Wholesaling Hud Houses

HUD, VA, and Tax Sales 5.8K Posts 823 Discussions

I've bought a hud home before, but never wholesaled them.

What is the whole deal of setting up a Non for profit to wholesale Hud homes?

Also, are there any challenges to wholesaling them as opposed to conventional wholesaling?

No challenges that I know of but why the non profit? Sounds like a way to be able to bid first before going to investors. Are wholesalers doing this?

I've done plenty of these. You need to add your buyer onto the contracts which your realtor should know, then you will quit claim him the deed at closing. Very simple. Contact me if you need me to walk you through.

Dan - getting purchase advantage by being a nonprofit subjects you to a lot of restrictions. There is a lot of info on this on the HUD website.

Originally posted by Greg P.:
I've done plenty of these. You need to add your buyer onto the contracts which your realtor should know, then you will quit claim him the deed at closing. Very simple. Contact me if you need me to walk you through.

Greg I would like a walk through of how you do these also. I see some opportunity in HUD homes and would like to know more.

Greg... I would also like a quick run through on this... thanks!

I would like a walk through of this as well.

Sure. Once you have it under contract after the bid is accepted, start finding your buyer. Once you have your buyer, ask your realtor to add your partner a.k.a buyer onto the contract (very simple amendment). Explain to your buyer what is going on and then you and your buyer write a separate purchase agreement stating at closing you will be quit claiming him the deed and get earnest money. Draft up the quit claim deed (use your state's), then bring the document to closing. Have the closer notarize it and have the buyer write you a check. Super easy after you do one. I'd also recommend using a HUD agent (someone experienced) and he will explain to you how to do this. My realtor was the one who helped me throughout the whole process. Good luck.

Hey Greg,
When you say you are quitclaiming him the deed, how has that worked for you? I only ask because I'm set to close on one next week and we were planning on doing a separate close between the end buyer and myself, therefore having to pay additional transfer tax. Can you help me out?

Why the end buyer wouldn't want to do this.
A quit claim deed doesn't protect the end buyer from whatever you might of done to cloud the title by owning it for a few seconds. If you screw up the timing and don't collect the quit claim deed at the table the investor paid for the entire house and owns 50% of it. Yikes!

Why the wholesaler doesn't want to do this.
Once you add on the new buyer to the contract with hud, god help you if that buyer ends up changing his mind. He is on the contract with you, with equal rights and it is hard to remove/add another person. I also see no legal way to collect your fee unless it's when you hand over the quit claim deed. I'd only accept cash if i were you at that point since nobody is protecting you (title company won't touch it).

I've done one of these before with a friend. I've done maybe a dozen same day flips with 2 closings. Costly, but safer for all.

Originally posted by @Drew Dickinson :
Hey Greg,
When you say you are quitclaiming him the deed, how has that worked for you? I only ask because I'm set to close on one next week and we were planning on doing a separate close between the end buyer and myself, therefore having to pay additional transfer tax. Can you help me out?

Drew Dickinson - in Pennsylvania, you will incur that additional transfer tax - unless the transfer is among the types that qualify for some exemption. The county recorder will have a form to be completed that is used to state if there is an eligible exemption and to determine the amount of the transfer tax - and when a nominal amount is used ($1 or $10 for example), then they use the current assessed amount multiplied by a leveling factor (that the state has for each county), and that amount is what they will use for the transfer amount and base the transfer tax due on that. So if your separate closing will be for a lower amount than what the state's formula will use for the transfer tax, then you just might be better off with a separate closing.

Thanks guys,
A seperate closing if probably what we'll have to do. Steve, you don't happen to know what formula Bucks County, PA uses to calculate this do you? I also hear what Greg is saying. Does anyone have any kind of assignment contract for this situation? Ie: "me and the end buyer agree to have a second closing on the property immediately after the first close. End buyer agrees to pay X and I agree to be removed from title in exchange for that X." Any help would be greatly appreciated. Thanks.

Still looking for advice; I'm getting the feeling that is a mess.
We (my wife) got a HUD deal under contract that we were gonna flip ourselves; we got it OUTSIDE of the exclusive owner occ period. We decided to buy something else to live in and wanted to flip this to someone for some money. I don't have the cash to close and no transactional funding.

So we found a guy who really wants the place and we added him to the HUD contract (which was easy). Now he wants to make sure that there are no deed restrictions and also how the logistics of this work out. Any advice?

I know this could have been done better but this is my first wholesale and at this point I just really want to sell it to him and he really wants to buy it. We have to stay on the contract or else HUD just puts the place back on the market and we lose our deposit and extension money. At least that's what I've been told.

