Quicker Possession I Pay Cash?

Question

If I pay cash for a property that is being wholesaled to me, will I get possession---and thus be able to work on the place--- more quickly than if I financed through my bank?

btw...couldn't edit title of post to read right, sorry!
          
          Thanks

Joel NA · Answer

Thanks J Scott

According to the negotiator, the short sale is in the works at the bank (approved?)....He seems to think it'll take a few weeks. He justified his fee to us by running through all the legwork he's done with the bank etc.

We're going over our purchase agreement now and we should meet with the seller and the negotiator soon.

After speaking with the title company, they said any liens will be caught at closing, so as long as our PA is good with adequate "escape" clauses, we'll be protected. Will that clean title search turn over HELOCs and other liens?

Thanks so much for the reply! Very helpful...

Jon Holdman · Answer

Yes, the title search would turn up any HELOCs or other such liens.  The owner should know exactly the lien situation, and should reveal this to you and this negotiator.  If the title search turns up something, I'd just walk away because the owner has no ability to clear these liens (they wouldn't be doing a short sale if they had money), and they bank won't be willing to deal with them either.

As long as its a good deal at the price you're paying, I wouldn't worry about the negotiator's fee.

Approved means the bank will sign a contract.  Ask this negotiator flat out "has the bank approved the short sale, and if so, at what amount to them."  "In the works" does not sound like "approved" to me.  That sounds like "I've submitted the paperwork and the bank is thinking about it."  Submit your offer with about a one week deadline for them to accept.  The bank will want to see a HUD-1 settlement statement showing them their net and showing all the other charges.  Ask to see this, too, as that will reveal exactly how this guy is getting paid.  If you don't get back a signed agreement from the bank in that time, move on.  With what you're saying, I don't think this guy as an agreement with the bank.

J Scott · Answer

Getting back to your original question (how long it will take to close), if this is a short sale, it's going to take one of two forms.

Either:

1) The bank has already approved the short sale at a specific price, and assuming you're planning to pay at least that amount, you should be able to push the deal through in a couple weeks, assuming no major title issues (as Jon pointed out);

or:

2) This is not yet an approved short sale, in which case it could take 4-6 months to get to closing.  If the short sale isn't yet approved, someone will have to provide all the documentation on the property and the offer to the bank, and they will have to make a determination about whether they are wiling to sell at that price.  Most likely, they'll counter-offer and want to negotiate.  More importantly, if there is a second-place lien-holder on the property (like a HELOC or second mortgage), you'll also have to negotiate the second and get agreement on the deal from that lien-holder.

Who is doing the bank negotiations?  He should be able to tell you more about where you are in the process, which should give you an idea of how long it will take from here...

Joel NA · Answer

we'll pay him at closing...closing will be title company, owner, this rep guy and us....

Joel NA · Answer

So I just had lunch with him and he's a negotiator only.

Unlicensed broker, then? He's been in dealings with the bank as the owner's rep.

So we could go around him I guess.

What's the harm in paying his fee if it's a "buy right" situation? All the risk is his, correct?

Jon Holdman · Answer

As long as you're all cash, should be OK.  How is he expecting to get paid?  At closing or separately?

Joel NA · Answer

Again, thanks for pushing through with me on this...

He describes the process as a short sale. I've been frantically searching and posting on BP since I came upon this property. I've learned a ton but I've seen how much more there is to digest!

Anyway, I guess it's a wholesale/shortsale? I had an earlier post about the legitimacy of this "buyer's rep." We kind of fleshed out that he was a wholesaler.

His line has been, "The bank will accept something in the 30k's, but I need a 5K finder's fee, cash." I won't go over 35k total based on ARV and BP's "buy right' criteria. I'm meeting with him today to figure out if he has a purchase agreement on the property. He makes it sound like he's negotiating on behalf of the owner, but I don't know the nature of their contract.

I didn't realize I had to double close at all. Why is that? Nor did I realize that a shortsale took longer than regular purchases.

Excellent advice about having the contract accepted by the bank first. Any other advice about dealing with a wholesaler---i.e. what to look for in terms of legitimacy?

Thanks!

Jon Holdman · Answer

Is this a short sale?  Sounds like it is, from your description.  If so, assume it will take a long time to close.  I would tell the wholesaler to let you know when he has a contract accepted by the bank and has all the signatures on it.  Tell him, if you're in a position to buy, you'll talk then.  Until then, keep looking.

You do realize you'll have to double close or some such, right?  The bank won't allow an assignment.

Jon Holdman · Answer

OK, I remember this.

I'm not sure we ever truly resolved this guy's role.  If he's a wholesaler, he'll need to have it under contract, then sell it to you.  One way to do that is with an assignment.  But, banks won't allow that on a short sale.  So, the other technique is to do a double close.  He has one contract to buy the property from the back for (say) $30K.  He has a second contract to sell you the property for $35K.  You provide the $35K (plus costs).  The title company uses this to fund both deals.  He walks out with his cut.

The bank will likely dictate the title company for the first transaction.  They may be unwilling to do this double close.  So, you may have to find a second title company to do the second transaction.

If, OTOH, he's just a negotiator, you may be able to buy directly from the bank.

Find out what his involvement is, specifically, and post it.  Be easier to tell you want to do if we know.

Joel NA · Answer

It's pre-forclosure...and the wholesaler, whom I'm meeting with today, is in negotiations with the bank.
                    
                    Excellent points Jon, thanks. I hadn't thought the possible title issues through at all. Great stuff as always.
                    
                    The reason for the timeline is that I'm a teacher and it'll be easier to rehab during the summer months...so I was hoping to get possession more quickly than the 30-45 days with a traditionally financed mortgage.