To flip or not, that is the question… - Posted by Michael Morrongiello
Posted by Michael Morrongiello on January 08, 2001 at 16:06:47:
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,