Is most wholesaling to investors only, not consumers? My aunt wants me to find her a house, and she says she'll pay me. Do I wholesale? I'm not going to sell it for retail to her. I have two other friends of friends who want to buy and live in the house. Do I just double close? Is wholesale appropriate to consumers? I'm in NJ.
I really don't like the term wholesale in RE! It's something I'm sure some guru came up with and everyone jumped on the bandwagon. You buy a property and you sell it, period. The kind of deal doesn't even need a name. Who you sell it to is not important either. If you have a dump and you sell it to some guy who will fix it up, just because there is a process between the buyer and the highest and best use end user of the property which is accomplished by a middleman buyer/seller, that got the name as a wholesale deal, doesn't really matter. If you have a house that needs repairs but you don't do repairs and you sell it to someone who intends to live in it, that is to the end user, that's a retail deal, as discussed now in investor lingo only, would you change the name of your deal if that buyer fixed it and sold it 90 days later, does that matter to you? No, you sell properties to who you can, when you can at the highest price you can, taking into consideration the type of property, it's current value in the condition it is in when you seel it, that's with all sales.
Back to your aunt, is she the end user? If she is, forget the wholesale jargon. You're buying a property to sell to an end user, you're flipping the house. If she has cash, you can find any house you want to, put her and yourself on the contract as buyers....(if she will pay you your fee later on when you deed your interest in the property back to her). Then just buy it! You can do the same with your friends and enemies as well!
As to fraud and selling, I don't think you title clerk understands what the fraud angle is, where you are cheating the bank out of saying it's worth X dollars and you sell it immediately for Y dollars is not fraud. There are other elements to this to make these transactions fraud. If you make improvements to a property and sell it for more, it's not the same property and there is not a leg for anyone to stand on to claim fraud. There is no law against finding someone willing to pay a higher price for anything in this world than what you paid for it! It's when you sell something you don't own, not in title to and you don't acquire the property in the manner you disclose, IMO.
When I bought my last REO, end of last year, the bank wanted to know if this was an investment property or if I intended on living in it. I said I intend on living in it, but anything I have is for sale! That's the answer they got and they had a 30 day hold on it I believe (that I did not pay any attention too, I was the quickest purchase transaction tyhe closer had ever had...I skim and sign as quickly as I see the signature line! (That's another subject, but I can always hook'em if they pull something, another story) That was fine with me. This was with Lenders Services and I bypassed the Realtors and talked directly with them on the deal.
If I had wanted to sell the thing, I would have entered into a contract the day I bought it, gave possession prior to closing and closed 31 days later! Not a thing they can do about it, period!
You can follow what Jon and Scott said above too to spin the house off to your Aunt of friends as well. I'm not saying the terms are incorrect, but these are concepts and stratigies that are named to convey how properties are turned over, getting caught up in them as if they have some weight or rule or law is not correct, you don't need to go there.
A double clsoing is simply when you and your buyer show up at closing when you buy it (or close to it) and the money used from your buyer is used for you to buy from your seller, this practice is now considered a fraudlent act since you're really not in title when you sell. Anyway, this is an arrangement that can also be used if you are a real cash buyer and you are selling immediately to someone else, the reason to do this is that the title company only does one title search and may give a break on other charges in closing as well. Doing a double closing has nothing to do with any investor strategy other than it is a closing process that can be used to accomplish simultaneous closings, which is not illegal. By the way, you can buy on a promissory note with 100% financing from a seller, owner occupied home from Mr. Homeowner and then use your buyers money to payoff that note five minues after you made it!
These are basic transaction functions. They are simply tools in the box to use when buying and selling real estate. How you sell and who you sell to should never be thought of as some limiting market, like an oil wholesaler sells ony to retail gas stations, not what is meant at all. For all you know, your Aunt might get a better offer the next day and decide to take a profit! When the IRS puts Real Estate Wholesale Investor or Retailer of Real Property in the IRS tax code as a profession, I'll change my mind (LOL).
I'm sorry your thread is the one I picked to ramble on with, I'm sure these points could have been made shrter as Jon and Scott did, fine explanations guys!
100% correct, unless you put a deal together from party
A to party C, and you are a third party payout on the HUD. Even then it is a long shot. You need to be dealing with cash buyers. Good luck man! :D
Bill, I'm still waiting for your evidence behind your claims of simultaneous closings being fraud. Again, please enlighten me AND hurry. I just did one last week and I'm scheduled to do another next week.
Do you think I should just turn myself in now, Bill? Which overlording organization is now splititng the hairs of this strategy and cracking down on it? Tell me so that I can call them to come pick me up! Which law should I quote when I do? Hurry, time is running out for me!?! And for the multiple title agents, attorneys, and title companies that do them for me, too!?! Its all over for all of us!!! HURRY BILL, HELP
On a more serious note, Bill, I am truly interested in ANY and ALL evidence and research you have that points to this closing strategy being fraud. I am VERY motivated to research whatever you can find. Please share what or who first advised you that this strategy was FRAUD, or maybe share what or who confirmed for you that it is FRAUD.
I am eagerly awaiting your response. :whistle1:
Spot on Ryan! Find the right title company and these transactions are smooth as silk. Illegal...right :roll:
Bill, its been 2 weeks and still no response?
Unfortunately, I am going to have to conclude that you have NO evidence or case law to sight in which a simultaneous closing has been construed as fraud.
Therefore, I am forced to conclude that in this particular matter, you do NOT know what you are talking about, and people should not listen to your misinformation about simultaneous closings being fraudulent and about certain unspecified organizations now cracking down on them.
Bill, stick with what you know. Making up BS to fill in the gaps is never a good idea.
Again, I am always open to being enlightened in this matter with anyone's REAL evidence.
Ryan,can you use simultaneous closing in every state?
I do not know. I have never seen or heard of any laws in any state prohibiting them, but that doesn't mean that they aren't out there. You should ask a qualified real estate attorney in your state.
The problem is an ignorant title agent or realtor will tell you that you can't do them even when you can. When you talk to someone who says you can't, simply ask them why. Ask for specifics of why. Which law, organization, or attorney specifically says you can't? What you'll normally get is a "I don't know but I know you can't" answer.
If you do get a specific answer please post it here and I'll help you research its validity.
Ryan,
I think you scared Bill off. Well, at least someone is at the "graduate" level.
I think it was he who was claiming a ways back that you have to be licensed to make hard money loans. Which ain't true either.
PG
Thanks Ryan.....you are right....I am doing business in Florida and I have 3 title comaniese that still do simaltaneous closings for me. Findng the right title agent is one of our keys to success. I have foun that the larger the title company... the less likely they are to be investor friendly.