How Can I Wholesale REO's?

Question

Members,

There is a TON of info out there on wholesaling, but I can find hardly any info on wholesaling bank/lender-owned properties. In this crazy, foreclosure-heavy market, we need a good way of doing this! Can anybody point me in the direction here?

Thanks,
Joe
Newbie

Adam Hochfelder · Answer

I used to focus on the off-market properties.

Joseph Irons · Answer

Not to mention if you do a lot of REO wholesale...think of the IRS audits you will have by opening up so many companies in your name and closing them so fast..probably won't look good...might be easier to just add your buyers name to the contract and you use your wholesale contract to protect you and assure you get paid outside of closing

Mia Brooks · Answer

Ryan, you're right.  I knew it had to be a glitch somewhere.  I didn't even think ahead that far to consider that you'd be doing different financing because of buying an LLC rather than the property itself.  Now I'm back to square one.  I better stick to the techniques most of you pros are using before I end up in trouble.

Thanks Ryan,

Mia

Ryan Webber · Answer

I personally have never used the LLC format, but I wouldn't think the bank would have a problem with different signatures.  Worst case being that the signor would have to prove with the corporate documents that they have the right to sign.

With my initial studying of this technique I have some concerns with it.  I am curious about the ease of financing the purchase of an LLC.  See technically your buyer is not buying real estate.  They are buying a company, and that company has real estate as an asset.  I'm not sure conventional financing would work, so you might have the same financing requirements on your buyer as if you were double closing.

If that were the case, doing a double closing would be simpler and easier.  You need a buyer who is using cash, hard money, or commercial financing, and you need an investor friendly title agent/company.

Mia Brooks · Answer

John, thanks for your valuable information.  But I just had a few more questions about your comment about buying an REO property through an LLC.

1.  Do you just have a few of these dummy LLCs set up and ready to do these types of deals?

2.  Will the bank have a problem with the signature of the new owner of the LLC if they see that it doesn't match the signature of the original owner of the LLC?

3.  Of course I will consult an attorney so I won't screw something up, but you said, "What will work with a lender some of the time."  Can you give me some reasons why this wouldn't work, because it seems like a great way to get around the and/or assigns clause in the contract.

Thanks in advance,
Mia

Joe Alonzo · Answer

Thanks, John

Joe

Account Closed · Answer

Joe,

All wholesales depends on one of three things.

1. The seller is fine with a deal that is being wholesales. They will help with the process (showing the property, dealing with extra paperwork).

2. The seller knows nothing about a wholesale deal but is not in the way. They are likely naive to how wholesale deals work.

3. The buyer does not wholesale. They do a double close or other process to avoid the problems when a wholesale is specifically blocked.

Lenders are sophisticated and they want to stay out of chains. They know that wholesale deals many times do not close smoothly if they close. Hence lenders do not want to do the deals. They also want best price. They would rather hire a licensed agent rather than use what might amount to a cowboy who stays up late to watch the get rich quick shows.

What will work with a lender some of the time.

1. Buy through an LLC and sell the LLC
2. Double close but you need the right buyer and the right closing agent.

John Corey