Wholesaling a Short Sale

17 Replies

Hello my fellow mates,

I am very new to real estate investing and I'm still in the early learning phase. After a few weeks of research I have decided that I want to start my investing career with wholesaling.

Fortunately I have found an amazing deal in New York City. However after doing my research on the property, I found out that its a short sale. I spoke to the real estate agency and they claimed it was in contract. May someone please explain what "in contract" means? I did a little more digging and found out that an REO agent owns/manage(not sure how the property is associated with the REO agent).

How would I wholesale this short sale? How should I approach the REO agent about the property? How would I market this deal to investors?

Typically if something is under contract there is an accepted offer and they are working through the deal.

Short sales are typically harder to wholesale since there is a lender involved. I don't see a lender being to keen on offers being assigned to other buyers; lenders typically want the property gone.

@Cazemba Richards ,

Lenders typically don't accept contract assignments on short sales. If you're negotiating a short sale, the lender is dealing with YOU, not an unknown third party.

David J Dachtera

"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
- DJ Benedict

Banks will often place deed restrictions on properties they allow to be short saled to prevent the property from being flipped.

I'm wholesaling a short right now in Long Island. Just have your attorney buy a Corp. and sell the Corp (and all assets belonging to the Corp i.e. The purchase contract) for the assignment fee to your buyer.

Short sales often appear as a great deal because the seller (and his broker) price the property very low, with the hope that the lien holder will be willing to write off some of the mortgage. However, two points must be considered. One, the seller's asking price may bear no relation to what the lending institution is willing to accept. Two, the seller does not have the ability to sell at that price (unless he is willing to make up the difference between the loan amount and the sale price out of his own funds), only the lending institution has the ability to agree to a price or contract.

Further complicating matters, in a short sale situation the seller may have stopped paying on his loan.  Therefore, taxes and insurance payments will be owed, legal fees, etc.  

Sometimes, real property is priced low as a marketing strategy, to encourage offers and a resulting bidding war.  Just because a property seems to be priced at a low price is no guarantee that your offer at that price will be accepted. In no state is a seller legally bound to accept any offer, even one at full asking price.  

There's man ways to wholesale that. You can do what @Anderson Minaya mentioned or you can double close as well which means purchase contract on this side and another purchase contract on the other end to your buyers. It's up to you how close you have to close each but I recommend the your buyers side gets closed within 2 days after your close and make sure that there's clause that ensures that the money is in a few days before in holding so you know that it will find the first. Now speak to an attorney to make sure how to structure that.

If you don't have the funds you can use a hard money or transactional lender and just take the costs into account in the deal. So make sure there is enough in it to cover the loan expense, the closing cost, and your fee.

Thank you for all the input everyone. I think I'm going to try to wholesale it either by double closing or buying a Corp. However there is a unfortunate twist to the deal. I just contacted the real estate agent and she just confirmed to me that the property is in the process of being purchase. 

I appreciate the help.

@Kedian Jimenez  : Kedian - Have you yourself used a double close strategy for a short sale deal in NYC? The attorney I contacted in Long Island who advertised that he could perform double closes in Long Island danced around the issue when I brought him a ABC close scenario and could not execute and that was not even for a short sale.

@Cazemba Richards in NYC you have to move quick. take it as a lesson. Now you'll be more on your toes for the next one. 

@Michael G. ive put some under contract but haven't had a DC close as of yet since it was a fall out. the contracts were sound though. Just like there are good attorneys there are bad ones. just like there are inexperienced ones, there are experienced ones. Sounds like you had an inexperienced one or maybe something else all together. Either way I bet a good attorney referral will get you what you want. honestlly all they have to do is make sure both contracts are good and that its structures in your favor. Banks will usually try and hit you with a few restrictions like you must hold the property for a certain amount of days or no closing. thats fine because Everything is up to negotiation. Just be aware that banks can be really stubborn or really maliable if you know the right angle.

PM me

 I have a deal on Queen's for 1.5 million that I will rehab and make two-story and I have a buyer after I'm finished I need 100% financing including the rehab fee which is $300,000 

@Kedian Jimenez  I've been around the block. I’m familiar with what attorneys need to do with the contracts in a double close. I’ve just never met one willing to do it. Have you? In fact…some have indicated that it is out right illegal to perform a closing that way. (I don’t agree with that but this is what they say). I've interviewed a few attorneys on Long Island, none of which was a proponent of the double close (except the one who could not execute). You have an attorney referral for an attorney that performs double closes?

Originally posted by @Cazemba Richards :

Thank you for all the input everyone. I think I'm going to try to wholesale it either by double closing or buying a Corp. However there is a unfortunate twist to the deal. I just contacted the real estate agent and she just confirmed to me that the property is in the process of being purchase. 

I appreciate the help.

 If that opportunity is still available, please let me know. I will pay a referral fee for bringing me that deal.

@Ryan Lee @Cazemba Richards go for it!! watch it happen. NYC is prime time.

@Michael G. I can gladly reffer the ones i've done it with in NJ but ill ask the ones in NY. or put you together with one. it possibly could be that the NYC one is different due to local laws. but again we can find out. 

I've literally ahd attorneys tell me BS before like you cant do AOC and i did one days later.... could be they dont want to bother, could be they genuinely dont know and have never done it. By default all contracts are assignable. its only if they specify against it that its a problem.

Lets get in touch i'd like to see if I can help you out with that