Can You Wholesale Houses That Have a Mortgage?

New wholesalers often find it difficult to determine if they should wholesale houses with mortgages. If you are in a similar situation and don’t know what to do, then you have come to the right place.

In today’s post, we will explain whether it is feasible or not. So, continue reading to get all the details that you need to make an informed decision.

Wholesale Houses with Mortgage 101

The answer is simple and straightforward: yes, you can most certainly wholesale houses with a mortgage. However, you must make sure that the mortgage amount is less than or equal to the amount that you’re willing to offer. Therefore, you must do your due diligence before you proceed forward.

Let’s take a look at an example to understand it in a better way: For example, after due diligence, you found out that you can offer $110,000 for a wholesale house. On the other hand, the homeowner owes $90,000. The next step is to find a cash buyer who will be willing to pay $120,000 for the house on sale.

After the closing of the deal, the homeowner gets $110,000. Out of this, $90,000 goes into mortgage pay off while $20,000 goes in their pocket. You end up earning $10,000. Therefore, it is a win-win for
everyone involved in the transaction.

How to Put a Wholesale House under Contract?

Turning the Tables

Now let’s turn the tables and see what happens. Let us suppose that the same homeowner owed $130,000 on that home. This is obviously a deal breaker as the homeowner is underwater. Underwater means that they owe more than the property’s worth. As a wholesaler, you can’t accept this deal
because you can’t earn any profit margin on it.

In order to make a profitable deal, you need to consider the following factors:

  • What does the homeowner owe in total against the house currently?
  • Does it include mortgages and liens?
  • Is the homeowner current on mortgage payments?
  • If not, how many months are they behind?

If the homeowner has no equity and they are behind mortgage payments, then this might be a deal breaker. However, in such a situation, the only way to create equity is to negotiate a short sale with the bank. Short sales take plenty of time and months to negotiate, and make the deal work.

Remember that, when dealing with real estate wholesaling, there needs to be an upside to the deal. The upside refers to not only getting the house at a profitable price, but also getting an investor to see the value.

In a nutshell, you can wholesale houses that have a mortgage. However, before you jump into a deal, make sure to do your homework on the property first so that you can earn profits on it.

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