Re: I have thought about doing that… - Posted by JohnBoy
Posted by JohnBoy on December 14, 2000 at 17:22:43:
You would not create a $10k spread. Assuming you were a broker doing this that $10k isn’t a spread created by you, it’s already money you would have made as a commission for listing and/or selling the property for the seller. So whether you out right sold the house and got paid the $10k commission or whether you stepped in to buy it yourself and elected to have the commission deducted from the sales price, that commission was already your money earned, not some spread you created that would add additional profit.
In this case with the broker I was referring to, he doesn’t negotiate anything on the selling price. He lets the buyer go out and find the property they like and they negotiate the best price they can get with the seller. The broker then steps in and buys the property at that price and then turns around and sells it to the buyers on contract. So the only thing the broker is making in addition to a real estate commission is the spread on the interest he charges his buyer vs. his rate on any financing he obtains. Or, perhaps he is paying cash with his own money and is happy with earning 10% on it instead of leaving it sitting in a CD or something earning a lower rate.
Before he buys a property for anyone to sell to on contract, he sends them over to see a mortgage broker he works with to see if the broker would have a problem getting them a new loan within a year after establishing a payment history paying on the contract. If they look decent he sends them out to pick the home they like. That would be the way to handle getting swamped with people interested in buying a home. Send them to your mortgage broker first to get them qualified for a loan now or at least within a year after establishing a good payment history where they can refinance. Those that don’t qualify through your mortgage broker…NEXT! Those that do…tell them to go pick out their dream home within the price range your broker qualified them for.
The good thing is you get lots of sales as a realtor/broker and earn some profit on the interest spread. The bad thing is the amount of risk you take for the amount of profit involved.
By the way, the $1k - $2500 down from the buyer gets eaten up as closing costs leaving the full purchase price as the amount being financed. If they have less than the $2500 to put down, the difference is added onto the sales price and financed with the balance.