Wholesaling Houses When A Seller Insists On Financing the Home

When happens when investors wholesaling houses run into an owner that insists on financing the property?

Why would a homeowner insist of financing a property instead of taking all cash? How can you talk them out of it or could these scenarios still make for profitable wholesaling deals?

This appears to be an increasingly common scenario encountered among those who are wholesaling houses. More and more real estate investors are reporting that sellers that should be motivated are cooling off and are opting to finance properties rather than grab the cash and run.

One of the most common reasons for this today is fear of tax liability. Homeowners are more knowledgeable or at least more alert to potential tax consequences of selling their homes or reporting large amounts of income today and are perhaps more sensitive due to rising taxes.

Of course most home sellers are not tax professionals and may not have the whole picture. While an installment sales contract may reduce the immediate tax burden for some, others will already have plenty of deductions and capital gains protections, and selling out right could be much safer. So when you run into this scenario when wholesaling houses and are determined to do a quick flip perhaps educating them a little or referring them to a tax professional can clear the path.

At the same time owner financing can be a great thing. It can shave thousands on borrowing costs, lead to a speedy closing and even help with reselling the property fast.

Under this scenario, where the owner is most concerned about avoiding taxes there could be extremely attractive financing terms available. This can be a big help while marketing the home for resale. Plus, forward thinking investors can also make the note assumable so that the home can be marketed and sold with attractive financing in place for the end buyer; resulting in a faster sale for a higher price.

However, of course no respectable real estate wholesaler wants to ruin their reputation by going back on their word or get stuck with a bad deal. So before inking the contract make appropriate provisions. This can include making sure the seller can really live up to their financing commitments, making sure any other underlying debt or liens will be satisfied, retaining the right to assign the contract, or making it an assumable loan, as well as ensuring there will be no prepayment penalty.

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