Posted by kate- on February 01, 2001 at 13:59:02:
Thank you for your comments. I was thinking about flipping in terms of obtaining a contract on distressed homes and then selling my position to rehab investors or owners. Perhaps the time it takes for the rehab will help to assuage lenders’ fears.
How do I sell a contract - Posted by Lisa Olivas
Posted by Lisa Olivas on January 08, 2001 at 03:05:09:
Hello,
How do I sell a contract? Let’s say that I put on contract to buy a home for 80K, that has a market value of about 107K. The owner has no mortgage, there are no outstanding taxes, liens, or loans. Then what? I have this contract I want to sell, how much is it sold for, and how does this impact the original seller of the property? Is selling contracts considered “flippging?”
To flip or not, that is the question… - Posted by Michael Morrongiello
Posted by Michael Morrongiello on January 08, 2001 at 16:06:47:
Lisa:
Lets understand a few things first;
Your contract to purchase the home for $80K cash to the seller is a SALES CONTRACT with the existing property owner. However you are then going to attempt to immediatly resell the home to a “retail” buyer for $107K - this is considered a “FLIP” type deal and would also be labled a “Simultaneous Flip” type deal since you do not have LEGAL TITLE to the home your attempting to sell.
Creating a seller financed note that will be based upon the $107,000.00 sales price to the “retail” buyer and then wanting to immediatly sell that “paper” for cash so that you can use the cash proceeds to complete your $80K purchase from the actual property owner is becoming more and more difficult to accomplish these days.
Traditional and Sub-prime Lenders, note funders, Mortgage bankers, etc. are often NOT willing to play on this playing field. They have been burned numerous times by these quick run ups in a properties value and apparent buyer remorse after the sale and a Seller who no longer has an interest in the property and down the road with their CASH in hand and little incentive to make parties “happy”.
Are these deals still possible? Sure, however there are a few legimate note funders that are willing to step into this fray and play ball (we will still consider these types of deals providing they are equitable for all parties involved.
Typically if the Seller financed 1st lien note and mortgage that is being set up to “Sell” the property to the retail buyer is Structured correctly and the “right” prospective buyer will be the payor on the note, where the buyer has a decent credit profile, credit scores, employment, stabilty, etc. one can realize a “cash value” or payout in the low to mid 90% precent level of the mortgage & note receivable balance. This is simply a generalization and not definitive until an actual underwriting of the files pluses and minuses take place.
To your success,
Michael Morrongiello
Sunvest Corp.
Re: To flip or not, that is the question… - Posted by kate-
Posted by kate- on February 01, 2001 at 01:41:23:
I am currently trying to educate myself before I attempt any actual investing of any kind.
I was very interested in flipping initially because generally seems to require only time and maybe a little money (which is proportionate to the resources I have available right now).
However, I am worried by your comment that flipping is becoming harder to accomplish these days. Is this really true? Across the board? Is the difficulty that there are too many people trying to do this?
Any information you can give would be appreciated.
Re: To flip or not, that is the question… - Posted by Michael Morrongiello
Posted by Michael Morrongiello on February 01, 2001 at 12:14:40:
There are plenty of opportunities to “buy low, and sell high”, so “flipping” properties as a way to earn realatively quick cash profits in and of itself is not a problem. Its the mechanics about how one goes about this type of deal that has become more restrictive.
Lots and lots of lenders have been burned recently by making mortgage loans to buyers of properties based upon the “retail” re-sale price where the property may bave been acquired only recently (perhaps only a month or so before) for far, far less. Some of these transactions have been bogus, fraud was involved, down payments fictitious, etc.
The “bad apples” who promoted these deals have now painted most investors with the same broad brush and have in essence ruined the availability of loose mortgage money to a degree.
“seasoning of ownership” is a buzz phrase that you will hear over and over again as lenders who have beeen previously snake biten by the charlatans will refuse to fund any deal where the seller has not owned the property for a minium of 6 months and in some cases at least a year.
So, is flipping not a viable option? NO- its just the way you go about putting together your acquistion deal and plan your exit stratergy that you will have to map out more carefully.
To your success,
Michael Morrongiello