BiggerPockets

ok everyone is saying that wholesaling takes little to no money to do. Im finding this to be a very erroneous statement. I live in a city where everyone uses an agent- there is no such thing as FSBO. Im am finding many bargain REOs/other properties out there but they are tied to an agent. If I wish to make an offer on a property, I am being asked to put down about $1000 in earnest money in addition to proof of funds. Well lets say I dont have a proof of funds- After all I want to assign this to another investor not purchase the property. In addition I have to give them $1000 just to get into a contract. For the gurus saying you can give $10 earnest money and lock a deal with them, where in the world are they talking about doing this- on mud huts in Nigeria?? Is there some sort of trick that Im missing out on?

Wheatie has it right on. It is VERY hard to wholesale a REO, someone may not say that is true, but for some of the same reasons your frustrated.

Little to no money wholesaling means getting out there and finding sellers of houses that arent listed with an agent. They are out there to. Marketing is the name of the game to get these sellers to call you. Once you get some motivated sellers calling you, many times you can get them under contracts for NO earnest money.

I would not recommend wholesaling a REO unless you plan on financing it yourself.

I would have to agree with Jon, Lenders are typically very hard to deal with when it comes to wholesaling a deal of theirs (it most likely will not happen)! Good luck though.

Jon and crew, I have been preaching that the " gurus" are full of crap saying that you can wholesale without any money. You can, but by the time you can do it that way you have already spent a sizeable amount of money marketing and building your network. It is like the banks they won't give you money if you need it. You can wholesale with little out of pocket once you have the pieces in place.

It is just not as popular to say you can't to the newbies. If you say you can then they buy whatever you are selling.

I've wholesaled several REO's. You have to double close them because the bank won't allow you to assign them. Yes, you need to provide proof of financing/funds and an earnest money check, which when you are starting out might not be feasible. Proof of financing could be a hard money lender, but the earnest money check is hard to get around if you don't have it.

As Jon pointed out, yes, they already have been marketed some through the MLS, and you are really looking for the price reductions and the new listings, but you would be surprised at how few investors check the MLS regularly. I have wholesaled about a dozen properties that I bought off of the MLS.

Some of Jon's other advice is huge here, too. Wholesalers joke that if there's a For Sale sign in the yard then its NOT a deal. Now, that isn't completely true, but the point being that you need to focus on getting to motivated sellers before there's ever a sign in the yard.

I would completely agree with Jason that you CAN find wholesale deals with little or no money, but it takes elbow grease. Yes, a substantial marketing budget makes it a lot easier, but it absolutely can be done with just gas in your car and internet access.

I actually have a couple friends who did exactly that. Time and gas is all they had in the deals. One of the guys actually did 2 or 3 deals with no marketing and no money. He'd find vacant properties, track down the owner's phone number, and ask them if they wanted to sell. Unfortunately he never understood the idea of reinvesting his profits. He spent his money, lost his drive, and he was done.

I understand the earnest money issue, and there's not really any way around that. The very first house that I put an offer on was a HUD, and I put $500 earnest money down on it. At the time $500 was A LOT of money to me. It was pretty much all the extra money I had at the time. I ended up chickening out and backing out of the contract, and I lost my $500. :cry:

If you can get over putting up earnest money then the title company/agent is the key to a double closing. There's a couple different options here. Some lenders will let you pick the title company if you pay for title policy. This would depend on which lender it is.

On a side note, technically, by RESPA laws the buyer has the right to pick the title company, but I've never pushed it much. I talked with an investor once that said that after he had a contract he demanded in writing to pick the title company, citing RESPA 2608??? I think, and the lender let him and still paid for the title policy. I've never done that though.

The other option is to see if the predetermined title agent would be open to a double closing. With many REO's they will have a central title company do the actual title work and then have a " courtesy" closing at a local title company. The agent who is doing the " courtesy" closing is the one that needs to be open to the double closing. Many times on the listing page on the MLS the listing agent will reference what title agent/company they want to use. Go ahead and call that title agent and ask them if they are willing to do a double closing. Yes, many agents are not open to it, but many agents ARE open to it.

Two of the REO's that I can think of that I double closed were with agents that I had never done any business with, but when I asked if they were open to doing a double closing they said yes.

I would recommend that you have your financing set up if you're looking at REO's. Losing $1000 earnest money and a good deal because you can't find a buyer quick enough is a shame. I've always been of the mentality that if its a good deal, I'm going to buy it whether I can find a buyer before I close or not. Obviously with that mentality you need to know for sure that its a good deal or you're likely to get stuck with a lemon.

I always recommend to beginning wholesalers to never buy a property. Use contingencies in your contracts and if you can't resell it before you close, back out. The last thing you need to do is get stuck with something you think is a deal but is really far from it.

Now when you've gained some experience and you know for sure its a deal, you need to be able to purchase the property even if you can't get it resold before you close. If you don't, you are leaving a lot of money on the table with lost deals, and you are also jeopardizing your reputation.

wow.... can i get an answer please

I hear of some guru's saying that if you buy their course they will provide you with proof of funds letters. Is there a place or somewhere I can get this? This is my only problem with wholesaling reos. Any advice would be great

Jordan,

As someone who is currently jumping into the world of wholesaling REO's, let me be the first to tell you that the term "wholesaling" is used loosely when dealing with REO's.

First, you won't find an REO that isn't listed with an agent, so right off the bat you are in a completely different world then when you practice "standard" wholesaling as you WILL have to deal with agents on a regular basis if you want to flip REO's.

Second, you ABSOLUTELY need at least $1,000 down on an REO if you expect the agent to submit your offer to the bank. The only way around this is to have a buyer lined up before your offer gets accepted by the bank, at which point your buyers down payment would be used as your down payment, but this is a risky move as everything would have to be timed perfectly.

Third, you do need proof of funds for REO's but there are companies that offer something called a "bridge loan" that will usually provide you with as many free proof of funds letters as you want, so this hurdle is actually easy to overcome.

The bottom line is that you can kind of wholesale REO's only because you won't be actually buying the properties before you sell them to your buyers, but standard wholesaling rules do not apply to the bank owned homes world.

Ryan,

I am well aware of the merriam-webster definition of the word wholesale. My point was that you can't follow the typical rules of wholesaling a house when you are wholesaling REO's.

And a bridge loan is a loan that is used just to close the first escrow in a double closing. The companies that provide them make it very clear that the loan will only be allowed for those doing a double close.

I have never personally used a bridge loan, but I use their proof of funds letters all the time.