Is it possible to do a wholesale deal when your buyer is just looking for a handyman special (for their primary residence) and is going to using conventional financing? Here’s an article explaining what I’m talking about:
Is this still possible today? It seems like you would be able to do a lot more deals if this was the case. Rehabbers are looking for properties at about 50% of ARV. I would think an average Joe would be happy paying 80% of ARV, opening up the possibility of taking deals you otherwise wouldn’t do with a cash buyer.
Can someone please explain if this strategy is still possible and if so, why it’s not utilized more?
I don’t see why you can’t if you write the original purchase agreement correctly to allow enough time and to allow for financing. Sometimes you can even just do an addendum to the original contract if the financing type changes after the original contract is signed. I did this when I put in a cash offer then switched to use a hard money lender.
It depends on the original seller and how much leeway they are willing to give you. In this case, it was a bank foreclosure and it was fine. Most sellers don’t care as long as they are getting their asking price and payout at the closing table in the agreed upon timetable.
If you are going to market to retail end buyers make sure they ARE PRE-APPROVED not just PRE-QUALIFIED. Anyone breathing can get a PreQaul letter but actual approval means the funds are their just waiting for the property to appraise. Right now we’re 60 days into the closing process when the Mortgage company is taking FORever to get this loan approved and it’s killing me to keep waiting b/c I’m the seller.
Banks also don’t like to lend on extreme fixer uppers and FHA has strict rules as well. On this house, the appraiser told me there had to be a full-sized fridge installed before I could close! I had never heard of that as many houses sell without a fridge as part of the deal. The property will have to meet your local code for habitation like installed flooring, a working kitchen and bathroom which is why so many need to be cash or hard money only purchases.