Can you wholesale an owner finance deal?

No, you're not practicing as an agent. As long as YOU have EQUITABLE interest in the property, you are ok, meaning you are only representing yourself in a transaction.

That being said, you have a couple ways you can go about this. Wholesale the lease option to the end buyer, or Sandwhich lease option. Both can still make you money, the only difference is with the wholesale, you're out of the deal completely once you get paid, and the buyer/seller work directly with each other.

So, we do a sandwich lease option, I wasn't thinking that way, but what kind of terms would you do with the seller and the buyer? I set the buyer up with the expectation that they'd buy at 20% down ($10K) and 10 year or less mortgage at 12% interest. So, that puts their payment at $575. I'm guessing once he gets the house in a position where it can be financed conventionally, he will do that, so maybe after a year or so (perhaps less)? Our contract is for a $45,000 purchase. What would you attempt to get the buyer and seller to agree to? We are running this through our heads, but other people's input is always helpful.

It's great that you started negotiations with the buyer. However, what does the seller want? Have you discussed price or terms with the seller?

I would try to see what they want (price vs terms) and then negotiate price/terms with the buyer so that everyone (seller/you_the_investor/buyer) enter into a WIN?WIN?WIN situation.

Make sense?

-Valiant

I understand the win/win/win. I have a good rapport with everyone involved. I just need to wrap my head around what the win/win/win is going to be in order to seal the deal. The seller wants to not worry about the house anymore, not pay utility bills, taxes, insurance, snow removal, ect.ect.ect. and he wants the most money he can reasonable get out of the deal. The buyer wants a good deal on a house that he can fix up. The house in question cannot get approved for traditional lending due to the bad roof and such. I'm guessing his plan is to do owner financing at the high interest until he can refinance the deal under better terms and then pay this off. So, I'm believe he is only going to use owner financing for a year or less until he can get the house fixed up to the point that it can get financed.

I've got a REI Partner who says you can wholesale an owner financing contract. He's also got a law degree and says that he has done it before.

Sandwich lease would work but I think you may still have a wholesale option. I can try to find out more but I've never tried it personally.

He told me that he had a way to wholesale someone's bank loan also but I understood only bits and pieces of it as it was legal speak.

Remember, L/O is not owner finance. Usually there is a time frame and the balance is due right? That may be OK with your buyer and seller but it might not. Can your buyer get his own financing during the lease period and ultimately exercise the option? When they ask for owner finance they usually can't qualify for a loan. maybe so, maybe not. Have your broker pre qualify your buyer. Set up credit repair or whatever is needed if anything.
Is the seller not concerned with cashing out? If the seller is, at some point some one will need to get financed right. Or will the owner just make interset until the loan to your buyer is paid off? Most likely not.
If it is short term like you mentioned above then do a "subject to" and assign it to your buyer. Take to your title company or attorney to get all the correct paperwork done and close at the title company or with an attorney. Make your fee.

Just a couple of thoughts,

Michael Mangham
MD Home Acquisitions LLC

I can definitely help you out here, but I need more information like:

1) What is your buyer willing to pay as a purchase price?

2) Is your buyer an investor or a tenant buyer?

3) Do you have this property locked up as a lease with the option to purchase or under a standard purchase agreement with owner financing terms? Perhaps maybe you just have locked it up under an option contract?

4) If it is under owner financing terms, does the seller hold the property free and clear or is there a mortgage? Also what kind of down payment is the seller expecting and what are they looking to get for a monthly payment? I will also need to know how long the seller is willing to hold the note for?

If you can give me this information I can give you the best route to go. =)

Larry F
TheFlipKid

You are not acting as a real estate agent because you are selling a contract... much like loan servicer is not acting like a bank because they are merely servicing the loan and not doing the actual lending. And... much like I am not acting as a lawyer because I am sharing anecdotal information.

It would be really cool if everyone had a lawyer on retainer for these types of situations and better if you checked with one. There are very inexpensive prepaid legal providers who make it so much easier for me to sleep at night. PM me for more info on the one I accidentally found in Michigan (less than $500 annually with unlimited phone support). Maybe they know of one in Illinois.

You might also find some good stuff here: (you probably know this, but... Copy and past the web addresses into the address box of your browser; )

http://www.deangraziosi.com/node/12463

http://www.deangraziosi.com/real-estate-forums/everything-else/69226/how...

good luck, Susan, and, peace,

My buyer could qualify for a regular mortgage. That is what he was looking for, but couldn't find the size or style of house he wanted in his price range. He is also in the construction business, so he thinks he can do all the work himself. So, a Lease/option would be great as long as the buyer was guaranteed that he could buy within the timeframe of 2-5 years.

Buyer made an offer today to do $50K at 10 years with 20% down and 12% finance rate as long as there was no penalty for early payoff. The buyer is a tenant buyer, willing to do all the work himself and has the money to do it.

The property is locked up at $45K cash deal, but I have spoken to the seller about possibly switching over to a seller finance with the terms mentioned above and he is good with that as long as he is protected and the buyer has builders insurance until the property is insurable under home owners insurance.

The sellers own the house free and clear. It is an elderly lady's home that went to hell because a son was living there with them and tore the heck out of it, it was then vacant for a number of years. The elderly lady is now in a nursing home and the property passed to the daughter (our seller).

The sellers were willing to take $5K of the 12K downpayment that we discussed before in an earlier owner/finance situation and they were willing to carry the note for 10 years or less considering they were going to net closer to $70K with all the interest fees and such. The buyers seem that they are only interested in financing at this rate until they can get their conventional mortgage approved (so really, probably less than a year) with the roof being redone and everything else in tact so a bank is willing to loan on this property. The ARV on this prop is $130K. The estimated repairs are around $40- 50K.

