All Forum Posts by: Craig P.

I agree lots of verbiage but really we just try to cover all bases. This is stuff we put in an addendum not the actual purchase agreement as I stated above.

Again we are not attorneys thus the reason why I stated you may want to discuss this with counsel in your area. We have closed many sub to transactions however.

One point of clarification....if we were to market or wholesale a house we had under contract with agreement on "sub to". We would not leave that in place for the end buyer as I would not have confidence that the person buying would follow through on payments, etc. Just my view.

Lots of good advice in this forum.

Write your PA "subject to:" existing financing. You'll want to make sure you cover your bases with disclosures that clarify exactly what you are doing.

We add the following language in a sub to addendum:

The closing transation will take place as a "Subject to Transaction", meaning the seller agrees to leave existing financing and other potential liens in place for buyer. Buyer will assume payment responsibilty upon successful closing, deed transfer and will make all payments from that point forward. Payments will be made on time by due date.
Seller understands that buyer has full payment responsibility and that the loan will remain in sellers name until buyer successfully pays off the loan or refinances following the renovation or rental period.
The buyer may immediately turn around and sell the home for a profit. The buyer may fully renovate the home first and based on market conditions or the buyer may be required to rent the home for an extended period or until the market improves. The buyer may also re-sell the property with existing financing based on marketability, changes in the neighborhood, the market and potential buyer demand.
Seller understands that credit may be affected negatively if the buyer misses one or several payments.
Seller understands that buyer may deed the house back to sell at some later point and based on mutual understanding amongst buyer and seller.
Seller understands that this could be a permanent solution to the property problem and disposition or this could end up being a short term solution based on worst-case scenario outcome, i.e. something catastrophic occurs that keeps the buyer from making payments.
The buyer has the seller's permission to begin marketing the property immediately and by whatever means deemed necessary by the buyer. This could include but, is not limited to the following: phone, email, regual mail, NTREIS, MLS, signage, or regual listing wherey the agent is only marketing the property and NOT representing the seller in any way
The parties are encouraged to get tax and legal advice and by signing this agreement they are agreeing that they have explored other options, sought council and done their due diligence.
_____________________________________ ___________________________________
Buyer Seller
_____________________________________ ___________________________________
Buyer Seller

You also want to get the following documents signed:
-Limited POA
-Due on sale acknowledgement
-Sub to change of address
-Escrow and refund authorization

We are not attorneys thus you may want to speak to counsel in your area to determine laws/regulations in your area relative to sub to.

Let me know if you have any questions.
Good luck.

All-
I wanted to share an interesting deal I recently closed. I recently came across someone whose father had passed away and did not have a will. She was interested in selling me the house but because there was not a will she would need to take it through probate.

Being we do quite a bit of probate deals we have a relationship with a probate attorney who will work our deals with a small retainer upfront and the rest paid on the HUD at closing. I paid him $250 bucks to get started.

The house is a 2 bed/1 bath home in a fantastic neighborhood in Denver. The tax value of the home is approx $193k, and the ARV is around $265k as it sits with the current layout. The note was $155k. Repair to get to the $265k is about $40k.

We felt our best strategy with the home was to put a 400 sq foot addition on the home plus a 2 car garage thus making it a 3.2.2 1500 sq foot home, which we believed would retail out $350k+

I determined who the note holder was, and contacted them to let them know I was interested in purchasing the home and was in process of helping the daughter get the house through probate. At that point I was told by the lender that they would short sale the home to me for 95% of the appraised value. They told me because it was a probate situation the short sale is expedited and they could get it approved in about 10 days assuming I could get probate cleared and provided all the documentation they required.
They told me in order to do the short sale I needed the following:

1. Appraisal. Any certified FHA appraisal would work. I could hire anyone I wanted as long as they were FHA certified.
2. Purchase agreement reflecting 95% of the appraised value
3. HUD-1 statement
4. Letters of appointment showing my seller was appointed as the executrix of the estate.
5. Letter from seller stating their intention was to do the short sale for 95% of the appraised value
6. Letter of Authorization for note holder to speak to me on behalf of the estate.
7. Proof of funds.

So while I waited on probate to clear, I hired an appraiser to go get the property appraised. He appraised it at $125k thus I was able to purchase it for 95% of the appraised value. I went ahead and put together all the items but waited to get them signed until probate cleared.
My attorney cleared probate within about 3 weeks. I then met with the seller and got signatures to purchase the property for 95% of the appraised value, plus the letters.

