Buyer Credit on HUD on Wholesale?

Question

Hey BP!

I’m interested in delayed financing on a property. As I understand it, the HUD has to show the purchase price and any repairs. It’s a wholesale assignment of contract. I want to ask the wholesaler if I can increase the purchase price, add repair cost to the HUD (same net to wholesaler), so that I can refinance that much later. Doable?

Will the lender ask for all receipts for the repairs? What if I plan to do a lot of the work myself?

The idea is that purchase + repairs < 75% ARV. So if I can get delayed financing for purchase + repairs I have less money in the deal. Working on this BRRRR. Thanks for your input!

Andrew Postell · Answer

@Annchen Knodt that blog is 100% correct...you have to list them as a cost that was paid for at or before closing.  That's exactly where it goes if you paid it out of pocket in the beginning.

Annchen Knodt · Answer

@Andrew Postell thanks for your input here - I've been learning about delayed financing for a while and based on everything else I've heard, not being able to put repairs in escrow is a surprise!  E.g. a lot of my understanding (and I think many others') is based on this blog post by Alex Felice where he talks about putting repairs on the HUD to maximize the DF strategy.  My understanding was that he's putting them in escrow to then draw from as he does the repairs (in his example, it's $10k wrapped into "settlement charges" on the HUD), though I guess he doesn't say this specifically.  If that's not actually allowed then that's very good to know!!

Andrew Postell · Answer

@Maggie Shadburn thanks for posting on this.  The formal rule here is that the delayed financing exception includes purchase price + closing costs.  So costs to purchase the property.  The repairs can't just be "listed"....they must be paid for.  Meaning, you would have to write a check to your contractor for work that they have not performed yet.  That is a slightly large issue.  No one is going to say to pay a contractor 100% in full without any work being done.  You would need to have a VERY trusting relationship here.  So no work performed by you.  No showing the "repairs in escrow"....paid in full at closing is the only route.  Because of this we usually work with Hard Money and just live with the fees or we use this strategy listed HERE.

Buyer Credit on HUD on Wholesale?

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