Lucky me. I pay thousands of dollars for a seminar on wholesaling, get an ugly house under contract, find a rehabber to flip to for a profit of about $2,000 and guess what happens? My title company tells me they can’t do the close because it would be an illegal flip!
What the flip?!?
Apparently, the good god-fearing state of Indiana has, in their immense wisdom, declared that reselling a house in less than 90 days for more than 6% of what you paid for it would destroy civilization.
Are there any investors in Indiana on this forum that know a loophole around this stupid law?
Yes, you can get around this. You are still in control of the property, right?
Couple things, assign the contract to the rehabber upon reciept of his $$…have him pay you at his bank where YOU WITNESS the drawing of the cashier’s check. Witness it do avoid any counterfiting concerns. Open an account at his bank and have them put that $2000 into your new account.
DONE. You’re onto your next deal.
I agree that this has been discussed before and you need to do a search to see the various different ways investors have closed these deals…
My suggestion is to ask around the local investor group, as in CALL them ASAP, and get the number of a Title company that actually isn’t paranoid about closing these transactions OR go to their website and get the name of an attorney and have him/her close the deal for you.
Ok, deep breath…go read a bit. I think your deal is still safe unless I am totally misunderstanding the situation.
I can’t do it that way because the contract would still be in my name and the title company does a judment search on the buyer. When the buyer shows up at the closing the title company will say, “Who are you? We can’t do this close because we haven’t done a judgment search on you.”
The closing date is 30 days from the day I sign the contract. This means I will have to actually purchase the property instead of just selling the contract. I’d have to use a hard money lender which would eat up most of my profit.
Most of my flips take about 90 days anyway and then another month or two to get them sold. I don’t jump into a project unless I can make about 20K. This covers most of the unexpected cost that can come up. Even with a 20K cushion I sometimes come close to loosing money on a deal.
rbcondo have you thought of offering owner finance to speed things up for you as you could sell the contract to a note buyer and get cashed out just the same ???
yes it would open a whole new area of buyers for you as well !!! I just think it is something every one should think of as a investor or any one in real estate in the buy and sell of it makes your place more apealling to more people
explain what you mean as you would be selling your own home on a contract and then selling this note to a note buyer Where are you seeing you are not selling a home ??
When you assign a contract you are doing just that…assigning a [/b]Contract[b]. You are never in the chain of title and you never own the house. You just collect a fee from your investor and they close on the house.
That’s exactly what I’m telling my title companies. But they all respond back to me with the same answer. “This is Indiana. And in Indiana law if your name is on the original purchase contract, even if you simply sell that contract to another party, that is considered a “flip” and it is illegal to flip a house in Indiana for more than a 6% profit in under 90 days.”
As far as I know a flip is when you buy a property then sell it ASAP. assigning a contract can not be a flip as you never closed on it. I would suggest another title company. For them to tell you that you can’t sell it for more than 6% under 90 days on an assignment is telling me they just don’t want to work with investors.