Flip This Wholesaler

Hi Guys/Gals,

Sorry for the lack of posting…. I’ve kinda got a full plate at the moment.

Murphy and I are working on 2 deals together, so I spent most of the weekend trying to get those sold.  Both of the deals are REOs that we’ve been after for the last few months, and the banks finally decided to cave.    Sometimes, if we are going after the same properties, we will double-team the bank, and then when one of us gets the offer accepted, we’ll just partner on the deal 50/50.

Such is the case with these 2 deals.

I think I have a buyer for one of them, and he thinks one of his buyers is going to take the other.

I’m leaving for the Windy City bright and early tomorrow, so it would be nice to get both of them wrapped up before I leave.

I’m still waiting to hear back on a few of the offers I made last week.  Most of them either got rejected or went to highest and best.  I usually just drop out when it goes to highest and best, as I don’t like getting into bidding wars and I am never the high bidder anyway, so what’s the point?

Maybe I will start bribing the listing agents like everyone else does….You’d be surprised at some of the shenanigans that go on with these properties.

I think I’ll write a book about it someday.  I’ll call it “The MLS Mafia.”  Or something along those lines. I’m sure it would be a bestseller.

Hehe.

Speaking of bestsellers, I’ve also been busy working on my ebook, which I’m shoooting to have finished by the last week of this month.   The 25th is the tentative date that it should be ready to go.  Mark your calendars.

Oh-  in case you guys hadn’t noticed- my transactional funding site (Fund This Wholesaler.net) is up and running!  If you need short term funding for your REO and short sale deals, you can go here to get it.  You can also get a free proof of funds letter to submit with your offers.    If you have questions about how it works, check out the FAQ section for more info.

Well, that’s it for now.  Jim is giving me dirty looks as I haven’t taken him out for his morning run yet, so I gotta go..

Have a great day!

P.S.
In case you guys didn’t see my post on Facebook, I’m pleased to announce that I am now a weekly contributor on Josh Dorkin’s Bigger Pockets Blog. You can check out my very first post here.

P.P.S.
To add me as a contact on Facebook, go here.

P.P.P.S
I’m trying to catch up on emails and private messages, so if you sent me one recently, I’m not ignoring you on purpose, I’m just behind. If you have a general real estate question, please feel free to post it on the blog, as I tend to answer questions here a lot faster than via email.

P.P.P.S.
If anybody has any information about that new SIMS product, please send it my way. I was searching around ALL WEEKEND trying to get details about it.

6/5/2009

Of all the questions I get from readers about the mechanics of structuring and completing an REO wholesale deal, the one I get asked most frequently is how to handle the closings. I thought I would post a few of the most frequently asked questions, in hopes that it would clarify the process for you…..

Here we go…

* Can you assign an REO?

99% of the time- NO. Most banks will have a clause in their addenda that prohibits you from assigning your contract. Every bank contract that I have ever signed has been non-assignable.

* My realtor told me that simultaneous closings are illegal, is this true?

I have been told that simultaneous closings (back to back closings where the funds from the second transaction are also used to fund the first transaction) are illegal, too, but I have yet to have anyone show me the law or statute that supports this as being true. I have consulted with two real estate attorneys in Tampa, and both have told me the same thing- no, simultaneous closings are NOT illegal. Many title companies will not perform simultaneous closings, as their underwriters will not insure the transactions, but this does not make them illegal.

It may be different in other locales, but in Tampa, simultaneous closings are alive and kicking.

If you have questions or concerns about the legalities of simultaneous closings, check with a real estate attorney in your area. It’s best not to take legal advice from realtors, mortgage brokers, neighbors, Aunts, Uncles, etc (or me, for that matter). Always do your own due diligence.

*How do I find an investor friendly title company in my area who will close an REO wholesale deal?

The best way to find a good title company is to ask for a referral from someone who is actively doing REO wholesale deals in your market. That is how I found mine- I sought out the wholesalers who were doing the most volume and I asked them who they were using. Peer Title was the recommendation that I was given, and I have been with them ever since.

If you grab the Yellow Pages and start cold calling random title companies and asking them if they perform simultaneous closings- be prepared for a mountain of REJECTION. Most title companies do not do them, and many do not even know what they are. Save yourself the headache, and just ask someone who is active in your market for a referral.

* I thought that the banks make you use their title company on REO deals- how are you getting around this?

OK, here is where there seems to be A LOT of confusion..

Yes, it is true that most of the banks force you to use their title companies (and most of their title companies SUCK, btw). There is no way around this that I am aware of.

