Saving the Day on a House Flip

Here I am… to save the Day!… (singing in my best Mighty Mouse voice) on a House Flip of course.

I hope everyone is having a great first back to school day! My family and I got started early this morning and I am ready to ROCK! I wanted to take a quick second before the week gets so busy and tell you about a quick Real Estate Wholesale case study.

Last week my office closed on a Wholesale transaction that could have gone south really quick! When we began looking at this deal 2 weeks ago the deal was riddled with problems. First off, the day we were called out to look at the property, another less experienced wholesaler put the property under contract 20 min before us. The wholesaler said he was going to do a “House Flip” to us…LOL.

James from our office told the homeowner that the wholesaler put the “Flipping House” under contract for too much money and that he was going to have a very tough time selling it, plus he did not explain to the homeowner that he would be assigning the contract so she was very confused. James just simply asked that she call him when all of the dust settled if the deal did not make it to a closing.

Seller Panic Rears its Ugly Head

Sure enough we were called 2 days later by the homeowner in a panic, we didn’t quite understand the urgency but this is was all revealed once we executed a purchase contract and went to open escrow at the title company. This is where the real problems began (This is where you earn the big bucks; become a problem solver)! So the property was encumbered by a “tax suit” and a “Home equity loan” in default. This is where things got funky because even the Title Co. wasn’t sure which encumbrance held the first position?

The House was actually going up for foreclosure in 3 weeks and if we didn’t work fast we would loose a deal and the homeowner would loose her house with nothing to show for it. The other big issue that we didn’t realize initially was that the owner of the Home Equity Lien had attached the lien to 3 properties that were all owned by our seller, including the property we were buying and the seller’s personal home.

When you’re doing a “House Flip”, realize that at any moment any perfect situation can go south on a deal in an instant. It's extremely important to have a good title and escrow agent involved that can help to weed through all of the issues to get to the bottom of things. Our title agent Angela was able to help work through all of the moving parts of this deal and help us figure out that the “tax suits” would take first position and legally had the right to foreclose before the Home Equity lone in default. Angela was able to track down all of the payoffs including old fees for being served by the Sheriff's department and fees to the city of San Antonio for lot clean up.

Using Blatant Bribery to Close the Flippin Deal

When everything was said and done and the final HUD statement was worked up the seller actually had to bring $10 to the closing (Final Hurdle). How do you get a homeowner to show up to a closing that it seems as if she doesn’t care about?

When all else fails turn to blatant bribery; ha-ha I offered her $150 cash for her trouble to show up to the closing, and the best thing about it is that it worked!

The seller showed up to the closing, our end buyer was in place ready to close on the Real Estate Wholesale transaction and the deal got done!

The best part of this transaction, which we didn’t even realize at the time, is that if the Home Equity Lien holder had foreclosed the seller ran the risk of loosing all three properties encumbered by the HEL, including her personal home. The seller would have had a good case to fight the foreclosure but it also takes money to fight that battle which the homeowner definitely did not have.

In the end we were able to save the lady’s home, help her walk away with a little spending cash, make some money ourselves and ultimately SAVE THE DAY!

If you have similar success stories or interesting Real Estate Posts please share…love us or loathe us, leave me a comment, I appreciate the feedback!

David Montelongo

Real Estate Investor | Mentor

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