All Forum Posts by: Tim Silvers

To All Seasoned REO Flippers:

I was reading some of your previous comments from over a year back on doing REO flips in which a few of you state that you were successfully buying off the MLS, finding good deals - and bottom line, making a profit.

I don't know about other states, but all I can say is that EVERY agent I've talked to as of late in both California and Nevada sound like a broken record -that because of the increased demand and lack of inventory, the REO market from single deals to bulk deals has largely become a seller's market and the banks are NO LONGER desparate to get rid of inventory at deep enough discounts for the flip business model to be pencil. The REOs are listed at market and, in many cases, are even getting bidded up over list. It is therefore impossible to make enough of a spread in order to flip on a simo close.

That being said, the only investors buying REOs (including the so-called bulk discounts) are the buy-and-hold and rehab-and-hold guys. A large percentage of them are Canadians paying cash and holding strictly for cash flow - and getting about 8% ROI, a model which does not suit my goals.

Are you guys still using the MLS for your flips and still making a decent spread?

Is it just my market that is basically tapped out for REOs flips?

What's wrong with this picture?

Let's hear the opinions from those experienced:

Taking into account the spread potential, current legal climate, competiton, and risk, which of these 2 business models has and potentially will fare better than the other and why?

As I see it, there are basically 3 business flip models:

- Virtual Wholesaling/flipping contracts/contract assingment - no cash needed
- Short Sale/REOs - using a double escrow and transactional funding
- Bulk REOs - using hedge fund financing, hard, or private funds

Although the web is besieged with tons of sites to gurus pitching their programs for their various programs, courses, boot camps and the like, I believe there are also some very well-respected "real" investors doing actually these deals and profiting. Real estate investor sites like this one comes to mind.

And these are the real people I need to network with.

In each of these models, there is a common deniminator - the investor must buy as low as possible by recognizing a window of opportunity and taking a deeply-discounted, short-term position on a ultra-distressed situation - in order to re-sell at enough of a spread or profit to make sense, but still at a deep enough discount for the deal to make sense to the end buyer which is usually, but not always, another investor - and one that's willing to hold, do the rehab, get tenants, etc. The only real difference between the 3 programs is the method and type of product and how it's acquired. It seems like they key is to have a list of end buyers lined up as soon as you find the property(s) or better yet, before you find them.

The bottom line questions for those in the field doing these deals are:

1) What is your close ratio?

2) Are the deals as lucrative as the promoters so claim (i.e., average of $15K per deal)?

3) Can they work in all markets (i.e., how can you do wholesale flips when the majority of good deals in a market that is predominantly underwater - and thus would become short sales or REO flip transactions)?

4) Out of the ton of online flip gurus promoting their programs, who are the top 5 that are most honest, helpful and "real" you'd recommend, if any?

5) Out of the 3 of these programs, how would you rate each program on a scale of 1-10 in terms of:
- how lucrative/profitable
- ease of the process from start to finish
- finding buyers
- finding sellers
- working with realtors - yes/no - and why

On a side note, I'd like to find other investors who I could co-venture with or who would be open to a mentor relationship in my area which is Las Vegas.

Come to think of it, I think you're correct, Brian. Since she does all the negotiating with the lender directly and, all due respect, has a "retail" mentality, I don't think a flip deal could realistically get done. Her allegiance is first to the seller and then to the bank, not an ideal situation of what we need as investors.

Again, Marcus, many thanks! Terrific advice.

Is your no. listed somewhere on this site?

Marcus, thanks for the response. You know exactly what time it is!

We are ground zero here in Vegas for short sales, REOs, trustee sales, you name it. I and my associates need to find more "real people" out there to mentor/partner with to learn this business other than all the hype, gurus, etc. on the net that is a jungle of confusion inundating me daily!

I will take your offer into consideration!

Thanks again.

I'm talking about short sale flips using transactional funding. Wholesaling is similar, but involves no cash.

What I meant for the agent was to refer me her seller, let me do the negotiations with the bank, she provides the BPO, meanwhile, she gets her commmish on the listing, and while the lender is processing the short sale, she can find me a cash buyer and can pocket another commission.

The price the end buyer gets will likely be slightly below market when it's all said and done.

The truth is that I'm putting a couple deals through (as a birddogger) a firm I partnered up with that does all the negotiations, paperwork, funding, etc. I am still green and wanting to learn how it works myself.

I will have more confidence once these deals hopefully close.

I have an agent with whom I've had a long term (past) working relationship for several years. 99% of her business is (no surprise in this market) short sales as a seller's rep. I, of course, am wanting to find a way to profit from those deals by doing flips while giving her the ability to increase her commissions by listing and then reselling the properties.

After my brief pitch, she was quick to explain that she is a very hands-on 'relationship person' with her sellers from start to finish and does all the negotiating with the lenders directly. She had never heard of short sale flips, transactional funding, or end buyers. When I explained how it works she was quick to say the following:

- "I don't see how the banks would let you profit, for one, plus they aren't willing to take less than the BPO in my experience."

- "I would never list the seller's property for more than the market value and, in fact, I always start listings at below market to move it as quick as possible to get as many offers."

I told her many investors start a bit above at first to try and create enough of a spread for selling to an end buyer. If no bites, then the price is lowered every week or so until there's an offer. She couldn't understand why and said "that's completely backwards".

Speaking of which, since I'm new to flipping, and haven't yet closed a deal, what do you investors tell your agent to list at? I'm assuming a bit over market to weed out the possible bites that might give you a bigger spread you'd otherwise miss out on had you started with a below-market listing? In other words, do you recommend starting the listing above-market and then dropping it at certain intervals?

She then stated that she felt an above-market listing would be a disservice to her seller, namely because it puts the seller at an increased risk of foreclosure, taking longer to move and increasing the likelihood of going further into default.

She was adamant about wanting to maintain strict control of the short sale process even though I explained she could be making much more by leveraging her efforts and handing the short sale negotiations to me, thus freeing up her time to take on more listings.

She again explained she works very diligently to build a hands-on relationship with desparate sellers, so it's a shoe-in for her once she gains their trust.

She also felt that most agents interested in doing these deals would want a piece of my spread. I said that's not legal as far as I know. All an agent's entitled to is a commission on the front (seller) and back end (end buyer - if they find one). I would think it's violation and a direct conflict of interest for them to get a part of the profit from the deal. Can anyone clarify this?

I just need to come up with some intelligent responses to these concerns.

Suggestions?