BiggerPockets

Its going to be really, really difficult to buy REOs without having the earnest money. If you could convince your buyers to front you money without having a property under contract, you could use that. But that seems unlikely.

Yes, you want to be well under ARV. That may not be the same as being 50 cents on the dollar vs. other listings. Most REO's need work, and that means more of a haircut for the seller than the amount of the repairs. If there are pretty houses, and ugly houses discounted only by the amount of repairs, buyers will go for the pretty ones. If there are junker short sales or HUDs on the market, REOs in similar condition may get similar pricing. And I've seen that banks try for "ARV - repairs" as their starting point.

Banks are looking for 10% of offer down in Earnest Money lately. You can submit less, but you must remember all the details of the deal are variable.

We find that if we want to low ball the offer, we have a better chance of success if we high ball the Earnest and remove as many other obstacles from the deal (termite inspections, radon inspections, property inspections, mortgage contingency clauses, sale of other property contingency clause, speed of sale, etc.).

We have a member of our REI Club that recommends 100% of offer in Earnest funds. He has been extremely successful in getting property are very low cost.

Think of the offer of give and take. What will you give in hopes that they will take something they want off the table?

You can put in your contract that the EMD will not be given until your offer is accepted. As was already stated, though, sometimes they will want it up front- it just depends on which bank you are working with.

I did not have the EMD for my first few deals, so I did what you are describing, and used my buyer's deposit. I would start shopping the deal around to my investors while I was still countering w the bank, and if I found someone interested, I would accept the offer, have my buyer write me a check, and then use that money to give to the bank. You have to be careful doing this, though, as you might get caught with your pants down, and end up with no buyer and no earnest money, and have to back out of the deal. Once you start backing out of deals, your offers are a lot less likely to be accepted.

I agree with Christian that the best way to get deals is to offer large EMDs and drop the contingencies. My best deals came when I was offering 5k or more as a deposit. I talked to a guy last week who is cleaning house here in Tampa, and he told me he is offering 10-15k EMDs. It makes a difference for sure.

Good luck,
Steph

Most if not all the REO contracts I've seen disallow assigning the contract to another person.

You need to offer significantly less than ask price by the bank. I go for around 55 cents on the dollar of CURRENT value. This number seems to work for me fairly frequently. Offer on many. If the bank tells you to pound sand, tell them your offer is valid for 1 or 2 weeks, sometimes they come crawling back to you.

Originally posted by Colin Ralls

You need to offer significantly less than ask price by the bank. I go for around 55 cents on the dollar of CURRENT value. This number seems to work for me fairly frequently.

IMO 'Asking' Price means little to nothing to an investors offer. 50 cents on the dollar off asking price can still be a bad deal. You want to focus on Current Market value or ARV (After Repair Value).

And the banks want 90-110% asking price. Theres ways to get asking price to come down a little to meet your offer, but offering 50 cents on the dollar of asking price to REOs will get you on a Black List veryyyy quickly.

Originally posted by Jason De Marre

J Scott- Is there any problems with seasoning structuring deals your way?

As long as your buyers aren't FHA, you shouldn't have any seasoning issues. That said, there are some lenders that will shy away from providing funds to a buyer who is participating in a double or simultaneous closing (they are concerned about both fraud and chain-of-title issues), so you could run into that as well.

My best suggestion is to find lenders who will support your purchase and sale strategy and "encourage" your buyers to use your preferred lenders to finance their deals.