Can you assign a contract to a buyer using bank financing?

Question

Hey Guys,

I have a 1,145 sqft 2bedroom, 1bath property that I put under contract to wholesale in Sandston,VA. I have been marketing this property and recently found a buyer who is very interested. He is a contractor and wants to design and do all of the work to the property himself. The only thing that concerns me is that he is not a cash buyer. He states that he has excellent credit and can put down a down payment on the property. Should I make his down payment be my assignment fee? Can you assign a contract to someone who is using bank financing? Does the seller still walk away with a check after closing? How does the title company write in my assignment fee? How does all of this work? Any insight on this issue would be greatly appreciated!

Thanks,

Nikki

Wayne Brooks · Answer

The seller gets the same cash whether the buyer is financing, or paying all cash...it's all cash to the seller.

Two issues with buyer financing and your assignment.

1)Your buyer can not include your assignment fee in his amount to be financed, only the purchase agreement price.  He'll need to pay the assignment fee, above and beyond his down payment.

2) If the house has major problems, it won't qualify for financing.

Account Closed · Answer

The bank will require an appraisal. Will the home appraisal for $75K? If he is going, FHA the home will need to pass an FHA inspection.

Joe Gore

Ben G. · Answer

I don't see why you can't assign to someone who is purchasing through conventional financing.  The problem arrives when your seller has to close faster than your buyer can find financing.  Is this an issue?  If the seller is in a distressed situation you have to do what's best for the seller and find a buyer who can close fast.  If I were you I would look for a traditional cash buyer.  If it's a good deal you shouldn't have trouble finding one.

This should help:

How To Find Cash Buyers

Account Closed · Answer

I don't see anyone paying you a upfront fee until the deal close.

Joe Gore

Joseph Zanazan · Answer

Is the property currently paid off or does it have a loan? If there is a loan on the property and are they current or behind? Who is the lender?

The answers to these questions will determine your capability and will ultimately decide what kind of offers you can and should be entertaining. Your ability to go with financing over cash, or vice verca, will be  contingent upon what the current note/mortgage situation looks like on  this property.

If there is no loan, as it was already previously mentioned, it makes no difference to your seller how and from where the funds are wired once the transaction has been closed. You at that point qualify the buyer to the best of your ability, like you would any other. Remember, if they're getting financed, they're already going to have to jump through their own hoops with the lender that's lending them this money. As long as you have a preapproval letter from a reputable institution, your role wont be so much as the qualifier as it would be the selector of the buyer with the most suitable offer and the best likelyhood of closing. If the property is free and clear, the new lender has no problem encumbering the title with their first deed position. You should be able to entertain financed offers. Make sure the contract the property is under has the necessary verbiage to protect your ability to assign. If the contract between the seller and you is the only contract on record, then the two of you are free to draw up any terms you would like.

If there is a loan on this property, the only way the decision to sell at a determined price will be in your seller's hands is if the proceeds from the sale cover the loan amount. Now all of a sudden the contract you have with the seller isn't the only contract on record.  The legal title held by the bank allows them to have a say so regarding terms and conditions of the sale. There are standard due on sale clauses to worry about if you're doing a sub2, otherwise if there is equity, the new lender will payoff the previous lender and you should be good.

James Jennings · Answer

heres the rule on financing. A bank or lender will lend a percentage of the sales price or the appraised value, whichever is less. If it a 80% loan to value and the appraisal is 100,000 theyll loan 80,000 or 100,000 times 80%. BUT if the contract is $100,000 and the appraisal is 60,000.....RUN! This is why many fail. Their comping techniques is wrong so they pay too much!

Account Closed · Answer

Yes you can I do it all the time

Bryan L. · Answer

In theory, there should be no reason why one couldn't wholesale a deal to a person using bank financing.  Can't your buyer just give you a check or cash for the assignment fee?

Nathan Nickles · Answer

Nikki Howard how did this turn out?  i'm in the same situation

Can you assign a contract to a buyer using bank financing?

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