I'm getting kicked out of the deal over the earnest money?

When trying to buy REO's and making a cash offer, banks still want $1000 to tie up the deal in a contract. I recently had a 2000 sf house, needed $25,000 repairs, FMV was $120,000, made an offer of $36,000, they countered with $38,000, but the earnest money had to be paid within 72 hours. If you legally can't market the property until after you get it under contract, how can you get the deal without paying the earnest money up front. I asked that they not take the money until after the inspection period of 14 days, but they wouldn't go for that. Is there anyone out there that will finance a "whole deal", including the earnest money? If I can get just one deal under my belt, then I'll have money for earnest money on the next project, something to valid my experience, and get my LLC set up. It so ***** frustrating!

Edwin Brown

Real Estate Investor · Chattanooga, Tennessee

151 posts
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Jul 17 '10, 12:14 AM

Rita, good for you on getting started in this business. As for having 1,000 as earnest money, the best way to find those funds is from your buyer. Use their earnest money to cover yours. What that means is that you need to already have this property sold before you commit to it. There are a couple reasons for this.
1. If you don't already have a buyer, there is a good chance you won't find one before your contract runs out and you will lose your earnest money.
2. Having buyers in waiting will help you know what properties to go after. When you are new to this business there are a lot of terrible properties that look like good deals. Let your buyers tell you what they want.

All that being said, you don't have to wait until you have a contract to start pitching your property. I wouldn't broadly advertise it but if you had a relationship with a couple of real buyers you could take them by and see what they think.

Curt Davis

Wholesaler · Memphis, Tennessee

Pro

1,161 posts
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Jul 17 '10, 01:27 AM

Rita, buying REO's from the bank is kind of like the big leagues. Buying from home owners who want to sell where you can tie it up for $10 and have no recourse if it never sells, well thats like the minor leagues. Sounds like you should not be looking or bidding on bank REO's. You need to be prepared to close on the home if need be and you also need proof of funds when you get one under contract. Good luck, I just dont think your ready yet.

Curt Davis, buyMemphisnow.com
E-Mail: crtdavis@gmail.com
Telephone: 901-881-0552
Website: http://www.buymemphisnow.com
Full Service Real Estate Investing in Memphis TN

Sean Integlia

Real Estate Investor · Woonsocket, Rhode Island

15 posts
2 awards
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Jul 17 '10, 02:35 AM

Originally posted by Edwin Brown

Rita, good for you on getting started in this business. As for having 1,000 as earnest money, the best way to find those funds is from your buyer. Use their earnest money to cover yours. What that means is that you need to already have this property sold before you commit to it. There are a couple reasons for this.
1. If you don't already have a buyer, there is a good chance you won't find one before your contract runs out and you will lose your earnest money.
2. Having buyers in waiting will help you know what properties to go after. When you are new to this business there are a lot of terrible properties that look like good deals. Let your buyers tell you what they want.

All that being said, you don't have to wait until you have a contract to start pitching your property. I wouldn't broadly advertise it but if you had a relationship with a couple of real buyers you could take them by and see what they think.

Good luck finding a buyer who would be willing to front you your dp to tie up the property with the bank without an executed contract from you to him, then pay over what the bank is settling on. Unless your a cutie like Steph Davis, and the buyer thinks, he can get a little somethin-somethin of course, or a relative or close friend. Wholesale flipping reo's is frustrating and risky. You need to at least give the appearance you are a pro with these buyers. How are you going to do this if you have to beg your dp from the end buyer ? Most buyers that like these properties want all the equity for themselves. Buyers flake, you can have them drive by the property, and see if they like it. But your 1k is still at risk, especially since you are disclosing to them the original a to b price to do a back to back close. They can just flake out and not close when they see how much you are making, wait until your contract expires with the bank then step in to get the property at what you got it accepted at. Lots of competition. You might want to go with Curts suggestion.

Jackie Patterson

Real Estate Investor · Kalamazoo, Michigan

666 posts
8 awards
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Jul 17 '10, 02:46 AM

Rita, You may want to consider birddogging for a short sale investor, or a wholesaler, and build up some funds that you can use to "set up your LLC" and provide the funds you need to do your own deals. This will also provide knowledge and experience which will be invaluable. There is a lot of money to be made in short sales and wholesaling......but you can also lose a lot if you don't know what you're doing!

Sam M.

Real Estate Investor · Kalispell, Montana

572 posts
8 awards
50 influence

Jul 17 '10, 04:29 AM

Jackie,
What amount of info/work does a birddog get for the SS investor? Does the birddog need to qualify the owner, collect necessary paperwork including contract as well as basic DD? Or do they just bring you a qualified lead (location, willing seller, specific lenders etc.)

Stephani Davis

Real Estate Investor · Tampa, Florida

190 posts
2 awards
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Jul 17 '10, 05:39 AM

Hey Sean-

I just wanted to clarify that I am not offering up sexual favors or anything like that when I market deals. Although, now that I think about it- it might not be a bad idea.

JUST KIDDING.

When I was just getting started, I didn't have the $$ for an EMD, so I would mention the deal to my end buyers while I was still negotiating with the bank. I just came right out and told them- hey I'm negotiating this deal and I might be able to get it to you for X amount of dollars- you interested?

Once I got a number out of them, I would go back to the bank and counter accordingly. This way I was able to get an EMD from my end buyer very quickly, and turn around and use it to give to the bank.

It was risky because the buyers could go around me and steal the deal, and it wasn't the easiest thing to pull off, but you know what? I was hungry and I was willing to hustle to make it happen, and before long I was closing a bunch of deals and had plenty of money for EMDs. Which was a good thing because I was one step away from working the street corner...

Steph

Jackie Patterson

Real Estate Investor · Kalamazoo, Michigan

666 posts
8 awards
50 influence

Jul 17 '10, 06:02 AM

[What amount of info/work does a birddog get for the SS investor? Does the birddog need to qualify the owner, collect necessary paperwork including contract as well as basic DD? Or do they just bring you a qualified lead (location, willing seller, specific lenders etc.)]

Sam, It depends on how much work they want to do and how much they want to profit from the deal. Obviously the more they do, the more they make. It also depends on the ability of the birddog, the quality of the leads, and the volume they are able to produce.