How To Flip A Short Sale And Get Your Profit At Closing?
Does anyone know how to flip a short sale where the property did not need any fix up to a SFR owner occupied end buyer and get your profit at the closing without using one of these "Rip Off owner financing companies"? To my knowledge there are no lenders that my end buyer can use that will allow flip transactions because of the 12 month seasoning issue. I also know that structuring the short sale transaction between the original seller and my end buyer and placing a lien against the property will not work because the lender that is short selling does not allow payout to junior liens on the Seller side of the HUD-1. The lender will neither approve consulting fees. How does an investor get his profit at closing?
Getting paid within the scope of the HUD1 requires a bit of planning.
The easiest answer would be to be paid outside the scope of closing from your Buyer.
[addsig]
Short Sale Pro -- I appreciate your reply however it did not answer the question. What planning? Outside of closing? How? Assume the end buyer used all available cash for their downpayment. Is there some kind of fancy technique available?
I learned early on that profitwise, the best ss candidates were those needing repairs that could be acquired at less than market value, cleaned up and resold at substantial profit. Not very flashy, but a consistently solid work plan.
Flipping a mortgagee approved, ss contract is tricky, and comes with some risk. At any point in the process, especially if a red flag pops up that indicates that a named Purchaser changes in mid-transaction and is replaced by a substitute buyer... the mortgagee could learn that they were sacrificing too much and rescind the approval at any time.
That's why investors don't generally pay a bird dog for an assignment of a PFS contract until insurable title is secured. After the closing.
One school of thought (which I recommend to the spot speculators) is to go into contract in the name of an LLC. The Contract becomes an asset of the LLC...
Members come and go... those that come in pay a membership fee... from which could be your 'assignment' fee. Complicated, but doable.
Another school of thought would be to act as CoBuyer, take title jointly with your "Buyer" and stay on title until you are paid to quit claim your interest. Comes with some risks, but doable.
Simultaneously Close. You'll need a forward thinking title/closing agency, and or an attorney willing to participate in these dual (two ring circus) transactions.
And have a Purchaser whose acquisition financing source has been fully apprised and able to accomodate the Purchaser's acquisition financing.
Short Sale Pro - Regarding the LLC.......Their membership fee becomes my assignment fee. Sounds doable. However, what complications arise when the end buyer goes to a lender for a puchase money mortgage and the contract is in the name of an LLC. Don't most lenders for a SFR want the sales contract with a persons name on it?
As a facilitator (you simply want to find the deal, set it up and get paid) part of your job is to control the project... steer the prequalified Buyer to a lender that you already have determined to be able to provide the financing. LIkewise the title/closing agent.
You must have an overview of whats going on... and orchestrate the transaction between the Foreclosing Mortgagee(s), the Seller, and The Buyer.
Short Sale Pro - After giving the LLC some more thought, I'm not so sure if it is doable. How would the membership fee be paid? It surely could not show up on the Sellers side of HUD-1. Is there a creative method to get it on the HUD-1 and have the foreclosing lender allow it? It doesn't sound likely since the lender wants as much money as they can get.
Why, on earth, would the internal business of an LLC be listed on a HUD1? Answer: it wouldn't. The incoming member to your LLC would pay or pledge a fee for membership into this LLC whose only asset is the Contract. Then, in exchange for the fee, you cede your interest in the LLC to the new member. The Buyer on the Contract hasn't changed.
Stiil the member.buyer must have a cash or equivalent because, as you correctly state, the foreclosing mortgagee restrict fees.
This must be accomplished outside the scope of closing.
Thanks for the 'meat', SSP!