The seller (not the city) does not want to do this due to the “cost” of a double closing. I wanted to do a double closing from the beginning. The seller was having some funding problems, so I directed her to a source and talked to the source to smooth things over and explain the situation.
Right now, the backend on this deal is about 60K on a conservative appraisal, so it’s kinda skinny for two people. I don’t want it to detract from other deals in time and money.
I have an exclusive option to purchase a SFH. I have partnered with a homebuilder/contractor to mitigate the risk and spread the expenses. The seller is attempting to “flip” the SFH to us, but the city will not let her assign the contract. She must close first with the city, soooo, I’ve “formulated” to have her close and we go in on a contract for deed, recorded under an affidavit. She gets a percentage of her option money at closing and everybody gets paid on the exit - conventional sale. I have disclosed to the seller that the rehab will take 8 weeks (really 4-5) and the sale may take 6 months (probably 2.5).
My partner, the contractor, will be tied in under a joint venture agreement with it’s own EIN and bank account for full, separate accounting under it’s own bank account.
Am I drinking my own bath water or does this sound like it will fly? All the costs keep us under 65% LTV based on a full market value appraisal of the property. All parties have said yes so far. I have a feeling that this may be too creative.
Re: Does this deal have too many moving parts - Posted by Mark-NC
Posted by Mark-NC on December 12, 2000 at 15:59:15:
Chuck,
Unless I am reading this wrong you are basicly trying to assign the contract not flip the deal. If this is the case most government agencies will not let you do this.
Why can’t you just have a double closing with two Hud statements( a true flip)? This will avoid the whole issue. This way she will be closing on it first. Then she turns around and sells it to her buyer a few minutes later using your partner contractors money to fund the closings.
I have done this several times with hud properties. And if it’s done right they never even know it was flipped.