Man, there’s some wild stuff going on in this thread, so let’s try to tame them a little.
First and foremost, if you are dealing with a REO property (this is a property that has been foreclosed upon and is now owned by the bank), then you are not, let me repeat NOT, going to be able to use your own contract with your own special terms, etc. etc. etc. REO’s are VERY conventional, and your creative real estate methods will not apply to the buying. Maybe you can be creative in your financing, but it had better look conventional within the offer.
Why can you not use your own contracts? One, because 99% of all REOs are now listed with real estate agents. RE agents, and especially REALTORS, will use their own state approved and protected contracts. Yes I know that agents are supposed to present all offers, and some even will. However, they won’t get too excited with their presentation, and the bank won’t accept it anyway. TWO, most banks now require that the offer be presented on their OWN purchase and sale contract. Any other offers, even those presented on the standard agent’s contracts will be rejected.
Since you cannot use your own contract, then you cannot add in any special assignability clauses. Most standard agent contracts are NOT assignable unless both parties agree to the assignment in writing. The bank won’t agree, period. ALL bank/REO purchase and sell contracts are NOT assignable period.
Also, practically all offers made to REOs must include either a proof of funds letter or a preapproval letter, so a financing contingency is limited only to the property appraising/being approved by your lender.
These are facts, boys and girls, plain and simple. Exceptions do happen but are rare beasts.
Concerning double closings.
State laws may vary some, but in general, double closings are legal and valid as long as a: There is FULL disclosure in each transaction. b: each transaction is self-contained and separate from the other.
As far as a REO property is concerned, they will want to know where your financing is being obtained. In fact, as stated above, it is a requirement that you have a preapproval letter BEFORE the offer will be accepted.
Now, let me explain the double closing requirements.
a: Full disclosure. This doesn’t mean that you have to tell the seller that you’re going to flip it. It simply means that you have to be truthful in you contracts/forms/etc that deal with EACH closing. This is true whether you are doing a single or double closing.
b: Self-contained transactions. Simply put, you can’t use the funds from the 2nd closing to fund the deal for the first closing. At least, it can’t be put on paper that way. More so, you can’t close the 2nd transaction (you as the seller) UNTIL you’ve closed the 1st transaction (you as the buyer). Why? It’s illegal for you to sell something that you don’t yet own. If you do either of the above, what happens if the 1st transaction doesn’t/can’t close? How are you going to explain to the end buyer that they don’t own the house, because you never were able to sell it to them in the first place? Trust me, explaing to them is the least of your worries. Explaining it to the authorities is probably more important.
In short, if the first transaction cannot hold up on its own without the aid of the 2nd (like the funds from the 2nd), then it’s very probable that there is something illegal about your transaction.