Hoping To Close My First Deal But Confused

[P.R. Romain]

Good afternoon. I am fairly new to the BiggerPockets community and real estate as a whole; I attended Than Merrill's workshop and got the motivation to try out wholesaling with my significant other/partner. We started an LLC., got a business account and have been trying to get properties under contract but to no avail for a few months. Recently I was talking to a foreclosed homeowner's listing agent and was looking to try to wholesale it but didn't know how to go about it since it's an REO. There was an open house for the property and I was too reluctant to go because I didn't know if I could build rapport and secure the deal viaa double closing. The auction also starts by next weekend and I don't know how to effectively relay that to my cash buyer. I also have two hard money lenders, one is willing to do a 70% LTV loan with the property being $250k and the other is willing to loan for the earnest money deposit. Additionally, I have a lawyer willing to provide consultation services but I just want to make sure I can smoothly sail in this field. Am I overthinking this or are there things I should be cautious of? I appreciate any response.

[Justin Abdilla]

I don't think you can wholesale an REO. The bank has absolutely no motivation to sell you the property, because they're simply waiting for someone to buy them out of their investment. They use auctions, usually, and it seems like in your case that's what's happening too. I just don't know how you get a wholesale from a bank auction, considering any motivated investor could buy that property at the same auction you plan to buy it at, and these are all public proceedings.

In my state, if the bank has already taken the property, they sell you the property at the auction and then it's up to you to make that property saleable to the third party. Most jurisdictions won't allow bank-owned to resell without inspections in my area, and title gets very iffy about writing these because the encumbrances on the property are hard to discover (old HOA debts, old water bills, etc.). I had one of these last year where I brokered a bank-owned to an investor and we must have discovered $5500 in liens that the Bank didn't even know about. This turned a $120k auction into a $127k transaction (by the time we had stripped these liens). This made our basis too high to short-term flip this property, and we had to simply reno and sell.

I usually recommend that my investor clients buy pre-foreclosure or probated properties instead of bank-owned or sheriff sale properties.  The pre-foreclosure properties require the current homeowner to sell it to you, which means you're directly rewarded by your business relationship and put into a position that lets you profit.  Same with the recently inherited probate properties.

Which state are you in?  Maybe if you supply some detail you could get the perspective of someone who buys these properties and can mentor you in acquisitions somewhat.