MLS, that same home could be listed at $95-120k.
When I talk to a seller, I give them options from the investor and real estate broker point of view. Since our market is hot, they know that if they list the home on MLS, they will get full or greater than asking price. If you have a motivated seller who needs to sell quickly, they will go with the investor option, but in our market, out of town "investors" are paying retail for fixers.
Also, on your #2, the seller gets earnest when they get a contract anyway. When the agent gets the listing, they pay all marketing fees up front and will get zero if the house does not sell. Many sellers overprice their homes, which is why they sit on the market. The agent provides comps and advice, but sellers often "don't want to leave money on the table".