All Forum Posts by: J Scott

To Steph's point, I've bought 3 REOs in the past two months where my purchase price was LESS than my original offer price. The bank rejected my original offers, eventually lowered the price to below my original offer, and I offered even lower than that. In one case, my purchase price was 50% of my original offer price ($22K vs $44K).

It happens all the time...banks (and listing agents) just aren't all that on-the-ball these days...

Correct me if I'm wrong, but I believe that's if the rental has been held for less than 1 year. If more than 1 year, they'll use the income/expense information directly from your previous year's tax return (along with the actual lease as proof of rental).

This has been my experience, but may have changed recently...

Wow, I bet he's been waiting over 2 years for that info...

Just kidding... ;)

I'm not a wholesaler, but I buy a lot of REOs...here are a few thoughts:

- Just because you are dealing with a bank as the seller doesn't mean that you can't have contingency clauses in your contracts that allow you to back out for any reason. It's called "due diligence" and most banks will allow you at least 5-7 days for due diligence, during which you can find your buyer if you're wholesaling;

- Earnest money can present a problem, but there are ways around it. If you put in a stipulation in the contract that says you have 48 hours *after* binding agreement to get the earnest money to the listing agent, that gives you *at least* 48 hours to find a buyer (and use his money for EM). Additionally, good wholesalers will be marketing the property to potential buyers during their negotiation process, giving them an extra 1-3 weeks. If you trust your buyers, you don't have to worry about them going around you.

- Simultaneous closings are legal and do happen, at least in some states. If you live somewhere where this is flat out illegal, you can use the double close instead (B closes with A, then C closes with B, all within a few minutes). In a double close, you need to come up with the money, for at least a few minutes. There are companies who specifically exist to loan you the money for the few minutes you need it to do a double close (they charge, of course).

- There are other ways to wholesale an REO property, where assignments aren't an issue. For example, you can create a company, buy the property in the company name, and sell the rights to the company to your buyer. Or, you can add your buyer's name to the contract (no seller will have an issue with this), and then after the purchase (with the property in both your names), you quit claim the property to him.

- There is at least one person on this forum who has been very successful wholesaling REOs, and started out with essentially no money. So, it's definitely possible.

- As for choosing the title company, most REO sellers will allow you to choose your own title company to do the closing. BUT, they will still require that their title company do the title work. If you want to choose your own title company, be prepared to pay double fees. But, it can be done.

- Wholesaling to owner occupants pretty much requires that the final buyer accept the property as-is. While there is no good way (that I've heard) to wholesale to an owner occupant and be able to include repairs in the sale, there are still plenty of wholesalers who have been successful wholesaling to owner occupants. The key is finding properties that don't need much work, and also hooking your buyers up with the right type of financing to allow them to get the rehab costs they need to fix the property.

Just my $.02...

I believe it's actually Monday, Feb 2 this year...

You need to find an agent who has sold a ton of REO properties. These agents understand what typical REOs in the area are going for and can help you determine where to start (and end) your negotiations with the sellers.

Additionally, good REO agents know the REO listing agents, and can make a 2 minute phone call to ask the listing agent how flexible the seller is. My wife is my agent, and there have been many times when she's called the listing agent to ask about a property and the agent has basically said, "Just make an offer...we haven't gotten a bite on this one in 3 months...at this point, the bank is willing to consider anything."

Lastly, a good REO agent is going to understand the process, will get the paperwork right the first time (and not piss off the listing agents), will help you understand the addenda that come with the contracts, and will help you deal with the nuances of the REO process.

It doesn't have to be $20K to make an impact on the seller. Even $5K is more than 95% of the buyers will put down, so if you can even manage that, it will give you a leg-up on the competition.

When you make an offer, put the following in the Special Stipulations section:

"Buyer agrees to provide earnest money to listing agent in the form of certified funds within 48 hours of binding agreement."

This way, you have two days *after* the offer is accepted to get your earnest money to the seller's agent, and you don't have to worry about having lots of checks out there at the same time.

Look up "wholesaling real estate" elsewhere on this site and then Google it...

Hey Mark,

Sorry, didn't realize the exact question you were asking...

There are essentially two types of agents:

1) Those who work for the seller and are contractually obligated to help the seller get the best deal possible;

2) Those who work for the buyer and are contractually obligated to help the buyer get the best deal possible.

The important thing to keep in mind is that if you don't have a specific contract with an agent that calls for that agent to represent *YOU*, then by-default they will represent the seller.

The seller's agent (known as the "listing agent") can certainly write up your offer for you, do all the paperwork, get you to closing, etc. In fact, he/she will do everything you need an agent to do to buy that house. But, the reason that agent recommends that you find your own agent is that -- while he/she will take care of all the paperwork for you -- he/she is still contractually obligated to help the seller get the best deal.

In other words, if you say to the listing agent, "I'm willing to spend $200,000 for this house, but let's put in an offer for $150,000 and see if I can get the seller lower...", the listing agent will be *legally* bound to let the seller know you said that. And that's not good for your negotiating stance... :)

So, while you don't need to find your own agent, it's in your best interest to do so. It doesn't cost you anything (the seller pays all commissions), and this way you have someone who is familiar with the process, and is also looking out for your best interest and can help you negotiate.

You can't really compete with the folks who are doing bulk REOs, and you can't do anything about investors who aren't buying, but if you have buyers who are going around you -- directly to the MLS -- you need to figure out a way to get better deals on the same properties they're trying to get to directly.

For example, I just underbid another investor on a property by $5K, but because I offered over $20K in earnest money and no contingencies, the bank accepted my offer. If I wanted, I could wholesale the property to the other buyer for a $5K profit, and everyone would likely be happy.

Another important aspect of getting your offers accepted (over other buyers, and then wholesaling to them) is to make friends with the REO listing agents. Get to know them, take them to lunch, etc. If you're good to do business with AND they like you, they can often push through deals that otherwise wouldn't get accepted.

For example, I had a listing agent the other day who told me that the bank had countered my offer. She basically then said, "If you choose to stand firm on your original offer, I think I can push it through for you." I stood firm, and the bank relented and accepted my offer. If I weren't on good terms with this agent, I likely wouldn't have gotten the deal anywhere near my original offer price.