OfflineI am looking for advice on a property I am working on. A lady emailed me the other day wanting to sell her home so that she would be able to purchase another one. Besides assigning her home to an end buyer, than assigning a contract from a home she is interested in to her, isn't there a different and more efficient strategy I can use? Someone told me of a strategy where you take the current monthly payment that the seller is currently in and just transfer those payments over to her new property. I forgot what she told me it was called. But if that is something that is possible, what happens with her current home if there is currently no end buyer during the time she purchases the new home? Would she have two mortgages she would have to pay? Any thoughts and opinions are greatly appreciated.
Hard to do transfers like this scenario. The new buyer moving into her place would want title to the property, and she would want title to the property she's moving into. Each one of the transfers of title would violate the "due on sales clause" on each existing mortgage. Banks rarely call this in as long as the payments continue to be made, but each bank is different and it's risky to both parties.
I do believe the easier way is to do the two assignments, collect your fees and let the assigned buyers and sellers complete their transactions.
- Tom
Thanks for the advice. I figured this would have been the only way to do it, but I had to ask and see if there may be a simpler way.
First of all, I have a feeling that the lady who contacted you is probably wanting to sell her house at market value. This doesn't work for a wholesaler. You must find house at below market value. Quite often the house is either a foreclosure or a fixer upper. It sounds like you are relatively new to the business, so my advise is first to build your Buyers List and then go look for under valued properties.
With respect to the scenario you describe above, it is going to be hard for you to make any money. If, by chance, she is willing to sell her house at a discount to market value, you could potentially assign your contract to one of your buyers and make some money. However, I don't see how you are going to make money on the purchase of her new house. She is probably working with a real estate agent and won't need your services.
Keep focused on finding investors, and then get busy and find discounted properties.
Good luck.
You didn't give us enough details to make a decision.
If the seller's property were over-leveraged (with negative equity <= 15% of the ARV), then you might be able to do a mortgage assignment--provided she has enough capital to handle her down-payment for the new home. Instead of a mortgage assignment, you could also do a lease-option, and assign your option.
If the seller's property were to have sufficient equity to cover your compensation, then you'd have more options (including the aforementioned ones).
Another (more advanced) option is to set up a multiway swap (or equity exchange) deal. I'll proceed with an example with 5 participants: 1) the person (Al) who sets all of this up, 2) a seller (Beth) who has to sell a performing note, 3) a seller (Carlos) who wants to sell a retail SFH in OH to downsize into a condo in AZ (owned by seller [Dean]), and 4) a retail buyer (Erin) who wants to buy a property in OH. Al executes a P&S to buy Carlos' home for $90K, and Carlos plans to buy a condo from Dean for $30K. Al suggests that Carlos invest the remainder of the proceeds of the sale ($60K) in a note, and Carlos agrees to do it. Al executes a P&S to buy a note, which has a present value of $60K, from Beth at a discount for $40K, and has Beth to place the note into escrow with a certified copy of the P&S. Erin executes a P&S to buy the home that Al has under contract for $100K. Erin closes with Al with $10K down, a $10K seller second, and a $80K bank loan. Al uses $40K of those proceeds to close with Beth. Al gives Carlos the note and $30K; Carlos closes with Dean; and Al walks away with $20K and a $10K note.
See Brent's tips above.
More than likely she is looking for market value, so it may not be something you can work with.
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