Can you explain the procedure of wholesaling. property is worth 100k, it is sold to an RI for 50k. Owner owes 60k, repair cost is 20k, How do you determine the ARV?
If a property is worth 50k and the owner owes 60k, the only way you can sell it is with a shortsale. The amount owed on the property , in the end, has to be less than the sales price you are trying to sell for. To find the ARV on a property, use local comparable sales. If in a city use 2-3/10ths of a mile and in suburbs .5miles. There are more things to look at than just that, but it’s where you start with it. That same deal should look like this
100k - arv
Pickup Price - 20k
Wholesale price - 30k
Owner owes - 10k
In this market, 60k sales price with 20k repairs on a 100k ARV isnt a deal. I can only speak for Philadelphia, but I highly doubt there are other markets that are much stronger.
Thank you We-SellHouses2Fix
I understand the procedure now. One more question, if that a seller sells his property less than what he owes, he deos need to come up with the remaining to pay off his mortgage at closing, doesn’t he?
The homeowner has to qualify through the lender and get their okay to sell it, or he can simply quit claim it to anyone, but by quitting, the person who they quit to is now liable for the debts.
To okay the sale the lender and homeowner need to work toether and come up with an agreement it’s faster this way. They do a whole financial plan toether to see exactly where the homeowner is. The homeowner should tell the lender they have a signed contract with a buyer, even an option. The lender may okay the sale and the homeowner never has to pay the differance still owed. Everything is negotiable.
The law use to be that the lender sends a 1099 to the homeowner after a short sale for the remaining owed so the homeowners would show it as income and pay taxes on it at the end of the year. However the law has changed and it’s not showed as income anymore!