A buyer has reviewed the package and would like to submit an offer to the seller. The seller explains to the buyer that they have it under contract with the bank and will sign a purchase agreement with the buyer once they provide proof of funds. However, the buyer will only proof funds once the bank contract can be verified. The reseller will not provide any proof of contract until the buyer shows proof of funds. Buyer thinks reseller can’t proof the contract and the reseller thinks the buyer can’t proof funds. Neither party is willing to take the first step. Here lies the chicken and the egg.
Why do resellers do this? Well, they want to make their profit on the spread by trying to contract with the bank at one price than selling it to the buyer at a higher price. This is not an assignment but called a “pass through transaction,” where the transaction simply passes from the bank through the reseller to the buyer with all reps and warranties conveyed. Some banks will allow this provided that the reseller can show a purchase contract and POF of the exit buyer to the bank. How do you make the deal work and how do you know when to walk from the deal?
Steps:
1. Have the reseller issue the purchase agreement and related documents.
2. Buyer and reseller finalize and execute the purchase agreement.
3. Reseller provides purchase agreement to the seller and the reseller/seller purchase agreement is finalized.
4. Reseller places their seller purchase agreement in escrow.
5. Buyer confirms via escrow the seller purchase agreement.
6. Buyer provides POF to same escrow company.
7. Buyer escrows non-refundable deposit subject to delivery as described in purchase agreement.
8. Close.
It sounds simple but the steps outlined above only work if the seller will issue a purchase agreement before receiving the POF. Most of the sellers who would agree to this arrangement are private sellers, not banks. The trouble begins if a bank is the seller and will not provide a purchase agreement to the reseller until a POF is received. When this happens, it is time to walk from the deal.
I personally like my chicken grilled and my eggs over easy.
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Good stuff team…