So that's the situation...

Thanks for your help!

-susan

I am actually in the process of wholesaling an owner finance deal right now. It's a 3 bedroom property that I have under contract for $110,000 with $10,000 down needs about $20,000 in rehab. I am about to assign this deal for $120,000 with owner financing in place. I used none of my own money. The new buyer will be paying $20,000 down (10k to the seller for down payment and 10k to me for assignment fee) and stepping into my owner finance contract with the seller.

I was completely up front with the seller in regards to my intentions of finding a buyer to assign the deal to and he was fine with it as long as he got what he wanted for the property.

So to answer your question YES you can wholesale an owner finance deal. I suggest that you get a new purchase agreement drawn up between you and the seller with owner financing instead of cash purchase. Then simply assign that contract over to your end buyer.

Is there any difference in the paperwork?

Thank you Carol! I've been on the phone all day with all parties involved and it looks like we have a deal in place! Carol, can you send me a copy of your assignment contract for your deal? We are doing the renegotiated contract with the seller tonight and we want to lock up our deal with the buyer ASAP, but I have no clue where to go with the assignment contract. Thanks for your help!

-Susan

Carol can you please explain how you got the SELLER to be comfortable with allowing you to wholesale it? Did you let her/him know upfront that you're not the actual buyer? Can you post a simple script/questions that you use/asked?

The way I got my seller comfortable with allowing me to wholesale it is by screening the buyer myself and finding out why they were wanting to buy, ect. Also, at least a 20% deposit or higher for the owner financing brings a large piece of mind. Then, if the buyer defaults, you bascailly foreclose on the house and take the house back, the buyer gets none of their money back and the seller gets to sell the house again all over most likely after the buyer has made some improvements. Another benefit of owner financing is that you can charge a higher interest rate (12% is what we are charging), so after it's all said and done, a 10 year finance gets the seller $75K on a sale of $50K, so the end amount of money is much higher. My seller is requiring that the buyer have a vacant policy that will convert to a homeowner policy in case the property is struck by some sort of destruction or something.

It depends on the seller and why they are selling to determine if the owner financing is a win/win. It's also easier to negotiate if the seller owns the property free and clear, if their is a mortgage, then things can be a bit trickier. Good luck!

Is anyone familiar with double closing? Would that work better for his deal? Interested to know because that is what I would like to do for my deals

the ONLY thing that is different from any other assignment is the TERMS

the TERMS of this contract includes owner/seller financing and as long as the seller is ok with the new buyer, you're good to go....collect your assignment fee and move on to the next one

TERMS or PRICE and sometimes BOTH

A double close in this deal would only work if the wholesaler were willing to be the financing person. To close once, the wholesaler would need the cash to close the deal, then to close the second time, the end buyer would want the financing, so the money that the wholesaler put up would be the amount financed. So, yes, that would work as long as you have the cash to cover the deal.

If you are wholesaling and not using your own money, then a double close would not work. The assignment here works with the owner financing because there is no bank involved. Banks don't do assignment contracts, but private lenders might not mind.

So, I told the buyer that they needed to bring 20% down or $11,000 to the close (minus the $1500 escrow) and we resigned the contract with the sellers. OUr assignment fee was supposed to be $10,000, but we were going to pay the closing costs and realtor fees, so we figured we would net $5K. But, now I realize that if we take our $5K, pay all the closing costs and realtor fees, the seller ends up with no downpayment at all. I'm pretty sure they are not going to be cool with that. So, now I have to go back to the agent and tell her that the downpayment needs to be $15,000 instead of $11,000, and we need to redo our paperwork with the sellers. AAAAAAAAAAAAKKKKKKKKKKKKKKKKKK! This stuff can be freaking frustrating!

-Susan

So were you able to restructure the contract and make yourselves a profit?

Practice, practice, practice! The first several offer were tricky learning the numbers and who pays what. The formulas get easier everytime there are even phone apps that have offer calculators and things like that. I hardly ever use them as pen and paper are just easier. Keep up the good work and make it a win, win, win!

Our buyers did not call back today. I told the seller what was going on, he is not happy and told me to get this back together for him, so we are going to attempt that and put the house back on the market. Definitely a lesson learned. I was really really bummed about this and beating myself up, but the thing is, I'm not out any money. Just time and frustration, so either the deal goes through, or it doesn't. Whatever, the world always evens things out. I'll keep you all posted. Oh, and we joined the Real Estate Academy today. Whooo Hooo!

Man, this is a roller coaster, but we still have a deal and we are going to recoup all of our assignment fees. The title company can't get this closed for 3 weeks, but buyer and seller are ready to GO. So, it's just a waiting game now. Thanks for the encouragement Sheila! We start our Success Academy stuff tomorrow and I'm so excited to get going! Our goal was to get my husband out of a job by the end of the year and I don't know if we will hit that goal, but I do think it's possible to get him out of a job by the end of January. We also mailed out a letter to some absentee owners in the area. We have a list of 1300 people and we have made it through and mailed about 200 letters and I've gotten about 15 calls and I have 2 possible deals I think I can lock up. So, I'm going to keep mailing to the list and if my returns are the same as the first round, we could end up with 10 deals from this campaign.

It's tough and gut-wrenching when the good deals go bad. Never burn bridges, that's a lesson that we've learned. Glad to hear its back on. Enjoy these ups and downs and learn from them. Way to go on the mailers! It only takes a few returned calls to get out of that J.O.B.!!!

Glad to hear that the deal is back on. Sounds like you guys are having fun on that roller coaster!