Denver, CO REO questions

[Trey Foradory]

Hello BP Community,

I started earlier this year with wholesaling in and around Denver.  One thing I've noticed is the much lower response rate in comparison to my business partner in Galveston/Houston Tx.  It's definitely a different market with different inventory and different sellers.

I've never gotten into Bank REO's and was looking to get some insight on the full process for these types of properties. I know that assigning is incredibly difficult, if possible at all, on REO's. Does anyone know of any good books to read that will begin to build a solid foundation of understanding for these properties and the processes involved? Also, if you are currently investing in Bank REO's in and around Denver, are these properties working well for you? Whether its wholesaling/whole-tailing or flipping. Any advice would be greatly appreciated!

[Justin Cooper]

Hi Trey and welcome!

How is the wholesaling coming?  have you gotten some deals closed? 

Regarding the Bank REO's, I think that ship has sailed for the most part in Denver. We are well removed from the crash and the number of foreclosures are minimal these days. It is even slim pickings at the auctions. If you are focusing on the Denver market, I would not waste my time learning how to get in with the REO departments or loss mitigation departments of the banks, there just isn't the inventory available to make it worth the effort, I think think.

That being said, sellers and their agents are certainly getting savvier and are not as willing to accept an assignable contract as they used to be. If you are doing direct marketing for sellers then you should have luck with this but anything on the MLS is getting more difficult. I think spending the time and effort in understanding how else to wholesale would be valuable.

The 2 ways, other than assigning the contract, that I know of, are the double close and using a "throw-away" LLC. The double closing refers to literally having two closings, ie. you close and buy the property in the morning, then have another closing and sell the property in the afternoon (A to B then B to C). This might be the cleanest but also the most expensive way as there are 2 closings that need to be paid for as well as the possibility of needing flash cash to fund that A-B closing. The "throw-away" LLC route involves creating a brand new LLC, for the sole purpose of making that offer and wholesaling that property, getting the contract with the new LLC as the buyer, then selling the LLC. This way the seller always sees the LLC as the buyer, but the owner of the LLC changes hands. You would sell the LLC for the cost of your wholesale fee. There are certainly costs associated with this, especially up front to make sure you have all of the right documentation to create the LLC and then properly convey ownership of the LLC but once you do it once, it becomes cheaper and easier to do so. I would certainly consult your local RE Attorney to make sure you do this all correctly.

Hope that helps a bit and makes sense!