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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
MORE RESOURCES: A Potential Mamdani Mayorship Strikes Fear in the Real Estate Industry The New York Times There’s one elite group propping up the Manhattan real estate market right now — everyone else is sitting on their hands New York Post Triangle homes sitting on the market longer, why a real estate agent says it’s about perspective WRAL.com Wellness Real Estate Set to Top $1 Trillion | Florida Realtors 4 real estate investors shared with us an overlooked advantage to buying property - Business Insider Senate Passes Tax Bill With Major Wins for Real Estate National Association of REALTORS® Detroit sues blockchain real estate firm that owns rentals with hundreds of violations Detroit Free Press Detroit sues cryptocurrency-based real estate firm to correct hundreds of property violations The Detroit News Meet HBJ’s 2025 real estate power players Hartford Business Journal Inked: Long Island commercial real estate deals roundup Long Island Business News Detroit Evening Report: Detroit suing blockchain-based real estate firm for neglecting hundreds of properties WDET 101.9 FM Shlichus Isn’t Real Estate Anash.org Opinion: Anticipated tax changes impacting real estate industry Springfield Business Journal LOCAL REAL ESTATE TODAY 7.3.25 KQEN News Radio George Pierson, Realtor, Home 1st Real Estate JTV Jackson Real estate market still good for sellers Addison Independent CEO Roundtable: Residential Real Estate Springfield Business Journal Would lower interest rates help NH’s real estate market? NH Business Review ‘Unfiltered’: Social media that pays — and the channels to skip Real Estate News by RealEstateNews.com Real estate secondaries has plenty of room to grow, but pricing can be a challenge Secondaries Investor Real estate firm acquires Cecil residential properties for $14.6M Maryland Daily Record Dawson County weekly real estate transactions, July 3 Central Nebraska Today 'Keep it moving': HGTV cancels TV show hosted by Georgia couple after 4 seasons Savannah Morning News Chicago Teachers seeking MWDBE private real estate managers Pensions & Investments Real Estate Transactions: July 4, 2025 Greenfield Recorder Three reasons why there’s value in owning real estate as part of your collision business Repairer Driven News 7 Morning Digest: Detroit sues crypto real estate company, community ice cream truck & more WXYZ Channel 7 REAL ESTATE | Harley-Davidson in West Bend, WI sold Washington County Insider News of public record: Muskingum County real estate transfers Zanesville Times Recorder Real Estate Minute – 07-03-2025 Texomashomepage.com Texas Senate Bill 17 Restricts Foreign Ownership of Real Property in the State The National Law Review Texas Teachers assigns $950 million to real estate, private equity Pensions & Investments Real Estate Transfers: July 3, 2025 The Suffolk Times Compass ‘has not and will not adhere’ to Clear Cooperation Real Estate News by RealEstateNews.com Long-closed Orchard Supply site in San Jose is bought in hopeful sign for property SiliconValley.com It turns out some real estate people like Zohran Mamdani The Real Deal Is Your Money Safe in the Bank in 2025? Norada Real Estate Investments Homes for Sale in New York and Connecticut The New York Times Top residential real estate sales for June 16-20 in Sarasota, Siesta Key, Palmer Ranch, Osprey, Nokomis Your Observer Homes for Sale in Manhattan and the Bronx The New York Times Hyatt Announces Agreement to Sell Playa’s Owned Real Estate Portfolio to Tortuga for $2.0 Billion Hyatt Newsroom Zillow ban lawsuit shakes real estate: What sellers need to know Fingerlakes1.com The dreaded Zillow ban is finally here. Here's what you can do Business Insider Egypt Sherrod Shares Heartbreaking News About HGTV's 'Married to Real Estate' Country Living Magazine More than 350 Quintana Roo real estate agents certified to provide buyers with verified ownership in real time Riviera Maya News ARTIS REAL ESTATE INVESTMENT TRUST ANNOUNCES TIMING OF RELEASE OF Q2-25 RESULTS AND CONFERENCE CALL Yahoo Was operator of San Antonio apartment complexes running a Ponzi scheme? San Antonio Express-News Zohran Mamdani’s Ideas on Commercial Real Estate Come Into Focus Commercial Observer Where Does Bruno Mars Live? Examining the Singer’s Real Estate Portfolio Architectural Digest Mounting lawsuits over cannabis real estate may force regulatory changes - Crain's New York Business Mounting lawsuits over cannabis real estate may force regulatory changes Crain's New York Business |
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