Pretty Home SS Exit Strategy Dilemma
Have a homeowner is preforeclosure. The house is less than 2 years old and basically just needs to be cleaned. FMV $107,000. The bank is requesting a listing agreement and offers. We want to offer $80,000, then turn around and flip it to an end user. Problem is how to do this with minimum fuss and maximum profit.
Probably my biggest concern is how to flip/assign to the end buyer in a way to avoid issues with seasoning or them knowing that we'll be making a money on the difference between what we get it for from the bank and what we sell it for to them. Is this where a double closing would be appropriate?
Also, how does the realtor get his cut? We can offer him 3% for helping with the listing agreement and working with the bank and another 3% when the end buyer comes along. Does that sound right?
Head is spinning a bit over here...any strategies anyone can offer would be much appreciated. Thanks!
posherov[ Edited by posherov on Date 04/15/2004 ]
You need double close with an investor.
First, remember that the bank would like for you to list the property. That does not mean that you must. You can try presenting them with an all cash quick close offer and see if they take it.
If you do list the property, it is believed that you should not allow more than 5% commissions on a SS. The bank sees anything more than 5% as excessive. Give the agent bring the buyers the traditional and you listing agent gets the difference.
Agent lists the property for 107k. You have a insider offer 80k on the property. The owner selects the insiders offer. You present the 80k offer to the bank. You prescreen the 107k offers you keep the best one for the second close. You must have a good attorney that knows that you will fund the first close with the money from the second close. The attorney should also be smart enough not to broadcast this to everyone within earshot. I would go ahead and get the deed into the Smith Family Land Trust and record it two weeks prior to the close. An insider is the trustee and the benficial. The trustee can sign the purchase and sale agreement on the second close. At the first close there is no deed to record - only the HUD to the foreclosing lender. The second close is with the end retail buyer.
If the timing on the double gets weird or the retail buyer's lender finds out about the double close, then buy it with hard money. Just make sure you prescreen your buyer and get a loan approval letter. It should have his lender and you verify that they have no seasoning issues.
Brenda
Thanks Brenda! That was very helpful.
posherov
posherov,
The realtor gets their cut from the bank(see HUD1 for the spot for this). You can use a realtor to sell or not. That is a seperate deal.
Kelly(WI)