can you wholesale a short sale?

Question

Hello BP,

Please excuse my ignorance, but I have a potential deal. The homeowner has been not paid the mortgage in 2 years and the property is in great condition, it is in a prime location and would be a steal for someone. The property has gone into foreclosure. What needs to be done with this property? Can it be wholesaled? Can it be shortsaled and then wholesaled? would this deal be beneficial to me? What do I do?

Robin Secord · Answer

We are just getting started & this string is very useful.  Thanks everyone!

Jordan Solomon · Answer

Well, I obviously don't know all the particulars. But, regardless, I would have to think that this type of thing would give anyone pause.

Eric Bowlin · Answer

Did he lie? Who knows. Just the frustration and hassle of dealing with a bank is worth something more, which is why short sales often sell far below fair market value.

Using this logic...buying a house for 100k and putting 20k worth of work..I should only sell it for 120k. Any more for 'profit' and I clearly paid too little and must have 'lied' about it's value before purchasing. What if I have a buyer lined up beforehand who cannot qualify to buy a distressed property but will qualify for a loan when its repaired. I'm being double deceptive!.... Ridiculous.

Simon Campbell · Answer

Read the article. And where did it state that the bank decided to accept his offers? Where did it state that the bank consulted with their listing agent to see if it was a market based offer? Where did it state that the bank ordered an appraisal to verify market value? Yes, he lied but there are systems in place that give the seller the tools to see if the buyer is lying.

As to wholesaling short sales - my opinion - yuck! What a mess. Short sales can take up to 6 months to process and often end up at the auction before the bank closes on the short sale. Additionally, you cannot assign a contract on a short sale. Plus, most banks will not allow a double close as they put a deed restriction on the sale. The only other option is establishing a LLC and then selling the LLC. Have fun with that. :)

But, here's the thing. If the property is not underwater and your purchase price would satisfy the loan requirements, just make a written purchase offer to the seller and bypass the bank. The bank will be paid off at closing. Done.

Jordan Solomon · Answer

I'm certainly not an expert on this subject, but apparently it's a very emphatic "no." Considering that you can apparently spend 30 years in prison for doing so, according to this article:

www.flippingfrenzy.com/category/short-sale-fraud/

Brian Gibbons · Answer

Here are some tips for short sales.

1. Use an agent that works THAT BANK - LENDER and has had success, not TRYING to DO IT.

B of A is different than Chase which is different than Wells Fargo.

2. Understand that there are too many variables to learn about Short Sale Negotiations on a forum.  Just having the rapport and experience with THAT PARTICULAR LOSS MITIGATION DEPT means success over failure.

I have a friend that is working 300 short sales at once, a crew of 5 people, it is a very frustrating business.

JaNarria Johnson · Answer

Thank you all for your input, advice, and recommendations. For those who are asking. The buyer lost his job and has just had odds and ends jobs and just couldn't keep up the mortgage. He stayed in the home because he had no where else to go. Why he didn't sell it sooner is beyond me. Hopefully I can try to find out more info from he asset holder which I think is someone like hud or someone who was supposed to take possession of the property in August and still has not yet. So hopefully I could help someone snatch this awesome property. If I could afford to I would buy and hold as the rental return is excellent and the location is a great location. Maybe I'll look at my numbers and try to figure something out.

Thanks again BP.

Tom Mole · Answer

@Maxwell Lee, look into using a sale-lease option to avoid deed restrictions. Structure the deal so that the option fee covers what would be your assignment fee. Open an escrow that closes the day after the deed restriction expires. Credit the lease payments to the buyer at the close of escrow. And, of course, check with a local real estate attorney to be sure this won't piss off a judge in your state.

This is just a suggestion to be considered, not a recommendation as I have never done business in FL. This is where I'd start if I were faced with the situation and goals you mentioned.

Happy new year!

Maxwell Lee · Answer

I do not have a lot of experience with this, but my understanding was that it was pretty much impossible here in FL. Most banks have in the contract that you cannot resell within a certain period of time, and I would assume that they would make it impossible to use any other wholesaling tricks. The bank doesn't want to see anyone make an immediate profit on a sale that its losing money on.