The bank’s title company is in charge of doing all of the title work and preparing all of the closing documents. Once all of this is ready, and the deal is ready to close, I let the bank’s title company (or the listing agent if I am not in contact with the title company) know that I will be signing all of the documents at my attorney’s office/title company. I then request for them to email the closing documents and wiring instructions to my title company. I tell them that my title company will do a “courtesy closing” for them, which means that they will get all of the closing documents signed and collect the funds for the purchase. Once everything is signed and funded, my title company FedExes the documents back to the bank’s title company and wires them the funds from the sale.

I do not ever try and explain to the agent or the bank’s title company that I am flipping the house on the same day via simultaneous close. This will only cause confusion. All they care about is that the deal gets closed on time, and I make sure that it does.

I have closed all but 3 of my deals in this manner and have never run into a problem doing it this way.

The key here is to have an investor friendly title company on your side who is familiar with this kind of transaction. You need to line this up BEFORE you put something under contract. If you wait until after you have a deal signed to try and coordinate all of this, you are asking for trouble. Have your exit strategy lined up FIRST!

*I’ve searched and searched, and I can not find a title company in my area who will perform a simultaneous closing. Now what?

If you are unsuccessful in finding a title company who will do a simultaneous closing, you can do a double closing instead (where you will have to bring cash to the table). You can accomplish this by using transactional funding aka “flash cash” or “flash funding” to fund the transaction between you and the bank. There will be fees associated with borrowing the money, so make sure to factor that into your numbers when you are structuring your offers.

If you are looking for a transactional funding source for your REO or short sale deals, I recommend FundThisWholesaler.net.    If you need a proof of funds letter to submit with your REO or short sale offers, you can get one @ FundThisWholesaler as well.   Click here to get a free proof of funds letter.

I hope this answers some of your questions about the mechanics of closing an REO wholesale deal. If you have further questions, or would like me to clarify anything in this post, feel free to ask.

Have a great weekend!

11/25/2008

I mentioned a few posts ago that I was working on a new website that is going to include a FAQ section… I’m not sure how long it’s going to take before it’s up and running, but until then, I thought I would post some of the common questions that I get from you guys. So, without further ado (did I spell that correctly?), here is FAQ #1……

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Hi Steph,

I am getting ready to make my first offer on an REO and the listing agent is asking me to submit proof of funds with my offer if I am going to make a cash offer. I do not have the cash available. How do I get around this obstacle? The listing agent says she will not even submit my offer until I have a proof of funds letter. What do you use when making offers? I really want to get started making offers, but have run into this road block. Any help or advice is appreciated.

Thank you,
Elijah

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Yes, it is true, almost all banks will require you to submit either proof of funds if you are making a cash offer, or a pre-approval letter if you are making an offer with a financing contingency. There is really no way around this. The banks want to see that you have the ability to close (understandably), and they want to see proof of your ability to close before they will consider your offer.

When I first got started, I was using a generic letter from a national hard money lender (can’t remember which one), and then one day, one of the listing agents called me up and told me that my letter was a joke (he didn’t use those words, but that’s what he was getting at), and told me that if I wanted to be taken seriously, I needed a letter that wasn’t so vague (my letter did not contain the property address, it just stated that I was approved if the LTV was below 65%). After that, I started using a statement from a line of credit (my Dad’s), and now I am using a letter from a friend of mine who will fund deals for me provided the price is right (my offers are always ridiculously low, so the price is always right).

If you do not have the cash to close, and do not have access to a line of credit, and do not have a private money lender to fund your deals, then you are pretty much screwed. Just kidding. Actually, there are now lenders who will provide “transactional funding” or “flash funding” for your short sale and REO deals. These lenders will provide you with the cash to close the first half (the sale between you and the bank) of your short sale and REO deals- for a fee, of course. Also, some of them will provide you with a proof of funds letter to submit with your offers. The company I recommend is Fund This Wholesaler.net.

Keep in mind that they will only fund your deal if you have a buyer already lined up for the second transaction. They only do back to back closings, so if you do not have a buyer lined up, you are not going to get the funding to close the first half of the deal. Here is the FAQ page for Fund This Wholesaler that explains their service in greater detail.

I hope that clarifies things a little for all of you out there who have questions regarding proof of funds and REO offers…

Now get on out there and start making some offers!!!

P.S.
If you have questions, please feel free to post them in the comments section so everyone can benefit. I will still answer private emails, but it might take me awhile to get back to you.

P.P.S.
I hate my new Blackberry. I’m giving myself until Friday to learn to like it, and if not, I’m taking it back and getting one without a touch screen.