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Conventional Financing For Wholesale Deals
This info is very important for both new and experienced wholesalers, AND buyers of fixer-uppers, to carefully read and understand. We learned it painfully, hopefully you won't have to :-) Often times we are asked by investors about using conventional financing for their investor deals. In other words, they want to go through a bank or other similar lending institution to purchase a fixer-upper from us, or another wholesaler. The obvious advantage is that rates are cheaper, and the loan origination fees (many times referred to as "points") are both much less than "hard money" (loans from individuals or small institutions specifically for investor type properties, with rates ranging from 5 points and 15% interest to 10 points and 18% interest). There are, however, some obstacles to using conventional financing of which you must be aware. First of all, these banking institutions will only loan on inhabitable, decent condition property. So if the property you are considering needs major repairs, forget this type of financing for the most part. Next is how you have structured the deal. Because of all of the recent frauds cases where banks have been burned, we have been unable to locate any conventional lenders willing to loan on a deal that has been "assigned" from the Buyer listed on the Purchase and Sales Agreement to a third party. They require that the Borrower be the Buyer named in the Agreement. And they absolutely will not fund the Assignment Fee. You can get around this if you can live with either of these solutions: 1. The wholesaler re-writes the Agreement with the Seller listing the new Borrower as the Buyer. This solves the paperwork issue. The Buyer will still have to fund the Assignment fee with some other source of funds. The wholesaler in this scenario is not protected because none of the paperwork demonstrates his right to purchase the property, nor the assignment fee to be paid. A separate agreement would have to be established with all of the parties. You see how this can get very complicated and cumbersome. By the way, even if you have a cooperative Seller you can not just list the inflated price (original sales price plus Assignment Fee) on the Agreement with a stipulation that the Assignment Fee portion will be paid to the "Wholesaler" at closing, because then the wholesaler's fee will show up on the Seller's side of the Settlement Statement appearing as if he acted as a Real Estate Agent. Note: This may be OK if the "Wholesaler" is in fact an agent. They'd need to check with their Broker. 2. The wholesaler must become the owner of the property and in the chain of title. Then he can legitimately write an Agreement with the Buyer listing the full price of the property including the assignment fee. The wholesaler can accomplish this with a cooperative Seller using short term Seller financing, "subject to" financing, or a short term bridge loan from a home equity line or private lender (usually friend or family). As long as the loan-to-value (LTV) still fits their requirements, the banks will loan on the new purchase price - thus funding the assignment fee. The other item to keep in mind when considering conventional financing is that it is relatively slow. Many mortgage brokers will tell you that their loans will be ready to close within 10 days to 2 weeks from submission. The reality is that they can only guarantee that they will process the loan and get it to a lender within a short period of time. With the current rush for refinances, most lenders' underwriting departments are backlogged - and applications can get stuck there for a week or more. They will also issue conditions that must be met, then submitted back to underwriting for final approval. Then add another couple of days for the loan package to be prepared and sent to the attorney. To be safe, you should count on three weeks to a month for a loan to close. If it closes sooner, you'll be pleasantly surprised. If the deal doesn't allow for that much time, you may want to consider alternative funding sources so you don't lose it all because time has run out and the loan isn't ready. Conventional financing does have a place in wholesale deals. We've closed several ourselves - but it doesn't work in all cases. You need to understand the process, and what will fly, and what will just kill the deal. Best of success & abundance, Lou Castillo FREE! Real Estate Investing Secrets To Earning $100,000 Your 1st Year! -- 11 Overlooked Real Estate Statregies That Will Turn Your Investing Business upside Down And On The Fast Track TO Success...Guranteed! Plus A Bonus Track With A Secret So Successful It Can Double Your Investing Income Overnight! http://www.InvestorSuccessTactics.com
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July 18 real estate transactions The Providence Journal The Pipeline: Commercial real estate roundup for 7.18.25 Richmond BizSense Frederick Ford, real estate executive and first Black Union League Club president, dies at 98 Chicago Tribune LOCAL REAL ESTATE TODAY 7.18.25 KQEN News Radio Home Buyers: Stop Freaking Out After the Home Inspection National Association of REALTORS® Home Buyers May Have Accepted a New Norm on Rates National Association of REALTORS® Tips on spotting real estate investment opportunities and avoiding risks, from experts at GR Property Group Community Impact SRS Real Estate Negotiates $4.5 Million Sale of Walmart-Anchored Property in Metro Orlando Shopping Center Business Miami-Dade’s self-storage surge a boom for real estate IslanderNews.com Top Stocks for Real Estate Investment Elite AI Stock Forecasts - Massive wealth growth Jammu Links News Hunt Companies Acquires Controlling Interest in Carter, Strengthening Real Estate Development Platform Business Wire Stage Point Europe Launches Its RWA Token $SPET, Setting it up as a Bridge Between Crypto and Real Estate Morningstar July Economist Snapshot: What Will the Big Beautiful Bill Mean for Commercial Real Estate and Housing? Urban Land Magazine New plans unveiled for Water Street’s second phase Tampa Bay Times Vend Leans Into Verticalisation As Real Estate Revenue Grows 11% In Q2 onlinemarketplaces.com Is Apollo Commercial Real Estate Finance Inc. a good long term investment - Explosive market performance Jammu Links News Vendor & Real Estate Partners Dollar Tree Development Services Offers Online Early Assistance for Commercial Real Estate Projects Prince William County Government (.gov) Wood County Recorder reports on second quarter real estate activity BG Independent News Real estate sales in Jefferson, Bullitt and Oldham counties for Jan. 2-5, 2025 - The Courier-Journal Real estate sales in Jefferson, Bullitt and Oldham counties for Jan. 2-5, 2025 The Courier-Journal Real Estate Transfers ~ June 25, 2025 The Bedford Citizen Drake Real Estate Partners closes largest fund yet after pivoting to institutions Private Equity Real Estate | PERE Real estate transfers: Lake Township condominium complex sells for $5.61 million - Canton Repository Manitowoc's real estate transfers include a sale of nearly $1 million to Riverside Dairy Herald Times Reporter CCI Real Estate Obtains $67M in Construction Financing for Mixed-Use Community at University of Georgia REBusinessOnline |
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