Do wholesale deals have to be cash and have no contingencies?

50 Replies

I've noticed some wholesalers saying deals must be all cash and some even require no contingencies. 

Is this standard? You can't buy wholesale deals with financing? You can't have inspections?

In the event that is true then I don't see how it differs from just buying at auction.

no you can have inspections it depends on the wholesaler 

Originally posted by @Brian Garrett :

I've noticed some wholesalers saying deals must be all cash and some even require no contingencies. 

Is this standard? You can't buy wholesale deals with financing? You can't have inspections?

In the event that is true then I don't see how it differs from just buying at auction.

 but the due diligence period is usually very short they don't want you shopping tier deal around or wholesale a wholesale deal. Proof of funds is needed and many times you will loose your deposit if you can not close 

These are usually unlicensed brokers. Deal with a licensee on a listing,,,use standard contingencies to protect yourself. NEVER pay any advance fee to an unlicensed broker. Advance non-refundable fees are NOT the norm in RE..and only "special" unlicensed brokers believe they are entitled to them. NOT ONCE have I ever paid ANY advance or non-refundable fee. 

Because most wholesalers move so much volume and most are a first come first served basis, they usually don't allow an inspection period after signing a contract in order to close quickly. However the buyer will always have time to do due diligence by bringing a GC. Buyers are still allowed to inspect the property until someone buys- keeping in mind that the property will be sold 'as is' to the first person that signs the contract. Also, most wholesalers emphasis cash but will also take hard money lending and private lending. Conventional loans usually take too long to process to meet the speed and agility of wholesaling.

Originally posted by @Steven Picker :

no you can have inspections it depends on the wholesaler 

What about financing?

Originally posted by @Steven Picker :
Originally posted by @Brian Garrett:

I've noticed some wholesalers saying deals must be all cash and some even require no contingencies. 

Is this standard? You can't buy wholesale deals with financing? You can't have inspections?

In the event that is true then I don't see how it differs from just buying at auction.

 but the due diligence period is usually very short they don't want you shopping tier deal around or wholesale a wholesale deal. Proof of funds is needed and many times you will loose your deposit if you can not close 

 Proof of funds isn't an issue but what if I want to use financing and not pay all cash for the deal?

Originally posted by @Brian Garrett :
Originally posted by @Steven Picker:

no you can have inspections it depends on the wholesaler 

What about financing?

 If you are going with a wholesaler you better have your ducks lined up either cash or a hard money loan in place 

Originally posted by @John Thedford :

These are usually unlicensed brokers. Deal with a licensee on a listing,,,use standard contingencies to protect yourself. NEVER pay any advance fee to an unlicensed broker. Advance non-refundable fees are NOT the norm in RE..and only "special" unlicensed brokers believe they are entitled to them. NOT ONCE have I ever paid ANY advance or non-refundable fee. 

Thanks John! What about the financing aspect? Are they usually all cash deals or can financing be used for acquisition?

Originally posted by @Steven Picker :
Originally posted by @Brian Garrett:
Originally posted by @Steven Picker:

no you can have inspections it depends on the wholesaler 

What about financing?

 If you are going with a wholesaler you better have your ducks lined up either cash or a hard money loan in place 

I have cash but I want to leverage my money through traditional financing not through hard money.

Originally posted by @Brian Garrett :
Originally posted by @Steven Picker:
Originally posted by @Brian Garrett:
Originally posted by @Steven Picker:

no you can have inspections it depends on the wholesaler 

What about financing?

 If you are going with a wholesaler you better have your ducks lined up either cash or a hard money loan in place 

I have cash but I want to leverage my money through traditional financing not through hard money.

 By the home first then refinance Wholesalers are not banks lenders The rules are strict and if you do not have experience in buying properties then work with an agent and you can do all the nice things like contingencies inspection appraisal financing etc

Originally posted by @Brian Garrett :
Originally posted by @Steven Picker:
Originally posted by @Brian Garrett:

I've noticed some wholesalers saying deals must be all cash and some even require no contingencies. 

Is this standard? You can't buy wholesale deals with financing? You can't have inspections?

In the event that is true then I don't see how it differs from just buying at auction.

 but the due diligence period is usually very short they don't want you shopping tier deal around or wholesale a wholesale deal. Proof of funds is needed and many times you will loose your deposit if you can not close 

 Proof of funds isn't an issue but what if I want to use financing and not pay all cash for the deal?

 Are you wanting to buy and hold or act as a broker? If buy and hold, you can always have a financing contingency. If it falls through, you can still close all cash. 

Originally posted by @Steven Picker :
Originally posted by @Brian Garrett:
Originally posted by @Steven Picker:
Originally posted by @Brian Garrett:
Originally posted by @Steven Picker:

no you can have inspections it depends on the wholesaler 

What about financing?

 If you are going with a wholesaler you better have your ducks lined up either cash or a hard money loan in place 

I have cash but I want to leverage my money through traditional financing not through hard money.

 By the home first then refinance Wholesalers are not banks lenders The rules are strict and if you do not have experience in buying properties then work with an agent and you can do all the nice things like contingencies inspection appraisal financing etc

If I buy the property cash then I have to wait to refinance back out after rehab. I don't want my money tied up in a single deal like that. No ability to scale. Of course I'm talking with agents as well but I want to be prepared in the event a wholesaler presents something good. I need to be able to leverage my money for acquisitions.

Originally posted by @John Thedford :
Originally posted by @Brian Garrett:
Originally posted by @Steven Picker:
Originally posted by @Brian Garrett:

I've noticed some wholesalers saying deals must be all cash and some even require no contingencies. 

Is this standard? You can't buy wholesale deals with financing? You can't have inspections?

