Flip This Wholesaler

6/26/2008

I get quite a few emails from readers asking questions about wholesaling REOs. One of these days, I will put up a FAQ section on this blog, but until then, I thought I would start posting a few of the more commonly asked questions in case there are others out there who might be wondering the same thing.

So, here we go..

Hi Steph,

My name is Frank from NJ, and I am new to wholesaling . I have some short sale , and wholesale training but still looking for the first deal. I read about your transaction on reibrain.com and was just curious. I have asked a few investors in forums about wholesaling reo’s. I have so many in my area and would really love to be able to wholesale the ones I find to be good deals. Anyway from what they have told me lenders will not approve of assignment contracts. So basically I would have to buy the house and then find an end buyer like one of my investors and do a double close . I really would rather flip the contract then put out my money first as you can understand. Can you give me any tips as to how you are assigning these reo properties without any problems from the lender? Continued good luck steph and thanks in advance.

Hi Frank,

You are correct in that (most) banks will not let you assign REOs. There are many ways to get around this, though, and still be able to wholesale them. What I am doing is using a simultaneous close. Basically, the closing between me and the bank and then between my buyer and me takes place at the same time, and both transactions are funded with my buyer’s funds, so I don’t have to come to the table with any money. Many title companies will not do this, but some will. What I would do is find the active wholesalers in your area and ask them who they are using as a title company. That is how I found mine.

You can also buy the property in an LLC or a land trust, and then sell your rights to your buyer at closing. I have never used this technique, although, this is the method my mentor, Steve Cook, teaches. Here is an article written by Steve that explains it in greater detail……

Another way is to have your buyer added on to your contract with the bank, and then after closing, give your buyer a quit claim deed in exchange for your fee. I would not recommend doing this, though, unless your buyer is someone you know and trust. I have only done it this way a few times, and it was with a buyer I have worked with several times before, and there was a mutual trust there…

Finally, as you mentioned, you can borrow the money for the first transaction, close on it with your funds, and then resell to your buyer right after the first closing (double close). There are quite a few companies who will lend money for this type of transaction. My recommendation is Fund This Wholesaler.net.  Not only can you get funding for your REO and short sale back to back flips, but you can also get a free proof of funds letter to submit with your offers.  If this is the route you are going to take, you would just have to take the extra costs into account when you are structuring your offer.

Anyway, those are the ways I know of to wholesale REOs. There are a few more hoops to jump through, but it’s really not that big of a deal once you start doing them.

Hope that helps,
Steph

3/6/2008

The REO I was talking about in my last post (REO #4), is now in a “multiple offer situation”- dreaded words.

Basically, it means every wholesaler and investor, and their Moms and Dads saw the price drop, put an offer in, and now we are being asked for highest and best. I upped my price $500, and am pretty sure I won’t get it. I’m at quite a disadvantage in situations like this when there are other investors bidding against me that can offer higher earnest money deposits, and close in a day or two with their own cash.

Right now, I just can’t compete.

Same situation occurs when a property comes on the market at a no-brainer price- like the 3/2 1200 sf house that popped up on mls 3 days ago for $27,250! Last time I talked to the listing agent, there were 11 offers on the table. I’m curious to see who gets it.
The good thing for me is, there are an ASSLOAD of REOs on the market, with assloads more being added every day, so there’s plenty to go around….

Last Friday, I talked to the lady at the title company that is handling REO #3. She told me everything looked good, and we would be able to close this Friday (tomorrow) . So, I called back Monday just to make sure (I don’t believe anyone anymore when they tell me that everything looks good), and a different lady told me the title work hasn’t even been started yet.

WTF???

She said she would try to expedite things (yeah, right), and I just resigned myself to the fact that it wasn’t going to close until the 18th, which is the last day they have to close. Well, apparently, she wasn’t bullshitting me, because she called earlier this AM and told me everything is ready on their end.

The only thing that is missing is the addendum adding my buyer onto my contract (I’m going to quit claim him off after closing for my fee).

I emailed it to the listing agent a week and a half ago (by the way, I didn’t even ask if I could add my buyer on the contract, I just wrote up an addendum, had it signed by my buyer (and me), and sent it over to the listing agent in an email telling him I wanted my partner on title and to have the bank sign it).

