Double Closing

[Zsmithz]

Thanks everyone for the enlightening me on this. 26 years in the business and I can still learn something new. The whole scenario just seems dirty, but I am not the judge.

Should I divulge in the appraisal how much the owner(seller) is receiving from wholesaler which as I stated earlier is MUCH different than the amount that the wholesaler is charging the "end" user(borrower)?

To me personally the wholesaler is kind of irrelevant in the situation. Usually if a wholesaler is involved they never actually take possession so they won't ever be on title or on the public record. They also probably got a deal for the end buyer of the assigned contract so if anything it is in the banks best interest to loan on the property anyways since even if there was a foreclosure they would probably be in a better spot than most low down payment mortgages.

I typically ignore the wholesaler unless the bank sends me two contracts (which hasn't happened yet but sounds like might be your situation) or I have a comment specifying who the ultimate seller and purchaser are and that an atypical transaction occurred.

How rough was the house? I have mostly seen this with cash offers on bad homes since closing times are pretty typically tight and they wont pass Fannie Mae.

 

[jay trotta]

am surprised we're not seeing more of it in today's market, with multiple offers.

 

[Tom D]

the owner seller to whole seller was not an arm's length transaction. probable, and typically, a distressed sale. the original price, as stated earlier, is irrelevant. the issue is that FHA will want a 2nd appraisal to avoid a fraudulent flipping scheme between friends. the 1004 lender, if they get nervous, may also do a 2nd appraisal. but you are getting too far into the original minutia.

 

[Zoe]

the owner seller to whole seller was not an arm's length transaction. probable, and typically, a distressed sale. the original price, as stated earlier, is irrelevant. the issue is that FHA will want a 2nd appraisal to avoid a fraudulent flipping scheme between friends. the 1004 lender, if they get nervous, may also do a 2nd appraisal. but you are getting too far into the original minutia.

and you know many fraudulent transactions occur. Hard to discover sometimes. But the market will tell you this transaction is not right. Throw it out. Call and confirm if possible.

 

[J Grant]

This was common back in the pre market crash in 2006-2008

If this is the subject contract then yes disclose all amounts each party is getting and the chain of sales. it is an assignment of contract

 

[Mark K]

I've seen it often and done it a few times myself. Buy an ugly house, get 90 days to close and also the right to enter and rehab during that time. Within the 90 days, market it, get a buyer, and either double close or transfer your purchase agreement rights to the final buyer. Nothing illegal or under the table. Win-win-win. Seller gets rid of a pig, middle man makes a few bucks for the risk and effort, end buyer usually gets a nice, rehabbed house.

By the way, unless a purchase agreement specifically prohibits it, the rights in any purchase agreement can be transferred to another party. Had one seller try to renig (?) on a sale after I rehabbed (and found a buyer for a nice profit) saying I couldn't transfer my PA rights to a third party. A letter from my attorney informed him otherwise.

 

[NJ Valuator]

To me personally the wholesaler is kind of irrelevant in the situation. Usually if a wholesaler is involved they never actually take possession so they won't ever be on title or on the public record. They also probably got a deal for the end buyer of the assigned contract so if anything it is in the banks best interest to loan on the property anyways since even if there was a foreclosure they would probably be in a better spot than most low down payment mortgages.

I typically ignore the wholesaler unless the bank sends me two contracts (which hasn't happened yet but sounds like might be your situation) or I have a comment specifying who the ultimate seller and purchaser are and that an atypical transaction occurred.

How rough was the house? I have mostly seen this with cash offers on bad homes since closing times are pretty typically tight and they wont pass Fannie Mae.

This was not FHA.

100+ year old house and just needed some interior cosmetic updating and exterior painting.

My concern is that I need discuss contract negotiations, asking prices, dates, etc. between 2 sets of parties. It is like there are 2 different contracts for the same property. Are there usually 2 contracts with this scenario?

First set is the owner and wholesaler and the Second set is the wholesaler and buyer.

Is the appraisal supposed to reflect the negotiation between the seller and wholesaler or the wholesaler and buyer?
If it is the seller and wholesaler, do I discuss the transaction between the wholesaler and buyer?
If it is the wholesaler and buyer, do I discuss the transaction between the seller and wholesaler?

BTW the assignment is currently on hold.

 

[sputnam]

I'm not a lawyer and I don't play one on TV however, I don't think this is a problem, of itself. It can certainly lead to trouble if everything isn't handled exactly right. A contract is a promise to perform in exchange for some sort of renumeration. It could be item for item, item for money, item for service, service for money, etc, etc. You can certainly contract to deliver something you don't currently own. If you fail to deliver in accordance with the contract, the other party can sue you for specific performance or money damages.

 

[J Grant]

Regardless of a Sales contract type or price, we opine on market value per the definition and market data and appraisal SOW . That stays the same regardless of a SC .

Just disclose what is in the contract you were given, a brief analysis to the extent relevant to the assignment ( we are not attorneys), and then move on and appraise the property.

the only time a contract really matters is at the end of the appraisal, after we provide our market value opinion. If a sale contract price is significantly over or under the market value opinion, then, an oddball contact type or terms of sale or who owns it or if it is a flip can help us explain why their SC price is over or under our OMV. It makes it easier for us to explain why in fact.