Rental Property Investor · Baltimore · Member since 2015 · 27 posts · 7 votes
I am trying to buy my first home in Maryland but the prices keep going up quickly. Would buying a property from a Wholesaler be a good idea or even possible with a conventional loan?
If so does anyone recommend a good wholesaler in Laurel, MD?
While a conventional lender will not pay an assignment fee, they will pay a contract cancelation fee. The wholesaler is paid to be taken out of the contract, which is allowed by FHA, and a new contract is drawn up between the buyer and seller.
The biggest benefit of buying from a wholesaler is not to save money. The biggest benefit is lack of competition. How many times do you lose out on a house because someone beat you to it or someone put in a higher bid? When a wholesaler brings you a house generally if you say you are interested and can get there to see it right away, you have a good shot of buying it.
The goal is to buy property that meets your criteria, regardless of where they come from. The more avenues you have, the faster you will reach your goal.
Wholsalers typically seek out cash buyers and buyers who can close quickly (in under two weeks). You would be considered a "retail buyer" who's using conventional funding. As long as your lender's appraisal is satisfactory for them, I don't see why you couldn't get it financed that way.
You could get a good deal from a wholesaler but you should do your own due diligence (verify, verify, verify) as with anything else.
@Erick Chavarria I would also add that 99% of all houses sold by wholesalers are distressed properties that will need some sort of repairs. Typically banks require the property to meet certain standards in order for them to approve a conventional loan. You might find it really hard to by a wholesale deal with a conventional loan because a) as Ruth mentioned wholesalers want you to close very quickly and b) even if the wholesaler is willing to work with you, the bank may not approve that loan due to the condition of the property. My advice if you want to get a fixer upper but also be able to qualify for a loan, is to look at the Fannie Mae, Freddie Mac and HUD houses. They will usually tell you on the website if you can purchase the property with a conventional loan. Also, Fannie has program called homepath renovation loans which will let you get a loan that also covers most of the upgrades on a property. Anyhow, not sure if your intent was to buy a fixer upper but just letting you know, wholesalers might not be the easiest option.
On top of everything that has already been discussed, a conventional lender WILL NOT PAY an assignment fee and generally do not cooperate on double closings.
Their title department is going to ask why the contract is with Person B and the current name on title is Person A. Once they realize what is happening they will not move forward.
So just stay patient and work the MLS for a distressed deal.
While a conventional lender will not pay an assignment fee, they will pay a contract cancelation fee. The wholesaler is paid to be taken out of the contract, which is allowed by FHA, and a new contract is drawn up between the buyer and seller.
The biggest benefit of buying from a wholesaler is not to save money. The biggest benefit is lack of competition. How many times do you lose out on a house because someone beat you to it or someone put in a higher bid? When a wholesaler brings you a house generally if you say you are interested and can get there to see it right away, you have a good shot of buying it.
The goal is to buy property that meets your criteria, regardless of where they come from. The more avenues you have, the faster you will reach your goal.