Flip This Wholesaler

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.

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