Posted by greg scott on October 22, 1998 at 01:05:52:
JPiper,
Thanks for the details.
Greg
flipping retail contracts - Posted by michael knight
Posted by michael knight on October 21, 1998 at 11:46:23:
I was told today that it is very unikely to be able
to flip a contract to purchase nowadays because
lenders are becoming stringent on investors whose
names are not recorded on the deed recieving the
spread between what they contracted for and what
they sold for e.g.
House is worth 100k and you got it under contract
for 88k. You found buyer that would buy the house
from you for 100k, you assign your contract to them
and go to close,while doing the title search th
lender finds you are not on the title and are about
to profit 12k on money they provide,without you
even being on the deed.You walk away wih no
recourse,like a real estate agent with no license
if this is true how do you go about getting your
spread without the buyer, who is probably strapped
for cash, coming out of his pocket for money
sorry for the long post
Re: flipping retail contracts - Posted by JPiper
Posted by JPiper on October 21, 1998 at 12:52:06:
There’s an element of your post that I would like to correct. When you assign your contract you assign it for a fee, the fee coming from the new buyer…not from the lender. The new buyer then takes over your contract via assignment. The new buyer’s contractual status at that moment is with the seller, not you. The sellers name is on the deed. This would not present a problem for any lender that I am aware of.
Now perhaps what you’re concerned about is that the new buyer may not have the cash to pay your assignment fee. If this is the case, remember that you could collect your fee with either cash, or a note, or both.
Perhaps what you meant to say was that you would be doing a simultaneous closing with your new buyer, and with the original seller. In this case when the title company pulls the title work they will find that the original seller is on title, not you. And yet you are the seller to the new buyer, the borrower with the lender.
If the latter is the case what you will find is that there are some lenders who have a problem with that, and some that don’t. I recently ran across a lender who has a “seasoning” requirement for seller’s…this seasoning requirement being 12 months. Therefore if your new buyer wanted a loan from this lender, you would be unable to sell to him. But I think there are many more lenders who do not have this particular seasoning requirement. Find yourself a good mortgage broker who can take the loans for the new buyers that you find to the proper place.
Lenders who have the “seasoning” requirements are concerned that your new buyer is obtaining a loan with no intent to repay, but to put money in your pocket. But let’s face it, if it’s a $100K house in a $100K neighborhood, with unrelated parties involved in the transaction, there should be no concern on the part of the lender…other than the normal concerns that a lender would typically have regarding the financial condition of the buyer and the value of the property.
JPiper
Re: flipping retail contracts - Posted by Greg Scott
Posted by Greg Scott on October 22, 1998 at 24:23:49:
JPiper,
I’m interested in the mechanics of the fee. And since you seem to be knowledgable in this area I’d like to tap into your skills.
Does it require a separate contract to state that buyer will become the assignee when he pays the fee?
Is the fee paid into the escrow?
Regards,
Greg Scott
Re: flipping retail contracts - Posted by paul(OK0
Posted by paul(OK0 on October 21, 1998 at 15:13:17:
Could you write a contract where the seller pays the assign fee? Would that fly better with a lender? I have a property that is worth 50k the seller just went through foreclosure(i.e. trashed) to get his property back. Now he just wants to get 20k out of the house. I have found a first time buyer that wants the house the way it sits for 30k. The seller is game for about anything as long as he gets 20k before the end of the year. Any ideas for a close with little or no money down?
Re: flipping retail contracts - Posted by JPiper
Posted by JPiper on October 22, 1998 at 24:57:18:
The way I assign a contract is that I have an assignment agreement signed, and I collect my fee at that time. Upon the completion of this, the contract is the assignee’s…and he may proceed according to it’s terms. There is no escrow for my assignment fee.
JPiper
Re: flipping retail contracts - Posted by JPiper
Posted by JPiper on October 21, 1998 at 16:03:39:
Paul:
I’m quite confused by your post. Perhaps you could repost ALL the details.
I would simply tie the property up for $20K…resell for $30K to your buyer…and close simultaneously. What bothers me here is that you say the property is worth $50K. You also say that “the seller just went through foreclosure (ie trashed)to get his property back”. I’m assuming that what you mean by this is that the property requires repair.
If the property truly needs repair, it would be important to know how much repair. Next, if the property is really worth $50K, I don’t know why you would sell it for $30K, unless there are significant repairs necessary.
It might be possible depending on what the actual repairs would cost, to tie this up for $20K…and assign to a wholesale buyer for $10K. Or, if you have the means to fix the property, perhaps you could find a buyer who is willing to pay market value, or something close to it.
Can the seller pay you an assignment fee. I would say no. This would strike me as you performing a broker type function…and that this would require a real estate license.
JPiper