Investor · Perth Amboy, NJ · Member since 2013 · 110 posts · 21 votes
I have some deals that I am looking at that my realtor friend has been trying to wholesale for a wholesaler :) .
There is a wholesaler who wants the fee for the LLC that has the contract. Now, I think this is a much better way to get paid and not have to worry double closings or trusting me to pay him.
I have to do due diligence on the contract I guess to make sure it is legit. My friend being involved gives me some hope because he is a good guy, but we all can get fooled.
Are there any post transfer of llc issues that can come up? Aside from making changes on the NJ website to change LLC ownership, what else needs to be done? What if this LLC owns something that is not an asset but a liability or has tax issues?
Would my proof of transfer mean I have the same as a clear title for this LLC?
Property Manager · Virginia Beach, VA · Member since 2016 · 2k+ posts · 2k+ votes
9y
@Marty Happle - I'd find out why he wants to sell the LLC instead of selling the house. Avoiding a double close doesn't make sense. There's no need to do a double close if you do an assignment of the contract. The only logical explaination I can think of is that wholesaling that contract is a prohibited transaction in the terms of the contract. If this is the case, I'd suggest you speak to a local real estate attorney to have him review the situation. A lot of people push this strategy as a way around the bank and HUD restrictions. In my market the FBI has spoken at legal symposiums for our attorneys and stated that wholesaling a short sale is bank fraud. Crazy as this sounds, since the bank accepts their offer price based on their own research, 98% of FBI charges result in convictions, so anyone would be crazy to challenge them. My fear is that if the transaction ever had any reason to be investigated, the creation and sale of the LLC solely to get around a legal limitation could be construed as fraud. I think it's worth a consult with an attorney.
Property Manager · Virginia Beach, VA · Member since 2016 · 2k+ posts · 2k+ votes
9y
@Marty Happle - I'd find out why he wants to sell the LLC instead of selling the house. Avoiding a double close doesn't make sense. There's no need to do a double close if you do an assignment of the contract. The only logical explaination I can think of is that wholesaling that contract is a prohibited transaction in the terms of the contract. If this is the case, I'd suggest you speak to a local real estate attorney to have him review the situation. A lot of people push this strategy as a way around the bank and HUD restrictions. In my market the FBI has spoken at legal symposiums for our attorneys and stated that wholesaling a short sale is bank fraud. Crazy as this sounds, since the bank accepts their offer price based on their own research, 98% of FBI charges result in convictions, so anyone would be crazy to challenge them. My fear is that if the transaction ever had any reason to be investigated, the creation and sale of the LLC solely to get around a legal limitation could be construed as fraud. I think it's worth a consult with an attorney.
Investor · Pawtucket, RI · Member since 2016 · 12 posts · 10 votes
9y
@Marty Happle I have to agree with @Patti Robertson here. At the very best this is an odd way to handle that transaction. at the worst you could find yourself in legal trouble. I'd think twice and about doing this deal, and if you are going to do it anyways I'd have a lawyer of your own look it over before anything is signed.
Investor · Perth Amboy, NJ · Member since 2013 · 110 posts · 21 votes
9y
@Patti Robertson thanks - it's not a short sale, it's an REO. The LLC seller has the property under contract in this LLC. The buyer of the LLC will then own the contract. I have spoken to some real estate attorneys already and no one seems to be saying the same thing.
Property Manager · Virginia Beach, VA · Member since 2016 · 2k+ posts · 2k+ votes
9y
@Marty Happle - OK. Then the issue is probably that the contract prohibits an assignment and the LLC doesn't have the ability to fund the deal for a double close. If my attorney blessed it, I would personally feel comfortable with structuring this as an LLC buyout as long as you confirm that the LLC doesn't have any liabilities you would be assuming. An attorney should be able to help you figure out how to confirm that.
Wholesaler · Myrtle Beach, SC · Member since 2017 · 276 posts · 80 votes
9y
All of these remarks are interesting to me in a good way. There is a lot of knowledge on this post. The best way to protect himself would be to do a double close. It makes no sense that he would sell the entire LLC instead of just the one property. We charge 1.5% for a double close for the wholesaler, so if he is doing this to avoid a 1.5% fee then something is definitely wrong here.