New wholesaler, stay away from REO's?

[Pedro Oliva]

Would you guys recommend to stay away from wholesaling REO properties till some experience is to be had? The reason I ask this is that from my understanding is that some banks have nonassignable contracts, thus need to be a bit creative to get this types of deals done. Please correct me if im wrong. Also this type of deals require proof of funds or pre-approval letter from private lender, which confuses me as to who would need to provide this the wholesaler or the buyer of the property? As a new wholesaler and a small network, private lenders would be somewhat hesistant to work with a new wholesaler I would imagine? This is from all of my understanding thus far and could be way off base, but would like help me understand this further.

[Jon Holdman]

If you're writing cash offers on REOs you will need proof of funds.  That means a bank statement with the same name as on the offer.  If you have a pre-approval you can write a financed offer.   If that pre-approval is from a private lender you'll probably have to provide their bank statements, too.

REO contracts are indeed rarely assignable. You can do a double close, but you'll probably need a transactional lender. That increases your costs. Some banks will put in restrictions that prevent you from transferring the property for some period of time.

The bigger issue is that banks don't usually come off their listing price by much. So, if you get a slight discount, then add your markup you're back to the price it had on the MLS. Investors who are buying have already seen the property at that price. REOs that have been on the market for months and months may get offers accepted at more significant discounts.

Not saying its impossible to wholesale REOs.  Some folks do make it work.  But better to do your own marketing to find sellers.