I am trying to do my first deal and had a few questions I was hoping to get help with:

  1. If the house has a relatively small mortage (in comparison to its FMV), how does the wholesale deal work out? Where does the mortgage go? Just to give numbers, lets say the ARV is 200K, the mortage is 40K, and the seller is offering to sell you the house at about $120K . Im just trying to figure out the end result to the seller, buyer and me (what does each person get). I understand how the wholesale deals work when there is no mortgage involved and also understand that a short sale would result if mortage is > than FMV.

  2. For beginners, would it be advisable to do only deals where there are no mortgage involved?

  3. Are you suppose to open escrow right after you get a house under contract using your own closing attorney? What happens if you open escrow with your agent and then your end buyer wants to use their closing attorney for the closing?

4)What if I cant find a buyer in time for the closing ? I understand that the seller get the earnest money - what happens to the opened escrow and does your closing attorney take any fees from you if the deal doesnt work?

5)Are you suppose to tell your seller of your intentions about wholesaling ie that you will eventually find a end buyer?

Thanks for the help!

  1. Wholesaling a house with a mortgage works the same way that buying it to live in. If you paid the seller 120k, then the seller would take that 120k, pay the bank 40k to get rid of the loan and then pocket the remaining 80k.

  2. Mortgage or no mortgage it doesn’t really matter. When a mortgage matters, is when the owner mortgage is larger then the a price you would pay for the house. In that case it would be a good short sale candidate. You can get more creative when a mortgage is involved to make things work in your favor, but don’t worry about that now.

:beer agreed with scostell… another thing i’d like to ad is no you dont have to open escrow when you get a house under contract because you wont be the end buyer its for the end buyer to do you just push papers(purchase/assignment of contract papers) because the end buyer will be taking your place in purchasing the house so its his call in who he wants to close with and all that good stuff… and 1 good key to wholesaling is have a few buyers lined up before you look for houses so you can bring them exactly what they want…

Another option is to assign the contract for 5k to an investor (and move to the next one). You get 5k, the investor pays the seller the 120k and gets a property with equity, the seller gets to pocket his 80k and be done.