Wholesaling / Assingment of contract

Guest 0.10 Dollars($)

I am buying a property from an investor that is wholesaling the house to me. He doesnt own it. He just has the contract. Is there a limit to the amount he can \\\"charge\\\" me for assiging the contract or can he charge me anything he wants.
Property is worth 165k, he has the contract for 125k and is charging me 20k to assign the contract. It is a multi unit that cash flows so even at 145 it is a great deal.

livinginnky · Posted: Sun Oct 28, 2007 9:47 am Post subject:

0.10 Dollars($)

I'm not sure I follow you. Are you just buying the debt on the house (assigning the contract)? Or, is he assigning a land contract on the house to you?

If you believe you are buying the actual property, the 1st thing I would do is make absolutely sure he has legal rights to sell the property- you said he doesn't own it. If you are just acquiring a land contract on the property, be very aware of the increased risk you are taking with the purchase. You may be getting ownership rights to the property, but you will have others with stronger rights to the property in front of you. I have heard countless stories of land contracts where the actual owner was receiving payments from the contract holder and not paying the mortgage. The mortgage company will then foreclose and you will have to pony up serious money if you want to protect your investment.

Eric's right to ask you- How do you know what the property is worth? Are you taking their information to establish this value?

larry · Joined: 27 Jun 2007 Posts: 3245 460.30 Dollars($)

Hi Joey,

You say that the investor does not own the property. So, are you sure that he can sell the property. It may seem to you very much luring but be absolute sure about the legal procedure of it. You can also talk to an attorney about it to find out whether all that the investor is saying is legally right or not.

Thank you,
Larry

Guest 0.10 Dollars($)

Thanks for getting back to me.

The investor found the property for sale and put an agreement of sale on it for 125k. He put in the contract xyz company and or assigns.

The property has an actual appraisal down and it had the market approach value at 165k. The rental income on each unit is 600 per unit for a total of 1800 a month.
The way the deal is structured is this.
The investor has the agreement for 133,750.00 , and gets an 8750.00 seller assist at closing. Bringing the total price to 125k. The investor assigned that contract to me for a price of 143,750. He says I get the 8750 seller assist, he gets 10k for "his trouble" and the seller gets 125k.
All parties agree.
However, I thought the most he could assign the contract for was just a couple grand. Also, I have a commitment from a lender for 145k, I have to put down 10%, and the lender has me with an 80% first mortgage and a 10 % second mortgage. This is with BOA.
Will they pay the investors assigment fee at closing or do I have to pay that in cash to him?

larry · Joined: 27 Jun 2007 Posts: 3245 460.30 Dollars($)

Hi Joey,

I think it will be better if you talk to the lender and the investor regarding this matter. Why are you going for piggyback loan? Are you a first time buyer? You can check out other options also.

Thanks,
Larry

livinginnky · Posted: Fri Nov 02, 2007 10:25 am Post subject:

First, get your own appraisal. It's the only way to truly know the value

Second, I assume there are 3 units @ $600 per month. What is the vacancy rate? Are there current leases? How long on leases? Just because a property has 3 units doesn't mean they will always have tenants. And the easy math shows that if even 1 is vacant that is a loss of $600 per month which can make all the difference in the world. Most banks will estimate no less than a 75% vacancy rate. That means they won't count 25% of the potential income from the property even if you have leases currently, because nobody can see into the future.

Thirdly, I would get an attorney. Without seeing his contract it is all up to speculation whether or not this is a good thing or not. Depending on your states laws he may or may not be able to charge you anything. Where do you live?

You never answered what type of contract the "investor" has. Is it a purchase contract? Is it a land contract? Is it a lease with the option to buy? How long until his contract expires?

As far as the finders fee, it will be up to Bank of America. And a side question is this, are you working directly with BOA or with a broker? If it is a broker you are going to run into trouble as BOA is moving to a retail only setup and shutting down there wholesale division. I don't remember exactly when but I am closing my last loan with them on Nov 8. After that they said no more loans.

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