Investor · Pittsburgh, PA · Member since 2008 · 163 posts · 50 votes
I made an offer on a REO property. I want to use transactional funding. My problem is I'm sikeing myself out by thinking i'm missing this or forgetting that. I need advise from someone who has been through it not someone sending me links. I made the offer. so I'm waiting to hear back. do I get to choose the title comp? do I close with the bank at their location with the trans funds then close with my end buyer at my location. how does this all come together? will they give me the exact closing costs i'll need so I can get it from a transactional lender? whats the best trans lender?
Don't get too caught up in that offer. Not to discourage you but... your offer probably won't get accepted unless you made a real bond with the listing agent... OR they'll just ask for highest and best offer.
You have only a few ways to close an REO.
1- Jon is 100% correct - banks won't let you pick your title and/or escrow unless you want to pay for it... No biggie if the #'s pencil out.
2- How do you close it? Close phyically with cash via t-funding OR use the end buyers fund and "make them the bank"...
Meaning... use a short-form deed of trust assignment of rent and at closing turn the cash-offer into a finance offer.
3 - ADD a buyer and quit claim your name off... you better do this early on in the game...
4 - Buy it in a trust... and sell the beneficial interest... it is MUCH cleaner and you don't need transactional funding to eat into your profit.
If you've made an offer on one REO this probably isn't a problem because you probably won't get anywhere with that offer. Get out there and make 20 offers. Then you have a shot at actually closing one of them.
You can choose the title company but typically the bank will only pay for title insurance if you use their company.
You may want to try to do a "hold open" on the title insurance. Then you can re-use the same policy when you sell. They title company may or may not be willing to do that.
You would end up with two purchase and sale contracts. One with you as buyer from the bank (A-B) and a second one with you as seller with your end buyer (B-C). Both go to the title company (or companies, if you use two. The title company(es) will prepare HUD-1 statements for both transactions. You will have to get the money for the first transaction from the transactional lender and wire it to the title company for the A-B transaction. The end buyer will wire money for the B-C transaction to the title company. All the money will have to land before the transactions can be closed. The transactional lender will need to provide a payoff statement for their loan to the title company as part of the B-C transaction. Once the two transactions close, the title company will wire (or send a check) the payoff for the transactional loan to the transactional lender. You would get a check (or wire) for the B-C transaction for whatever is left after the payoff and all the expenses.
Don't get too caught up in that offer. Not to discourage you but... your offer probably won't get accepted unless you made a real bond with the listing agent... OR they'll just ask for highest and best offer.
You have only a few ways to close an REO.
1- Jon is 100% correct - banks won't let you pick your title and/or escrow unless you want to pay for it... No biggie if the #'s pencil out.
2- How do you close it? Close phyically with cash via t-funding OR use the end buyers fund and "make them the bank"...
Meaning... use a short-form deed of trust assignment of rent and at closing turn the cash-offer into a finance offer.
3 - ADD a buyer and quit claim your name off... you better do this early on in the game...
4 - Buy it in a trust... and sell the beneficial interest... it is MUCH cleaner and you don't need transactional funding to eat into your profit.
If you've made an offer on one REO this probably isn't a problem because you probably won't get anywhere with that offer. Get out there and make 20 offers.
This is true for MLS listed properties. If it was priced right, you will likely be bidding against many others. If it was not and you low-balled an offer, unless the DOM is very high, odds are it will get countered or ignored. Finding an end buyer for a specific property each time is difficult which is why flipping an REO via transactional funding/double closing is not easy.
Yes, the seller picks the title and escrow company, if you want to choose, you will have to pay both sides, then have the second closing costs of title and escrow. The "holding title open" Jon mentioned is called purchasing a "title binder". Depending on the property value, this cost is usually under $100 and cuts your resale title policy by over 50% so on flips, it is always better to purchase a title binder.