Am I able to wholesale a property that’s on short sale and if so what advice would you give. All info appreciated. Newbie here.
So, let's review. The lender is about ready to take a loss on the property. And, the lender has agreed to do so only if they have the right to approve the sale and the contractual terms. As a former banker and a broker, there is no way that a short-sale lender is going to take a chance on having a "maybe buyer." The contract will not be assignable under this scenario. It's not worth kicking those tires.
Essentially, no. The bank will require you to show the actual ability to buy before they will enter the process and the contract will be non assignable as any any Approval Letter will be for Only the buyer on the initial contract.
@Patricia Steiner thank you for your response. I’m really new and this (what I thought would be an opportunity) came up I thought I might be able to do something with this.
@Wayne Brooks thank you for this. Would there be anything I could do in this situation?
You could actually buy the property and then resell it but with fees and whatnot, probably wouldn't be enough upside.
Without knowing the details of the deal, it is impossible to give you a correct answer. Depending on the situation, you may be able to wholesale a short sale deal under certain conditions. So, go ahead and spill the beans.... and I will tell you if it is possible or not.
Waiting to read from you...
It actually is possible if you have the ability to get it under contract by giving the bank everything they ask for (proof of funds and all of the homeowner situation details, hardship letter, proof of income, expenses, etc.). If there's an agent representing the bank in the deal, they should be able to tell you everything you need.
The trick is to get under contract under the name of a disposable LLC (an LLC you create just for the purpose of making an offer), rather than assigning or double close. Then once under contract all ready to go with closing date, you sell the LLC to another investor. Since the LLC owns the contract, now the new owner of the LLC owns it.
A few other tips:
1. To show proof of funds you can use a Proof of Funds Letter from a transactional funding (double close funding) company like http://besttransactionfunding.... I don't have any affiliation with them whatsoever but have used their letters before with banks on REO's. Banks won't always except this kind of proof of funds but some do.
2. The bank won't throw a fit as long as the cash is in escrow at their title co by the time they find out the LLC has a new owner. As long as they have their money, they won't care.
3. The Main Risk: If your cash buyer doesn't come through with the funds, you are still obligated to fund at closing and could get sued if you can't. To lower your risk, vet your cash buyers well. Better yet, have a list of cash buyers that you or your investor friends have worked with before that you know you can trust to come through. Also, have back-up cash buyers ready to go in case your first one falls through. Or, have a back-up plan to fund the deal yourself with your own money or a partner's money or a hard money lender on stand-by. Again, if the lender gets the money in escrow at the bank's title co before they find out you're not paying for it with your own cash, there won't be an issue.
As you can see, this strategy is a lot riskier than some. So, being a newbie, I wouldn't recommend it for you. But, if you partner up with a seasoned investor who has worked with banks and just give the deal to them for a birddog fee (which you get after they get it under contract) or partner with them letting them fund it and you rehab it, then it becomes less risky than trying to wholesale it.
In Cali, YES!!!! But not in the traditional sense of using "and/or assigns" on the offer and then an assignment contract. The way I get them done here is with an entity (i.e. LLC or Land Trust) as the buyer and the end buyer "buys" the entity for the assignment fee amount.
@Lori Greene damn that’s brilliant!!!
Originally posted by @Stephanie Simmons :
@Lori Greene damn that’s brilliant!!!
Thank you very much. Happy to help.