Thanks for you’re reply to my post. I’m not actually going to close my end just going to sell my interest to the buyer and have the “Contract Seller” write up a new Purchase and sale agreement, I am going to iron clad my pay from the sale though. I will stand to earn $8K that’s not too bad. I will be making sure I’ve covered all the loop holes where I can get left out. I mean,…it takes work and money to make this business go. Thanks again for you’re input
I need some input from those who have done this kind of deal:
Details:
Sub (investor) has home under contract to sell for the owner. Selling for $66,500.00 Appraised for $74,000.00 but will take all cash for $64,000.00.
I (investor) want to purchase and resell to my buyer (do a simultaneous close) I am selling at a slightly higher amount than I am offering, but not over the appraised value.
This seems ok to me. Is there anything that I should be adding to the contract between me and the person who holds the contract to sell. Is there anything wrong with this plan. I live in Canada by the way. I don’t want to get into a legal tangle and I practice by a very rigid code of ethics. I just want to generate a little cash flow and also I am willing to put in some money to help my buyer qualify. Thanks for any help that you all may give me.
Posted by Joe Kaiser on April 27, 2007 at 13:28:00:
Albertha,
A good deal requires three things . . . profit, certainty, and 10x. Here,
you’re clearly lacking in the profit department.
You can do this deal but only if certainty is off the charts (that means
you’ve got a solid buyer signed up and ready to go). Even still, it’s way
too skinny to make a habit of.
It’s rare that there’s enough room for two people to make a profit by
flipping the same property, but it certainly can and does happen.
You don’t want to do a simultaneous close. Closings cost money and
there doesn’t appear to be enough of it here. Someone needs to step
into someone else’s shoes and run with it.
Contracts? Yes. Asking what to put in a contract means you need to
first learn how things work and have a good handle on the paperwork
aspects as well. You may be doing this deal from behind the learning
curve, and that’s rarely a good place to be.
You need to be certain of the property’s value, i.e., if you sold it through the means you are planning what would you get for it? If I was in your position the appraised $74 would mean almost nothing to me. I would determine the value looking at comparables sold, pending and current. Use this value to determine if the deal is worth it or not.
Hi albertha. With such a slim deal you definitely want to make sure that your contract states that your purchase is strictly based on your ability to do the simulatenous closing with your end buyer. I would get an attorney to word it properly.
Thanks for replying Joe I’m using John Alexander’s material which I have modified somewhat. I guess I used the wrong wording when I said simultaneous closing. What I am doing is buying at $64 and selling at $74 to my end buyer, I’ve looked at the comps of houses that have sold in the area and it’s in the $84-$90k range. It appears that I can earn about $8k from this sale. I am being upfront with the “contract seller” and disclosing what I will be earning and having him sign documents to that effect, everything has got to be upfront. I am using an “investor notice disclosure” and an “invoice/release” form. I can’t see where the “contract seller” is going to make any money unless the real owner is selling it at a very low price. I have a buyer but as yet they have not been pre-approved for the mortgage, I’m going to go ahead with the transaction. I will find a way to put the wording in the two forms I’ve mentioned above to include the real seller so that I don’t be squeezed out of the sale> You know certain types of people will stoop pretty low when money is involved and that’s so unfortunate. I remember when I sold real estate for a RE Broker I had another RE agent whip my commission right out from under me, you should have seen him scurrying he was watching as I was showing the house, unreal but it happens. Very unprofessional. I don’t sell for a broker anymore, I’ve gone private. Anyway’s thanks for you’re answer to my post
Thanks Jim
I think I am certain about the property value and I did see the comps, that part looks ok. I just want my fair pay for my work on this and want to make sure that I am not getting into a legal battle. I want to avoid that at all cost. I like to keep it above board and simple. Everyone winning and happy. Thanks so much for your reply to my post