FLIP issue - Posted by Chris

Posted by JPiper on November 18, 2000 at 08:47:34:

I’m assuming that the problem here is that the buyer’s lender doesn’t like the fact that you aren’t on title and have no title seasoning…therefore they won’t make the loan to your buyer.

You could assign your contract with the buyer back to the seller for a $25K assignment fee…perhaps secured by a second mortgage or a performance type mortgage.

Obviously you’re probably going to need a very good relationship with this seller to accomplish that…or perhaps you’re going to have to give him a cash inducement to pull this off.

And I would also say that I have not done this…so I don’t know if the lender would have an issue when they see the original contract in combination with the assignment…whether they simply look through the transaction and turn it down because it is obviously a tactic to get past the title issue.

You avoid this issue by re-writing the contract in the name of the original seller and your new buyer…perhaps in combination with a second or performance mortgage again. However, before I did this I would want to speak with my attorney to make sure I wasn’t doing something that could later be construed as fraud. Other issues might revolve around whether this second mortgage might be construed as “acting for another, and for a fee”, an activity that might be considered as needing a real estate license.

By the way, I think you do have the equity to sell a note. However, you would probably have to create 2 notes…the first let’s say being 80% LTV…which you would discount to a note buyer. You’d end up with a second, the downpayment, and some cash proceeds from the first. The problem may be that the notebuyers might not like the nonseasoned aspects of your deal either.


FLIP issue - Posted by Chris

Posted by Chris on November 18, 2000 at 08:11:06:

I have a home under contract ($50,000) and have found a buyer to flip it to ($75,000). Unfortunately, my buyers are unable to find financing that will allow them to acquire a flip. Also, the spread is not big enough for me to sell it to them via owner financing and then sell the note to a buyer to cash me out.

Can I somehow grab my gross profit (spread between my acquisition and selling prices = app $25,000.) by using an assignment? However my buyers have just enough money for their downpayment. Can the assignment fee somehow be paid out of closing if I rewrite my contract with the folks that I am buying the home from at the price that I am selling it to my buyers at (increase my offer from $50G to $75G), and have them pay my buyer’s assignment out of closing proceeds on HUD1?

Thought/other ideas? Thanks.

Re: FLIP issue - Posted by Dave T

Posted by Dave T on November 19, 2000 at 15:08:35:

Are you in a position to buy the property outright and sell to your buyers on a wrap-around mortgage – perhaps in a simultaneous closing?

This will preserve your profit and maybe the buyer’s downpayment would cover your out of pocket expenses. You would have to wait for your profit, but if you have a three year balloon in your note, the wait may be worth it.

Re: FLIP issue - Posted by Paul_MA

Posted by Paul_MA on November 18, 2000 at 22:19:11:

I agree with Jim as to structuring the note and realizing a profit by the figures you stated.

But you could create a 1st mortgage for 90% of appraised value since the property will be owner occupied.

Also, depending on which notebuyer you speak to, seasoning may not necessary. The notebuyers that require no seasoning look to the credit of the buyer.