HML for Wholesaled Deal

8 Replies

I have not had any problems with HML's until I ran accross this.

The property has a formally appraised ARV of 170K, loan needed 55% of ARV (this includes all repairs). the HML's in the area will not fund because the property is being purchased from a wholesaler who will not be taking title.

HML's have demanded to see copies of the wholesalers contract.

Reasons given: our business model does not allow us to fund this type of deal.

This reason is given by multiple HML's not just one.

I'd appreciate any comments, solutions workarounds etc:..


Lesley

Hi, IF the wholesaler is doing repairs, contract with him to do so with his price in a construction/repair contract and you and the seller sign it. Have the seller clean up the purchase contract with you as the buyer with you agreeing to pay the sale price plus costs of repairs and attach it to your purchase agreement.

But, if all they wanted was a copy of the wholesale deal, why not show it to them? Hmmm?

What you have ommitted is the sale price today in it's as is condition, which is what the lender has to loan on. Unless you have an appraisal with an Estimated Market Value with repairs, any claims to an ARV means nothing to a lender and is nothing more than a preceived value. Lenders do not loan on preceived values, unless it's preceived by an approved appraiser with a punch list.

Look at it this way, I can buy a place for 51,000 and if I got a loan at 55% of your ARV of 170,000. I get 93,500. Then I could put 34,000 in it to bring it to your claimed ARV. What happened here?
1. As a lender I just made a loan at an LTV of 110% of value, since on an acquisition the loan to value is the cost of acquisition or the appraised value, WHICH EVER IS LESS!
2. Not only did I make a 110% LTV, but I did it as a cash out purchase at $8,500.00! Totally not cool for a bank.

Did you take a guru course? If you did, I hope you didn't pay more than $19.95!

If you need help on the deal, contact me....good luck, Bill

Perhaps I should have given more detail but I did say in my text that the loan INCLUDES repairs.

APPRAISED (by lenders own appraiser) value WITH punch list = 170K,

Purchase price 65K
Rehab - Estimate made using three different rehab contractor quotes

As with all HML the repair $$ to be escrowed with proper draw schedule an final release of liens prior to final payment.

there is no walking away with any cash in my pocket except what I get when I resell.

no the seller is not doing the repairs.


Lesley,

Bill makes some very good points and speaks to the standard analysis hard money lenders use for this situation.

I am working with a hard money lender who will fund a loan based on a true 50% ARV. The lender will not look at how you are acquiring the property. An appraisal will most likely be required to determine the ARV.
They are fnancing purchase/rehab projects nationwide. 1 - 8 unit buildings, and will finance blanket purchases of multiple buildings.

Please contact me for information and to discuss your financing needs.

Originally posted by Joel Soforenko:
Lesley,

Bill makes some very good points and speaks to the standard analysis hard money lenders use for this situation.

I am working with a hard money lender who will fund a loan based on a true 50% ARV. The lender will not look at how you are acquiring the property. An appraisal will most likely be required to determine the ARV.
They are fnancing purchase/rehab projects nationwide. 1 - 8 unit buildings, and will finance blanket purchases of multiple buildings.

Please contact me for information and to discuss your financing needs.

Yes I agree bill's points are good (except for the $19.95 comment), but they are not quite related to the actual situation. I already had a really good deal on an HML to finance the property. The lender appraised it with their own appraiser and everyone was happy until the fact that the seller was a wholesaler came up. I was surprised.

I'll send you a PM, thanks :)

Ooops! LOL, Leslie, I appoligize, I did not mean for it to sound so personal, but after reading it again, I see that. I see so many people try to do exactly what I ran by and such strategies arise out of those sources. If I were more familiar with you (as now I have more information) I'm sure I would have worded that differently.

I think the red flag for the lender is the wholesaler and not seeing the deal, can you not disclose the deal? Can you pay the wholesaler off if he is not in title and deal directly with the seller? You deal does not sound out of line for a portfolioed loan, it's rather common with the appraisal you have and your LTV. Bill

No problem Bill :)

The lender of course has seen the executed contract, but they want to see the sellers contract which he is not willing to produce for them.

I like your suggested workaround.. :), I had considered something like this but you have clarified my thoughts here.

thanks...

You can offer to pay the wholesaler his fee outside of the closing, so that he knows he is getting paid. Then, the closing will be on the original price that the wholesaler contracted with the seller, correct? And the HUD1 would then reflect the actual seller's net and selling price that was agreed to. You have to somehow pay the wholesaler with your own funds to do this; check with your CPA to see how this would affect your basis for this purchase.

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