Contractor · Cleveland, OH · Member since 2015 · 10 posts · 1 vote
I've heard of people making money from buying bank-owned properties and selling them before they're required to make their first payment. They say its as easy as that, but I remain skeptical. For those of you have done wholesales... what really happens?
Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
9y
Wholesaling is typically done one of two ways:
1. The wholesaler gets a property under contract then markets their position in that contract to an end buyer (contract assignment). A lotta folks muck that up and sell the property rather than their position in the contract, with the end result that some states are cracking down on it in a major way.
2. "Back-to-back" closings, often mistakenly referred to as a "double closing" which is illegal in most jurisdictions due to major abuse by short-sale flippers. The wholesaler buys the property outright, then flips it to end buyer within the terms of any title restrictions imposed by the seller, the lender, the state, etc.
Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
9y
Perhaps things are different in the south, but all the bank-owned properties we've bought have come with a no-resale clause for a period of 90 days or longer as part of the APS. If you were to turn around and sell one of these inside 30-days, you would be in breach of your contract.
Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
9y
Wholesaling is typically done one of two ways:
1. The wholesaler gets a property under contract then markets their position in that contract to an end buyer (contract assignment). A lotta folks muck that up and sell the property rather than their position in the contract, with the end result that some states are cracking down on it in a major way.
2. "Back-to-back" closings, often mistakenly referred to as a "double closing" which is illegal in most jurisdictions due to major abuse by short-sale flippers. The wholesaler buys the property outright, then flips it to end buyer within the terms of any title restrictions imposed by the seller, the lender, the state, etc.
Contractor · Cleveland, OH · Member since 2015 · 10 posts · 1 vote
9y
Roy,
Thank you for your answer. So, as an investor, you can either sit on the property for 90 days and sell it having done nothing to it as far as remodeling or repairs, or you could remodel and/or repair it and sell it. Either way, you have it for 90 days (or whatever amount of time is agreed upon or required).
So, am I correct in assuming that flippers go for the quality over quantity approach? Whereas, wholesales are for quantity? Or is it more complicated than that?
Your position in any contract to purchase an asset is itself a marketable asset. You can assign your position as buyer to a third party who them closes with the seller and pays you an assignment fee.
A lot of large business transactions are done that way. In RE, it's known as one from of wholesaling.
So you'd be acting as a middle man, and the assignment fee is like a finder's fee?
Also, what's keeping the third party from making an offer on the property you're in a position to buy? Is there some contractual agreement between you and the seller that you can transfer to a third party?
Once the seller accepts your offer, it's under contract. He can't take another without legal consequences. The contract is assigned to the 3rd party buyer who completes the purchase from the seller and pays your assignment fee, or you close on it yourself, then close with the third-party buyer for a higher amount (back-to-back closings).