**If this needs to be in the wholesale section, feel free to move it!
So far I've come across tons of great articles on both of these topics. I just wanted to put together a scenario and run it by you guys to see if I have things right...
1. Find an owner facing foreclosure, hit them with my great USP
2. Owner agrees to a short sale with me
3. Run my numbers, use them to put a package together for the lender
4. Submit package via knowledgeable REA
5. Shop the deal to my buyers
6. Lender approves the SSpackage and I find a buyer
Now this is where I need the most help - what comes next?
7. My buyer/investor goes to pay off the agreed upon amount, title company cuts a check to me for my "fee" and to the agent for theirs.
Is that right?
Can I get away with one agent? What other fees are sitting there at closing? Can you do this simultaneously like a normal wholesale transaction?
Thanks in advance!
Short sales are not the best avenue for wholesaling.
The lender will require the property to be on the open market, MLS.
The bank won't allow assignment of the contract, and will require POF in the contract buyer's name. There will usually be a resale restriction.
The lender will be looking for near FMV.
The shorted lender may not allow any assignment type fees in the transaction.
As Wayne stated, lenders will not allow assignments on short sales and many contracts will come with an addendum stating that you can not transfer title within a specific time period ranging from 30 to 90 days.
Very difficult to wholesale a short sale. Not to say it can't be done because it can, you just need to have certain ducks all in a row and your vesting needs to be appropriate. I prefer the trust method, but there are other means as well.
The challenge that makes it difficult if not impossible to wholesale a short sale is that many banks do not allow buyers to assign the contract in short sales. They'll reject the contract if it includes "and/or assigns." When banks approve the short sale package, they usually include the buyer from the original contract on the approval letter that must close on the property. No other buyers would be allowed to close on the property since the bank needs to establish that the buyer has no ties to the seller and no shenanigans have taken place, especially since the bank is selling for less than original loan balance. Foreclosures might meet the same challenges with assignment of the contract as some might not allow. Others might have better suggestions, but this is what you will encounter with this specific approach.
I am a broker in Southern California. I have not done any wholesaling but I have negotiated and closed more than 100 short sales in the last few years. When a buyer submits an offer on a short sale, that is the ONLY person (LLC, Corporation etc....) allowed to close. The contract can not be assigned. The buyer must also submit proof of funds / pre-approval in the buyers name, dated within the last 30 days. Neither the title company nor the bank will allow any additional buyers other than those who have been approved, and they will not delete any buyers. Additionally, many of the banks have an addendum attached stating that the property can not be sold or transferred within 30-90 days of closing. You would have to close on the property yourself, or have your buyers name on the original contract prior to submitting the short sale offer & package. The buyer may be able to pay your fee on their side of the HUD, but it would not be part of the short sale / offer contract. You would have to have something separate and submit it to escrow. Each short sale lender, and each underlying investor on the loan have different qualifications regarding approval of short sales. Fortunately, in California, if the lender (any position) agrees to a short sale, they can not seek a deficiency against the home owner. I hope this helps. I'm sure there are other investors who may know how to get around this.
Wayne nailed it in his post above. I would not try to wholesale a short sale personally. I've had a hard enough time wholesaling anything let alone a short sale. But anything is possible with hard work n dedication...
Suuuuuper helpful. You guys all replied faster than the notification emails from BPs. Impressive.
This might be a silly question then, but where are people making money on short sales? Is it for the cash investor who can actually be the buyer and then flip the house?
Usually it will a property in poor/vandalized condition that can't be financed, and needs rehab.
@Adam Hofmann they may also be good for rentals or lease purchase. It just depends on the property, condition and the neighborhood.
You can wholesale a shortsale but you have to close on the deal first. You have to have the cash...