I submitted everything into the note holder and within 5 days I had a response. They came back stating the closing service cost was not an item they would pay for; so I simply moved that cost to my side. Plus they wanted a copy of the tax bill, which my title rep provided to them. 5 days later they came back with the approval.

So in 10 days I was able to negotiate this through and get approval on the short sale.

Now for the good part….here is what the deal looks like.
ARV: $360-380k (my HML had an after repair appraisal completed)
Rehab: $75-85k for addition, garage and house remodel
Purchase: $118k
Typically I do not mess around with short sales because they are typically such a pain. The moral to this story is that I believe many lenders will expedite short sales when probate is involved.

I’ll keep you all posted on my progress once the house gets completed.

Happy investing.

I'd be in...I have been looking to form or join a mastermind group. What does the experience level look like?

I would argue you should attempt to simplify the process. Asking sellers to send you back information will deter most folks from following through. We try to make the process as simple as possible. I'd schedule a meeting and go meet with them and establish rapport and then work on getting the info you need to evaluate the deal. Sellers like selling to people they feel they can trust and ones who make the process "Simple" and "Non threatening".

Also I would argue you should not direct them to a voice-mail as many people will just hang up and go onto the next distressed property buyer.

Put a number on the sign that points to an live answering service if you can not answer the call yourself.

You really need to understand more before you can make an offer. You need to know:
1. After repair value or Top end retail value.
2. As Is value. What you could sell this property for by listing it as-is on the MLS? What are similar REO/Bank owned properties selling for?
3. Repair cost. 2 options- Retail flip cost or basic fha flip cost. There is a difference.

We always evaluate those 3 things before deciding on a offer price. I'd suggest scheduling a time to look at the property so you can understand the "fix part". If you do not understand that part, I'd suggest taking someone with you who does.

Most new wholesalers fail as they don't have their foundation set before going out and putting houses under contract. By this I mean make sure you have:
1. buyers. You need to have your list of buyers ready so when you get a deal you can move it.
2. Good contractor who can help you determine rehab cost. This is important when you are getting started as you likely do not quite understand who to estimate fix-up cost quite yet. Take an expert with you.
3. Agent. Someone who can give you reliable data to show you the value of the property including: Top retail value, & as-is value.

Once you understand the value and cost you can make an educated offer, and assuming you have buyers ready you can easily sell deals.

I'd suggest working on 1-3 and then the rest will follow.

Good luck.

Agree with Kai. Real investors won't care that you are making $20-30k on a wholesale transaction as long as the numbers work for them. IF they do care sell it to someone else. This is also why you never put all your eggs in one basket. You should always have a plan A and Plan B. Plan B could be to fund it yourself.

The key is to know the real players in your market. Chances are there are 5 or 10 companies/guys doing the volume in your area. Find them and work with them as they won't care the amount you make on your assignment fee.

I hate the discussion around what is fair on an assignment fee. You can not apply the same % to every deal as every deal is different. If I buy for 20-30 cents on the dollar is it fair for me to sell it at 60 cents on the dollar if the numbers still work? Yes it is. People that think otherwise should go hustle and spend the large amount of marketing dollars it takes to get the super deep off market deals. It is way harder than most think.

Floor n Decor is awesome. We also use lumber liquidator for hardwood flooring. Both are great.

Ask for the manager at lumber liquidator as they will sometimes give you better pricing than advertised.

Hey Anson,
Keep me posted on the next get together. I'd like to attend.

We primarily focus on off market deals through many of the sources that have already mentioned.

I would like to share a few deals I got in the last week as they are not the normal route I usually take to find deals. The best part is I didn't spend any marketing dollars to get these.

I was successful last week getting a deal that was listed as a FSBO. Just happen to drive by it and notice it was empty and needing work...I called and the seller was actually asking a reasonable number on it. I signed this with very little effort. I can wholesale this one and make $15-20k or rehab it and clear a really nice spread.

I also hit up an estate sale over the weekend and spoke to the people holding the sale. A brother and sister inherited their mothers house and I negotiated a deal right there. They signed my offer the very next day.

I may have just gotten lucky here as most FSBO sellers typically are not realistic about their desired price-point.