WHOLESALE ON A SHORT SALE....Any Advice?

Question

Hi.  I know a person who is preparing to do a short sale on their home.  I heard bells going off in my head.  I asked her to tell me what the bank needs before she puts the house on the market.  I've got buyers ready to go if the numbers are right.  My question is....What issues has anyone come across wholesaling a short sale?  Is it harder?  Is it easier because I personally know the homeowner?  Any insight would be much appreciated.

David Dachtera · Answer

@Karen Tinley,

Lenders do not allow wholesale deals on short sales. They are negotiating with you as the buyer - period.

That said, of course, you could use transactional funding to close the purchase, then resell. Just watch out for "title seasoning" requirements (you may need to buy it and hold it for 30 to 90 days before selling to your end buyer.

Also, understand that there is nothing "short" about a short sale other than that the money the lender gets falls short of what is owed. Short sales can drag on for months or even a year or more.

Karen Tinley · Answer

Hmm. Interesting @Brandon Sturgill.  I will definitely look into that.  Thanks so much.

Brandon Sturgill · Answer

The alternative for you is to get into a lease-option or subject to position...unsure of your market, but a sandwich lease may provide you a bit of income and save your friends credit.

@Karen Tinley

Brandon Sturgill · Answer

@Karen Tinley No reason you can't collect a "referral fee" for locating a buyer that can close on the property if they get agreeable terms from the lender. This isn't going to be a clean transaction, though...good luck.

Karen Tinley · Answer

Oh.  That is discouraging.  Well at the least I can help out a friend who is looking to buy and hold.  The search continues for a good wholesale.  Thank you @Ted Akers.

Ted Akers · Answer

Hello @Karen Tinley

@David Dachtera post is right on regarding short sales.  The short sale bank will not allow assignments so you will need private or transactional funds to purchase it before selling it.  You will likely see restrictions in the short sale approval precluding you from reselling it for 30 days, or if you resell for more than 120% of your purchase price then for 90 days.  This holding period does pose an issue for most transactional funders.  Title companies will also not allow use of the end-buyers funds to close on your purchase.

The short sale bank will require that the property be listed and you will need a realtor to represent you as buyer.  Try to find one very experienced in short sale negotiations and willing to work negotiating a discount.

Karen Tinley · Answer

Thank you David.

WHOLESALE ON A SHORT SALE....Any Advice?

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