In the event that is true then I don't see how it differs from just buying at auction.

 but the due diligence period is usually very short they don't want you shopping tier deal around or wholesale a wholesale deal. Proof of funds is needed and many times you will loose your deposit if you can not close 

 Proof of funds isn't an issue but what if I want to use financing and not pay all cash for the deal?

 Are you wanting to buy and hold or act as a broker? If buy and hold, you can always have a financing contingency. If it falls through, you can still close all cash. 

I'm looking to BRRRR and keep as a rental or rehab and flip depending on which way the deal makes sense.

I believe the point others are making here is to move quick with cash then re-finance with more traditional loans for the long hall and to get your cash out/leverage. The BRRRR (buy renovate rent refinance repeat) strategy has a lot of info here on BP.

If you find a good wholesale deal it will most likely go to cash long before you could get financing in order. 

@Brian Garrett traditional financing takes to long for most wholesale deals.  The deals go to the buyers on first come first serve. If you sign a contract, then have to wait a month or so, then get denied,...well the wholesaler could of sold the deal to someone else, if it was truly a deal. 

The financing aspect also depends on the seller. I have DC developers I work with, to sell their inventory off-market, that will take traditional financing. Motivated sellers are expecting their property to be sold, fairly quickly, and in as-is condition.

Originally posted by @Bob McGhee :

I believe the point others are making here is to move quick with cash then re-finance with more traditional loans for the long hall and to get your cash out/leverage. The BRRRR (buy renovate rent refinance repeat) strategy has a lot of info here on BP.

If you find a good wholesale deal it will most likely go to cash long before you could get financing in order. 

Thanks Bob I'm very familiar with BRRRR. I was simply asking about the financing aspect of a wholesale deal.

Moving quick with cash still means my capital is tied up in the deal until I can complete rehab and refi back out.

Originally posted by @James Green :

@Brian Garrett traditional financing takes to long for most wholesale deals.  The deals go to the buyers on first come first serve. If you sign a contract, then have to wait a month or so, then get denied,...well the wholesaler could of sold the deal to someone else, if it was truly a deal. 

The financing aspect also depends on the seller. I have DC developers I work with, to sell their inventory off-market, that will take traditional financing. Motivated sellers are expecting their property to be sold, fairly quickly, and in as-is condition.

Understood thanks for your input James. I'm just trying to find a way to not have my cash locked into the deal because then I have no ability to scale or acquire more properties until I'm able to cash out refinance and recycle my capital.

You still can have cash by borrowing private money  don't stress over tying up your money in a deal if it is too good to pass up

@Brian Garrett This is a good use case for Fannie Mae's Delayed Financing Exception.  You close in cash and then immediately refinance with a conventional loan.  The bank will lend you the lesser of your purchase price (plus loan closing costs) or 75% of appraised value.  Here is a link to Fannie Mae guidelines.

Originally posted by @John Thedford :

You still can have cash by borrowing private money  don't stress over tying up your money in a deal if it is too good to pass up

Thanks John I definitely won't pass up on a great deal even if it means paying cash and figuring out the refi later.

Originally posted by @Dan Mahoney :

@Brian Garrett This is a good use case for Fannie Mae's Delayed Financing Exception.  You close in cash and then immediately refinance with a conventional loan.  The bank will lend you the lesser of your purchase price (plus loan closing costs) or 75% of appraised value.  Here is a link to Fannie Mae guidelines.

Wouldn't I still have to wait until I complete the rehab to get the new appraisal at the new ARV?

Originally posted by @Brian Garrett :
Originally posted by @Steven Picker:
Originally posted by @Brian Garrett:
Originally posted by @Steven Picker:
Originally posted by @Brian Garrett:
Originally posted by @Steven Picker:

no you can have inspections it depends on the wholesaler 

What about financing?

 If you are going with a wholesaler you better have your ducks lined up either cash or a hard money loan in place 

I have cash but I want to leverage my money through traditional financing not through hard money.

 By the home first then refinance Wholesalers are not banks lenders The rules are strict and if you do not have experience in buying properties then work with an agent and you can do all the nice things like contingencies inspection appraisal financing etc

If I buy the property cash then I have to wait to refinance back out after rehab. I don't want my money tied up in a single deal like that. No ability to scale. Of course I'm talking with agents as well but I want to be prepared in the event a wholesaler presents something good. I need to be able to leverage my money for acquisitions.

I am not an expert, but this is what I would do.

Use your cash for 20% down on a property with Hard Money and then refinance after the rehab to cash out and carry on to the next deal. I would also use a mix of Hard Money and Cash to finance the rehab portion. You can layout the cash for portions old construction and be reimbursed by the hard money loan.

This should minimize the amount of cash in the deal and enable one long term mortgage at the end that takes all your cash back out. Meanwhile you can use the remainder of your cash to finance multiple other deals.

For a Hard Money loan you will only pay about $750 per month for each $100,000, so if you are not n the project for too long and the forced appreciation is decent, the extra carrying costs shouldn't be to bad compared to the overall deal.

Originally posted by @Dan Mahoney :

@Brian Garrett This is a good use case for Fannie Mae's Delayed Financing Exception.  You close in cash and then immediately refinance with a conventional loan.  The bank will lend you the lesser of your purchase price (plus loan closing costs) or 75% of appraised value.  Here is a link to Fannie Mae guidelines.

Thank you for sharing the Fannie Mae guidelines. Interested to learn you can take advantage of the delayed financing exception even with an LLC!

@Brian Garrett Yes, conventional financing is based on current appraised value, not hypothetical future ARV. This is true for both purchase and refinance. If you want to borrow against ARV, you're back to looking at private money or hard money, not conventional financing.

(There are government backed renovation loan programs like 203k but that's unlikely to be feasible in a wholesale or other competitive bidding situation).

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