Posted by Redline on December 14, 2000 at 15:20:40:
As I understand it from people on the board that deal with banks regularly - you’ll have a hard time entering into a contract with a bank on a property and flipping that contract. More than not the bank is looking for as traditional a contract as it can get.
RL
Learning Experience - Posted by Shenesa
Posted by Shenesa on December 14, 2000 at 14:43:12:
I thought I write this up especially for us newbies not to get down on ourselves when we miss good deals. One in particular was a 2 family house that was a REO I came across on the MLS. The house was HUGE just needed some painting, a window and screen door replaced. The bank was asking 32k for this house which could have been sold for 65k and each unit rented for $650 w/ tenants paying their own heat. Well the bank wanted 1k as ernest deposit, I said NO I’ll give you $100 they took it to the board and they accepted the deposit. Then they wanted a pre-qual letter. This is where it got interesting. I had spoken with this particular broker in past about my REI plans, which he was referred to me by a RE Lawyer I met a few months back. Anyway, my agent, at that time, drew up the papers. My plans were to tie the property up for 60 days and either assign it to another investor or flip it. The broker new of my plans and declined to write up a pre-qual letter for me. I have no idea why, he just stated because he knew my plans for the property and would not do the letter. Ouch, Ouch, Ouch. I was upset and told the agent to forget it. Mind you the agent was fine with my plans.
Now everytime I pass that house I wonder “WHAT IF” the broker cooperated. But I use that situation as a stepping stone and not a stumbling block. Sometimes you can talk toooooo much to the right person and they do the wrong thing. Mind you this broker is familiar with creative REI and gave me a breifer on double closing and flipping.
So every deal that may seem to not fall through can always be a learning experience. Therefore take a licking but keep on ticking. Believe me I have plenty more learning experiences but time will not allow me to go through them all. Like my best friend said to me last week, “Shenesa, when they hand you that check at closing it will all be worth it.”
Much Success
Shenesa,NY
Re: Learning Experience - Posted by dewCO
Posted by dewCO on December 15, 2000 at 09:31:14:
Perhaps you could have gone to another lender to get the prequal letter, one who didn’t know what you planned.
Re: Learning Experience - Posted by Mark-NC
Posted by Mark-NC on December 15, 2000 at 06:58:02:
Shenesa,
I know that any bank properties I have bought, the contracts were not assignable.
I found the best thing to do is find a hard money source as a back up. This way if you have 60 days to close and you can’t find someone else to flip it to, you can at least close the property with hard money untill you can find a buyer. You could also use the hard money lender for your pre qual letter to the bank.
If your numbers were right on this, there shouldn’t have been any problem obtaining this with hard money. It would be a sweet deal even if you had to include some hard money fee’s to obtain it.
Mark
Re: Learning Experience - Posted by JohnBoy
Posted by JohnBoy on December 14, 2000 at 18:08:29:
Most banks, if not all banks, have clauses that do not allow assigning or flipping their contracts. You have to close on them yourself. You could arrange to do a simo closing with your buyer, but even those are getting harder to pull off lately.
Another good idea that was mentioned here a while back that would work is to either enter into the contract using a LLC or trust as the buyer. Then you can sell your interest in the LLC or trust to your buyer by assigning your interest over to them. The LLC or the trust will still be the entity closing on the property.
Depending on what it cost in your state to set up an LLC would determine whether to use that as an entity to enter into contracts with or whether to just set up a trust to use instead.
If memory serves, I think it was Steve Cook that said he was using LLC’s for this and that they only cost $75 in his state. In my state an LLC cost $400, so I would use a trust instead and avoid paying out the $400 for the LLC.