Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
14y
Because if you contract for the property and then assign it, you're going to get a cut. The bank figures that if there is a buyer who will pay a higher price than you're paying, that buyer should buy directly from them. The bank is taking a loss on the deal. You're making a profit. If they could sell directly to your end buyer, their loss would be less.
What they are really trying to avoid is when the people on the ground (you, your buyer, the listing agent or some combination) collude to present the lower offer as if its the only offer on the table. In reality, there really is a higher offer on the table - the one your buyer is making to you.
Now, banks don't seem to have a huge problem with paying real estate commissions on short sales, though they may cap these to a slightly lower amount than the usual 6%. I suppose that's because real estate commissions are fairly small and those people collecting them are bound by certain laws and regulations. An unlicensed wholesaler isn't bound by those same regulations.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
14y
Because if you contract for the property and then assign it, you're going to get a cut. The bank figures that if there is a buyer who will pay a higher price than you're paying, that buyer should buy directly from them. The bank is taking a loss on the deal. You're making a profit. If they could sell directly to your end buyer, their loss would be less.
What they are really trying to avoid is when the people on the ground (you, your buyer, the listing agent or some combination) collude to present the lower offer as if its the only offer on the table. In reality, there really is a higher offer on the table - the one your buyer is making to you.
Now, banks don't seem to have a huge problem with paying real estate commissions on short sales, though they may cap these to a slightly lower amount than the usual 6%. I suppose that's because real estate commissions are fairly small and those people collecting them are bound by certain laws and regulations. An unlicensed wholesaler isn't bound by those same regulations.
Wholesaler · Orange County, CA · Member since 2011 · 42 posts · 0 votes
14y
which brings up a 2nd question for then:
So what would prevent a real estate agent from getting a ton of houses/propeties they could sell? (I've heard many real estate agents are suffering so I can't imagine they're all getting enough properties to go around)
-do they have to have "special connections" with the banks to get the opportunity to sell the houses in the first place?
Wholesaler · Orange County, CA · Member since 2011 · 42 posts · 0 votes
14y
Thinking more, heres another question:
So you're telling me that if I bought a short sale for cash, then turned around and wholesaled it(no repairs, just straight selling it to an investor), that that would be OK?
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
14y
Paying cash then immediately reselling is sometimes fine. There are lenders, "transactional funders", that will give you a loan. You have two separate transactions, each with their own funding.
That said, lender are sometimes putting language into their contracts that limit you ability to do this.
The listing agreement for a short sale is between the owner and the listing agent. Listing agents find those listings in the usual ways - word of mouth, direct mail, advertising, etc. REOs, OTOH, and handled between the bank (seller) and the listing agent. And, yes, those often seem to be a special relationship.
Dallas, TX · Member since 2013 · 4k+ posts · 744 votes
12y
Cameron,
There is a chance you could do that if you can find an escrow/title company willing to use the end buyer's funds, and you let the end buyer know you are using their funds to close the first transaction.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
12y
In general, you can't do a quick B-C wholesale of a short sale...there are two reasons why:
1. You will generally be required to sign an affidavit at closing (as will the seller and both agents) that indicates you have no other financial agreements related to the property that haven't been disclosed to the lender. If you have an agreement to wholesale the property before you purchase it, you couldn't truthfully sign this affidavit.
2. Many lenders now impose a resale restriction period of 30, 60, 90 or 120 days after purchase. So, you'd have to hold the property for up to 4 months before you could resell.
Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
12y
the bank is going to want to see a pre qual or proof of funds before they approve the short sale as well.
Like @Jon Holdman said the bank cannot determine the listing agent on a short sale. The owner of the home decides that. With REO the bank decides because they are the owner. There are many special requirements and skills needed for reo and banks tend to use experienced reo agents.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
12y
All very good, correct, answers above. Also Cameron, it is very difficult to find a title co. that will use the B-C funds to close the A-B transaction, even when there are no resale restrictions. Also realize that investors don't want to pay FMV, and the bank (not the seller) will determine an acceptable price that will be very near FMV. It will be very tough for you to get a bank to accept a price far enough be.ow FMV to satisfy your investor, and also have the spread for your fee in there.
Also, wholesaling is getting to be a popular endeavor by many inexperienced people and most agents can smell a wholesaler's offer/speak. I spot them fairly easily ( a POF that is fake, off the Internet, in a different name, a preapproval that's from a transactional lender, individual, Internet, the buyer has never owned a property, etc) and all wholesaler offers go to the trash ( after the required copy is sent the seller with directions to his trash can).
For ALL the reasons above, as a wholesaler, short sales should be the Last thing you're looking for to flip and your energies will probably be much better spent elsewhere.