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Updated about 14 years ago,
Flipping Short Sales vs Wholesaling 4 Newbies?
As we all know there are tons of wholesalers out there. There are tons of good deals out there and there are just as many short sale opportunities.
Question is...as a new investor would you recommend one to learn to flip short sale properties and create value for my buyers out of thin air OR start out wholesaling properties like the many other newbies in this business? The way I see it is if I learn the more difficult approach by learning to flip short sale properties first and then learning to wholesale properties would be a walk in the park. From my understanding flipping short sales can be outsourced and therefore one could close deals cross country?
Based on my research of both flipping short sales and wholesaling properties this is what I’ve come up with. Please correct me if I'm wrong.
Wholesaling process
1. Create your buyers list
- REIA meetings
- Order bandit signs “ We Sell Houses 555-5555â€
- Keeps eyes and ears open for other bandit signs in the area
- Internet classifieds, use craigslist (Whol)
- Courthouse records
- Realtors
- Real estate auctions
2. Finding sellers
- Send out mailers to homeowners stating your service
- Social networking
- Tracking down owners of an abandoned property
- Door knocking / door hangers
- Magnetic car signs
- Bank REO departments
- Classifieds
- FSBOs
- Your own website
- MLS (team up with an agent) You can meet with a few Realtors who are willing to co broker deals with you in return to access some great leads on the MLS.
3. Before meeting with the seller run comparables on the property (MLS, state’s taxation website, zillow.)
to get an idea for a happy median price for your seller and your investor with your wholesaling fee included. Check the register of deeds/county registrars for any liens on the property.
4. Meet with the seller and show them benefit of utilizing your services vs. doing a FSBO or getting it listed with a Realtor and waiting forever for an offer. Let them know you have access to several buyers. Take a walkthrough of the property with the seller with a “fix it list†and clipboard of any repairs that are needed. Take pictures of any damage to the property. Verify with the sellers to make sure they know about any liens.
5. Seller agrees to your services and the selling price. Present the offer either by an Option or Offer to Purchase Real Estate Contract & file it with the County Clerk’s Office (disclose to all parties involced that you will be filing your document with the County Clerk.)
6. Hire an attorney to type up a real estate contract for you. At the same time contact a few contractors to get different estimates for the repairs (if any).
7. Close the deal either with a contract flip or a transactional flip. Request that your buyer references your services on the HUD1 form with their closing attorney.
Flipping Short sales process
1. Find homeowners
- Your website
- Agents
- Loan mod companies
- Referrals
- Door knocking/ door hangers
2. Qualify the seller: give them their options; died in lieu, loan mod, foreclosure, loan workout, forebearance agreement, short sale.
3. If a short sale is in their best interest research the mortgage info, property & tax info)
4. Determine the property’s value: run comparables ( state’s taxation website, zillow or team up with a Realtor to access the MLS)
5. Present an offer to the homeowner. After seller agrees to move forward with the short sale have them sign a written authorization form and a purchase contract for their property.
6. Start negotiating the process with the lender’s Loss Mitigation Department & get authorized. Have the lender fax you the short sale packet.
7. Submit a hard copy and an email copy of the packet to the lender. It should contain
- Homeowner’s hardship letter
- Cover letter
- Mortgage statements
- Bank statements, pay stubs & W2s
- Low MLS comparables (get from agent)
- HUD1 form
- Get repair estimates from different contractors (submit the highest priced one since it will help you negotiate a better deal.) Also include pictures of the property damage.
8. Wait a week to a month for the lender to review the package. Meet with the lender’s BPO agent and present to them all the market data so they see what the distressed property is really worth.
9. Harass the lender’s Loss Mitigation Department every 3-4 days to make sure everything is moving forward.
10. The lender might say “NO†to the final offer. Negotiate with the Loss Mitigation Specialist to find a happy median.
11. Once the approval and retail buyer are in place close the deal and get paid.
[/i]Would you recommend one to learn to flip short sale properties and create value for my buyers out of thin air OR start out wholesaling properties like the many other newbies in this business [i]
Phhhew! Good night ! That was alot of typing! I'm gonna pass out now :cool: