Wholesaling foreclosures & Power of sale in Canada & in general
Hi Everyone,
I took all the experts advise and partnered with an investor friendly Realtor. He has told me about a Power of Sale property.
How do I go about wholesaling a bank owned property (foreclosure/power of sale) since I cannot assign a contract.
I have read that simultaneous closing is the best way, but there is no specific explanation on how to do this.....well that i could find.
What paper work is needed with the A-B and the B-C transaction and what other paper work is needed?
Do I need to get a cash loan from a hard money lender?
I hope you can help me.
Thanks in advance
@Victor Parag, an investor friendly agent does not always = an agent who understands real estate investment niches and strategies. You should also ask this agent.
Wholesaling and assigning the contract are the same thing.
I do not have the answers to your questions, but I am looking forward to hear what the Canadian "pros" have to say.
These are my "assumptions" and I hope I am wrong because they would be good tools to use: (1) You cannot assign a bank owned property in Ontario, (2) You cannot simultaneously close a RE transaction in Ontario.
We will get our answer soon.
You would be correct that you cannot assign a bank owned property, but you can close simultaneously. I have discussed this in detail with my lawyer. We primarily buy, fix and sell properties in Ontario and have purchased several bank sales.
I would also add to this one more very important note. Not many real estate agents really get the house flipping, real estate investing side of the business. We have been at it for 10 years and after only finding 2 agents that even remotely understood what we are doing my partner went out and got her license so we don't have to deal with it anymore.
Ask them if they own rentals, or if they have flipped a house, or what ever type of investing you are doing. Make sure their track record reflects what they say they know and understand. Run numbers with them. If they get a dazed and confused look run as fast as you can in the other direction. LOL!
I cannot speak for all jurisdictions in Canada, but in all in which we have experience, back owned properties are always sold through a listing agent - who, by the way is only getting 1/2 - 2/3 the regular commission on the sale ... the banks stick it to everyone ;) You will also find bank owned properties in Canada are never the fire-sale deals you will see in the U.S.A. ... some of this has to do with the relative size of the markets, but most is a result of differences in banking regulations.
On top of that, every bank contract to which we've been party contains a clause whereby the buyer pledges to hold the property for a minimum period (90 - 180 days in our experience, but I've heard of longer). This is designed specifically wholesaling or a paint-n-scrub flip ... the banks don't want you and I to turn around in 30-days and sell the property for 20K more than they received for it.
Given the scarcity of real estate agents who understand buy and hold investing, I would expect finding one with a thorough knowledge of flipping to be like finding a deposit of iridium. Of the folks I know who flip, most have someone with a real estate licence on their team for this very reason.
In Ontario we have purchase at least a half dozen properties through a bank sale.There is no 90 day clause in Ontario. Beside I would probably negotiate it out of there if there was.
The way I look at it as a house flipper our company is doing the city/town a favor by taking a junker and making it a good quality salable home that can bring in taxes and improve the neighborhood. The bank should have no control over these things. The house is likely trashed or at least in very poor condition. This is a result of the previous owners and the bank should be happy to unload the non-producing asset and move on.
I know in Ontario the rules of power of sale are very clear. The bank must try and sell the home at fair market value. It is there legal duty to try and get as much as they can for the property in its current condition. The proceeds are to be used to pay off the debt to the bank and any other liens on the property with the remaining funds going to the homeowner. That is if the bank, lawyers, and property managers don't hammer them with fees. Let just say the homeowner always looses in these situations. For me it's just business.
Here is the problem...the apparent power of sale lists that claim "get it before it hits the market". Its a pile of horse pucky!! If the owners in power of sale only new their legal rights and had the money to sue these banks who don't take the rules seriously, we would see a big uproar in Ontario.
It is a flawed system, but it is a good source of properties for us.
The agents here are just as responsible. They are short changed on commission, but they are still obligated to do their job. I get very angry with some of these agents who forget their legal obligation. They are working for the banks and the bank is required by law to get that house sold for as much as the market will bear, but no one in this scenario cares regardless of the obligations.
We recently purchased a house from Home Trust in Ontario and I have to admit they stuck to their guns and really tried to get the maximum for the property. The agent didn't even try. Usually we throw out a low number with no conditions and quick close and the bank is all over it. Again not really right, but what happens all the time. As a business man its not my job to worry about the bank, agent, or the person in power of sale. I use to worry about this, but not any more. A deal is a deal.
To answer the initial question for a simultaneous close we would use a private or hard money lender for the transaction. It is just to put money in your account to pay for the home and then sell it directly to the new owner on the same day. You need to get everything set up to make this happen. We usually negotiate a set fee vs a percentage. $80,000 could be an $800 fee or 1%, but on higher priced purchases you can work something out. It's always good to find a few investors that have access to this kind of money and understand what it is you are trying to do.
Sorry for venting. This has always been a source of frustration for me. Now that Stephanie my partner has her real estate license we are seeing so much of the real estate industry that we dislike. We knew it was bad before and a huge reason for getting her licensed, but now its is even more obvious rubbing shoulders with some of these characters.
@Dave Vogt dont worry about the venting, that type of info definitely helps out newbies like myself. Thanks for sharing and responding.
Power of sale properties are SOLD at current market value in Ontario.But you are buying it "as is". There is NO discount at all in the price.