What is the best way to do this? I have heard from people here that there has to be two closings and two transfer taxes paid which is fine. This is supposed to close ASAP. Can't we just sign an agreement ahead of time stating that we will be removed from title in exchange for the fee that we have already agreed to? Any help would be great.

If he agrees to allow you to just quit claim the property to him for a fee, then you can definitely do it that way. He has to trust that you'll actually go through with the quit claim, as he's taking a risk that you won't do it and he'll have to take you to court to enforce whatever contract you have with him.

Assuming the property is bought outside the owner occupied time period, there should be no deed restriction on the property.

Medium lishproplogoJ Scott, Lish Properties, LLC | [email protected] | http://www.123flip.com

Can write in a partner (end buyer) and quit claim the deed to him on Fannie mae properties as well. Example "homepath" properties?

I just talked to a HUD real estate agent. They said that, as an investor (wholesaler), I have to wait till the owner occupied bidding is done. HUD doesn't allow investor to bid in the beginning phases. He said that if HUD does find out that the buyer does not live in the property after they purchased then they can be fined $250K and so can the agent. 

He did say that investors can bid after the owner occupant time period passed. Does that sound about right? 

@Greg P. @Steve Babiak

Sorry to resurrect an old thread but...I'm needing some clarification.

I talked to a wholesaler recently who has started using his non-profit company to purchase HUD properties during the initial 30 day offering window.  He is then wholesaling these properties to investors or homeowners and his non-profit makes some nominal fee of $2,000 for being involved in the deal.

The benefit to the non-profit is the transaction fee, the benefit to investors is that he can purchase properties during the first 30 days with less competition.

My question is if I create my own non-profit to purchase properties can an LLC that I own purchase one of those properties?  The LLC would likely not purchase all of the properties but I would want to be able to do that occasionally.  The non-profit company would be legitimate in that I would be using the transaction fee to benefit my community and church (not to pay me a salary).

I've done some reading here: http://portal.hud.gov/hudportal/HUD?src=/program_o..., but I'm still unsure of whether or not this is allowed.

Is there an arms-length rule, minimum holding period, or other qualification on who the non-profit can sell to?

What if the non-profit company completed repairs on the property and then sold it to my LLC?  Does that affect anything?  My thinking here is that the non-profit itself is providing benefit to the community by repairing properties, creating suitable housing, and increasing home values in the neighborhood.

@John Lindemann , @J Scott , @Steve Babiak

@Dan Koch   This is great information.  I am a Lic. Broker in New York and just applied for a NAID number.  If you guys are interested in doing some deals in NY or know of anybody who is, please keep me in mind.  

Thanks! 

Originally posted by @John Lindemann :

@Greg P. @Steve Babiak

Sorry to resurrect an old thread but...I'm needing some clarification.

I talked to a wholesaler recently who has started using his non-profit company to purchase HUD properties during the initial 30 day offering window.  He is then wholesaling these properties to investors or homeowners and his non-profit makes some nominal fee of $2,000 for being involved in the deal.

The benefit to the non-profit is the transaction fee, the benefit to investors is that he can purchase properties during the first 30 days with less competition.

My question is if I create my own non-profit to purchase properties can an LLC that I own purchase one of those properties?  The LLC would likely not purchase all of the properties but I would want to be able to do that occasionally.  The non-profit company would be legitimate in that I would be using the transaction fee to benefit my community and church (not to pay me a salary).

I've done some reading here: http://portal.hud.gov/hudportal/HUD?src=/program_o..., but I'm still unsure of whether or not this is allowed.

Is there an arms-length rule, minimum holding period, or other qualification on who the non-profit can sell to?

What if the non-profit company completed repairs on the property and then sold it to my LLC?  Does that affect anything?  My thinking here is that the non-profit itself is providing benefit to the community by repairing properties, creating suitable housing, and increasing home values in the neighborhood.

 While it may "technically" be okay, I'm not sure if I'd want to get into a situation buying a property from the federal government using a shell non-profit. While it might not "technically" be fraud, it is against the spirit of the sale and it is a grey area I don't know that I'd want to mess with when there are plenty of deals to be had elsewhere.

Originally posted by @Christopher Baker :

@John Lindemann , @J Scott , @Steve Babiak

@Dan Koch   This is great information.  I am a Lic. Broker in New York and just applied for a NAID number.  If you guys are interested in doing some deals in NY or know of anybody who is, please keep me in mind.  

Thanks! 

 Even though I'm new to investing I would like to learn more about deals in NY. I would like to expand up that way in the future.