Back Tax Problem

[James Williams]

I have a seller who wants to sell his property for 10K, but he owes 6K in back taxes, the property needs about $7K in repairs, the ARV is 30K. As a wholesaler how should I handle this deal.

[Kyle J.]

Originally posted by @James Williams:

I have a seller who wants to sell his property for 10K, but he owes 6K in back taxes, the property needs about $7K in repairs, the ARV is 30K. As a wholesaler how should I handle this deal.

Using your numbers (and omitting closing costs for simplicity sake) it would go something like this if you're doing a typical wholesale deal:

1)  You contract with the seller to buy his property for a purchase price of 10k.

2)  You find an end buyer willing to pay more (let's use 13k as an example).

3)  You assign the 10k purchase contract you have with the seller for an assignment fee of 3k (the total of which equals the 13k price you marketed it to your end buyer for).

4)  The end buyer then closes on the property for 13k, of which 3k goes to you (assignment fee), 6k goes to pay off the back taxes, and 4k goes to the seller.

5)  The end buyer then apparently spends 7k to complete the repairs, at which point he's now got 20k into a house that now has a value of 30k.  He can then rent it out or sell it or do whatever he was intending to do with it.

(That's just one example of how it could work.)