I have found multiple threads on here regarding wholesaling a short sale property but a lot of them seem to have mixed reviews whether this is legal or not and most are those who are doing it are outside the state of New Jersey, which doesn't exactly answer my questions/concerns as it seems all states have different laws. I know of people doing this in NJ so I know, or at least assume, this is legal as lawyers are involved in the process, however I do have some questions as to the steps and looking for feedback on the process from someone who has/is doing it in New Jersey.
I have an off market property that I am working on to acquire and my end goal is to wholesale it to another investor who I already have lined up. The next step is setting up an LLC in order to purchase the property in order to avoid the short sale restriction of having to wait 90 days to transfer title, but I want to have all the details ironed out before doing so.
1. Does the LLC have to have a certain amount of time that it is active before I can purchase property under it in the state of New Jersey? (I have heard mixed reviews, i.e.: the LLC has to be active 6 months + before doing this)
2. Once the property is purchased under the LLC, does the the transfer of the LLC (not property title) occur at the closing table or is this done before the closing so the person purchasing it can have the title transferred under their name? Do they also have to wait after the 90 days or that doesn't matter because I am selling the LLC with the property within it?
3. Lastly, how is the wholesale fee distributed to the me?
I am sure about some of these questions but want to confirm what I've heard it the correct and legal way of doing it. I would appreciate if someone who has done this is NJ would be able to comment or provide their feedback.
Please let me know if I was unclear in the above and thank you in advance for reading and your assistance.
@Account Closed In my experience with short sale properties, if the owner wants to sell, he/she has to contact the bank first for approval. The bank will then use their short sale agent who will list it on the MLS, in order to get maximum exposure and offers.
So how is the short sale property off market? I would think as soon as the owner notifies the bank, the bank will take over and tightly control the sale process.
Maybe you are using Short Sale as "bank owned"?
Briefly, the process; the bank will require the property to be listed, fro probably at least 5 days. Find an experienced short sale agent. Your LLC must have a POF/preapproval, in the buyer's name on the contract, before a bank will even look at your contract.
The bank will require documentation showing who owns the LLC. Do your beneficial interest transfer after closing. You get paid by selling your beneficial interest on the LLC.
But, in general a short sale is Not a good avenue for wholesaling. You've got an informed bank making the decision on value, not some desperate, or ignorant, individual seller which is what wholesalers usually need to find. Also, the owner usually gets screwed in the end because the bank won't agree to the wholesalers' price that he needs in order to be able to resell, below market, to an investor, and the owner just ends up 90 days closer to foreclosure auction. You can probably understand why we Never allow short sale clients to sign contracts with with wholesalers.
Updated about 3 years ago
Update: Forgot to mention, the bank does Not pick the agent.
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