No resistance whatsoever.

Anyway, I emailed it to him a week and a half ago, and he just got it to the bank yesterday. Friggin slowpoke. Anywho, all we need to close is that signed addendum, which means we SHOULD be able to get it done tomorrow. Woohoo!

Let’s see, what else? Oh yeah…..I’m an Aunt!! Auntie Steph. Trevor was born a day early- Monday eve at 5:21 pm. I’m going to head up to St. Louis in the next month to meet him. Can’t wait.

2/13/2008

I FINALLY got the signed contract back from the bank yesterday on my latest REO deal. They just seem to have no sense of urgency whatsoever. Meanwhile, the listing was still on the mls as active, and I was freaking out thinking another offer was going to come in for higher than mine, and I would be screwed. I think I called the listing agent 50 times asking what the hell the hold up was. Seriously. Get your shit together, and get me the damn contract already. Sheesh.

I’m meeting my buyer this afternoon to get a deposit, and to have him sign an addendum adding him on to the contract. For some reason (because they are slow as molasses, probably), the bank wants the closing date on the contract to be March 18th. The listing agent said they will be able to close sooner, though. Not really sure what the deal is with that- I certainly hope it doesn’t take them over a month to get the title work done. Wouldn’t surprise me, though.

Well, I’m off to make some more offers….

1/17/2007

I am pleased to announce that I have REO #2 sold!!

My rehabber friend went to take a look at it and wanted it.

It’s set to close a week from tomorrow.

I was initially hoping to make 5k on this one, but it will be 3k instead, which is fine by me. This is another instance where I could probably find a buyer for a few grand more, but I’m going with this offer because I know it’s a done deal. This is the 3rd deal he has bought from me, and I know I don’t have to worry about any bs with him.

I had my friend John (I put the offer in through him) call the listing agent and tell her (not ask) that we needed to add my partner on to the contract (I will quit claim myself off ofter closing in exchange for my fee).  No problemo. I was all stressed out about it as usual, but it was no big deal. They don’t care as long as it gets sold.

I got some coaching from my friend Chad in Atlanta, who was the one who told me about this whole quit claim thing a few months ago. Thanks, Chad! Doing it this way is saving me quite a bit of money in closing costs. It’s also pretty darn easy to do.

Here is what the numbers look like on this one…… ARV $115k-$120k, Repairs 20k (I was way off on my repair estimate, btw), list price $54,900, contract price $55,000. Assignment fee 3k, which will be paid outside of closing in exchange for a quit claim deed to my buyer.

One of my goals for the month was to buy a new computer (laptop), which I will be doing once this deal closes. I can’t wait!! Check it out- it’s PINK!! I’ve had a picture of it tacked up on my wall right behind my desk for about a month now. Motivation.

Me wantee.

1/12/2008

Well, the  REO that I got under contract last week closed yesterday afternoon.

The closing ended up being at the buyer’s house, as the title company that the bank was using was in Ft. Lauderdale.

They sent a mobile closer (a very grouchy one) to handle it. I was going to have my title company prepare the quit claim deed for me, but an investor friend of mine told me not to waste my money, and sent me a template of the one he uses . It’s pretty straightforward, actually. Only a half page long, and took about 10 minutes to put together.

I was a teensy bit afraid to ask Grumplestilskin to notarize it, because she was really mean and kept talking about what a long day she had, how bad traffic was, how bad she wanted to go home, etc.

I made her already awful day just a little bit worse when I accidentally signed the paperwork with a black pen instead of blue (oops). I thought she was going to jump across the table and stab me in the heart.  Also, I thought I was going to have to go into a ten minute explanation regarding the purpose of the quit claim, but she just notarized it without asking any questions, thankfully. Anyway, I was out the door 20 minutes later with a check in hand!  Woohoo!

Since I had never seen the property, I thought I would take a drive by it on the way home from the closing, just for kicks…….

Pretty, huh? In a “Kermit the Frog used to live here” sort of way.

I seem to be coming down with whatever it is that is making everyone sick lately, so I’m going to spend the day in bed reading.

Have a great weekend!!