Quick Resale For Profit

The installment contract approach may also be used to quickly buy and resell a bargain property, with little or no cash from the prospective intermediary.

At the same closing, the buyer can purchase the property from the owner and immediately sell it to another buyer. For example, Fiona finds a home on sale for $75,000.

  1. She knows that she can resell the home for $110,000 with good marketing—for a delightful profit. Unfortunately, Fiona doesn't have the down payment, credit or resources necessary to buy the property.
  2. So Fiona approaches the sellers and negotiates an installment contract for $75,000.
  3. As soon as the installment contract is signed, Fiona immediately signs an agreement to sell the property to another buyer—for $110,000.
  4. It is a complicated closing because it is essentially two settlements happening at once: Original Sellers completing the purchase to Fiona; and Fiona selling to the New Buyers. However, her real estate attorney is able to help her through the whole procedure. This is a perfectly legal transaction, at the end of which the seller gets their $75,000, the buyer gets the property and Fiona walks away with a tidy profit.

The new buyers will provide the $110,000 sales price. From these proceeds, Fiona pays off the $75,000 (or less) balance of the agreement with the original sellers. Upon that payment, the original sellers will immediately transfer the title to Fiona, who then gives the title to the new buyers. Once the transaction is fully concluded, Fiona walks away with a $35,000 ($110,000 - $75,000) profit, less closing costs:

$75,000

Sale price for home, per lease-purchase agreement

$110,000

Appraisal value for home, and price at which Fiona re-sells home

$35,000

Profit from resale of home, or even of just the purchase option

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Real Estate 101

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