We’ve been doing some sandwich lease options, and haven’t had to actually purchase anything, but now we’ve got a line on a house here in Seattle.
Owner is agreeing to sell the house for 415K, neighborhood comps come in at least in the upper-500’s. We think that with about 45K worth of curb appeal and updating, the house could be sold for 640K. No way can we get financing for 415K. So, we are seriously considering tying up the property with a Purchase & Sale agreement, then assigning the contract. We think that it would even be a good deal for a rehabber at 450K, which means we could get 35K. Would someone even pay 35K for an assignment? Or should we try to do a simultaneous close? And pardon our ignorance, how do you actually DO either one of those?
Any tips you could give us would be greatly appreciated!
Howdy Fairlead:
If I were flipping the deal I would do a double closing. No way to get a buyer to write a check for $35K.
A hard money lender may loan you $450K This may be a little short of what you need total for purchase, fix up and carrying costs but you may be able to do it. I did not think I could do the deal I am currently doing but here I am in Corpus in a motel rehabbing a $750K building. U can do it too.
tedjr,
I am trying to get similiar info for a deal. If he wanted to double close:
would he have to pay any earnest money?
would he have to have financing set up with a bank for himself or would only the end buyer?
what is important to have in the contract to protect the investment from getting sold underneath him?
How would he show the property without getting the seller and end buyer from meeting and possibly cutting him out of the deal?
Howdy M3by2003:
A wholesaler needs earnest money. Some teach the $10 deposit and it may work if the seller is a fool or can not read English. I believe at least $500 will be needed on most deals.
Most sellers are requiring offers to be submitted with a pre-approval letter from a lender especially sellers like banks, HUD, Va etc. You can use a hard money lender. One that I have tried to use here in Texas has a web site that generates them automatically for their clients.
There is nothing that protect you except the contract. You could record a memorandum of contract at the courthouse that would create a cloud on the title but this is not done very often and perhaps only if you suspect trouble. I did submit a contract once to a lady in preforeclosure and it turned out that she had signed over a dozen contracts and had collected some of the earnest money. I found out later that she did not even own the house and had deeded it to her attorney for her divorce expenses.
This could be a bit of a problem if the home is occupied by the seller. If the seller knows ahead of time that the wholesaler is reselling the house it would make it a bit easier to keep the two apart. I did buy some property once that I had under contract with a wholesaler but could not get the loan approved with my original lender. The wholesaler lost his contract and several days later I found a new lender and was informed by the Realtor that the property was available again and at a lot lower price and I bought it. It still happens even with the best protection in place, kind of like condoms and babies.
some investors will write a 30g check. People get them all the time that assign probates and preforeclosures