BiggerPockets

When you make an offer to a bank do you make the contract assignable? You have to, to wholesale it don't you? Or do you do a double close? Is it common for the bank to accept an assignable offer on a REO?

Banks won't allow assignable contracts in any markets, so as Curt shared you will need to double close.

In reference to Curt's first post about wholesaling, I would be one of the people who disagrees.

1. You do NOT need good credit.

Your credit matters very little if you are doing straight wholesaling. Getting a loan isn't necessary, and normally a pre-approval letter from a hard money lender will suffice. Now with REO's some banks are requiring you to apply for a loan with their mortgage company to even make an offer on the property, but that's not very common. Your strongest wholesale deals will not come as REO's, though. You can make much better margins dealing with motivated sellers directly, and they don't care about your credit.

2. You do NOT need much cash.

The only money you need is whatever your marketing plan is, and if you don't have much cash then your plan needs to mostly be time intensive marketing rather than cash intensive. Now if you are making offers on listed properties, whether they are REO's or homeowners with agents, then, yes, you will need earnest money, but, again, the best wholesale deals you are going to find are buying directly from sellers, and motivated sellers don't care about earnest money.

3. As a beginning wholesaler, my advice is to never actually BUY a property.

If wholesaling is your game and your first starting out, I would recommend backing out of the contract using a contingency rather than going through and buying the property. I say this because there's a 90% chance that you think its a good deal but its not really a good deal. It takes experience to learn what a good deal really is, and my experience is that new investors think something is a really good deal when most of the time it isn't. Now I would also advise a new wholesaler to begin to build the capability to close on properties themselves, so that as they begin to gain some experience in learning what is and isn't a deal that they will have the capability to actually buy the property if they need to. Until you have that experience, YOU are your own worst enemy, and not buying property in the beginning will most likely save you a lot of money.

4. Burning a bridge with ANYONE is not a good idea in business, but the long term effects of backing out on a contract with a motivated seller will probably not amount to much against your reputation.

The thing is that motivated sellers are not return customers. Not that I would recommend doing it generally, I WOULD recommend backing out over buying a house when you are first starting out. Now if we are talking about dealing with a bank with an REO, then absolutely, burning the bridge can have long term effects on your business.

The thing about wholesaling is that WHEN STRUCTURED PROPERLY, you can have little or no risk exposure and still be able to make a fair amount of money from it. It IS the easiest way to get started if you don't have much cash or if you have bad credit.

In my opinion as an experienced wholesaler who has also sold many homes, wholesaling is a good way for the new investor to break into the business.

Is it easy? Is anything in life that is truly worthwhile easy? You know to be honest its really not that hard. Just like anything else there is a learning curve and until you've reached the apex of the curve its a lot of work, but once you round the top it gets a whole lot easier. Doing what you need to do becomes like second nature. Its just about figuring out what you need to do and doing it. Is that hard? Is that easy? I guess it depends on what you make it.

Curt, I absolutely agree with what you're saying in reference to dealing with banks.

Chris,

Sounds like you would be better off being a bird dog. You can find property and buyers with literally no risk and no money out of pocket. Leave whole selling up to the Pros.

When you put a property under contract from someone who is the home owner and you do not disclose to them that you have no intention to close on the desired close date, when that date comes around and you back out b/c of some contingency in the contract that they did not understand in the first place, YOU ARE GIVING WHOLE SALE INVESTORS A BAD REPUTATION.

Sorry for being so blunt, I guess I have just been used to the big leagues of selling property.

I have heard many people here on BP talk about "wholesaling" the property via a double closing and no money or credit needed. Few, have gone into deal to answer this question: If "A" is the bank (seller), "B" is you, and "C" is your end buyer, the A-B transaction must close before the B-C and you can not use the C funds to close the A-B transaction (in my state and many others). That is considered loan fraud in CA and no title company will touch it. So how are you guys getting around this?

Question 2 is this: IF you are buying a bank REO, in many cases, the property is in poor condition (or at least needs some amounts of repair). IF you had a situation where you wnated to sell to "C" and "C" was an owner occupant looking for a ready to move in condition home, how do you get the home fixed while it is in escrow and owned by the bank prior to doing your double close?

I've never been involved in a double closing. But, I've heard enough people talk about doing them, including title company folks, that I'm quite sure they do happen. Bronchick even has a little skit he puts on where he has giant deeds and checks and has people come up on stage and hands them around.

I don't see how you could possible do a fixup and do a double closing. Even if you got permission to do the work, you run the risk of the deal falling apart before the closing. If a fixup and a retail buyer is involved, you better just do a traditional fix and flip.

Originally posted by Jon:
I've never been involved in a double closing. But, I've heard enough people talk about doing them, including title company folks, that I'm quite sure they do happen.

Jon,
I am not saying they don't happen, they do. What I am saying is that you (party "B") must bring your own funds to the table to close transaction A-B then "C" closes with you "B"..

J Scott:
Great insight. I agree. I am familiar with all the strategies you listed. Keep in mind that I do have my own funds to close the transaction A-B so it is not an issue for me. Of course, as you pointed out, there are companies who provide the flash funding for double closings.
I was just curious if there are people who have found ways to sell in the situations I laid out. Thanks for your answers.

Originally posted by nationwidepi:
I have heard many people here on BP talk about "wholesaling" the property via a double closing and no money or credit needed. Few, have gone into deal to answer this question: If "A" is the bank (seller), "B" is you, and "C" is your end buyer, the A-B transaction must close before the B-C and you can not use the C funds to close the A-B transaction (in my state and many others). That is considered loan fraud in CA and no title company will touch it. So how are you guys getting around this?

Question 2 is this: IF you are buying a bank REO, in many cases, the property is in poor condition (or at least needs some amounts of repair). IF you had a situation where you wnated to sell to "C" and "C" was an owner occupant looking for a ready to move in condition home, how do you get the home fixed while it is in escrow and owned by the bank prior to doing your double close?

Hello Nation,

I completely agree with all the advice that you have been given, but I too have run into problems while trying to Wholesale in California. The majority of the banks really aren't accepting assignments. Actually, I'd say like 97% of them are saying no! But don't fret though because there's still 3% of the banks that will allow you to assign a contract, especially if they're desperate.

I got into investing about a year ago, and I'm one of the million people who haven't made a deal yet...Of course that was due to my lack of knowledge, but the 6 mth run around taught me a lot about this crazy California market... And let me be the first to tell you that a lot of these strategies are automatically tossed out of the window for us :( But you can't give up...

Just this past weekend, I put my foot down and marched to my agent demanding that he submit 25 low ball offers on properties that have been on the market for a while. These properties usually have minor to major repairs , but its okay since you're offer is low. From those 25, my agent found out which banks accepted assignments and it drastically reduced the huge list to a whooping 4 properties. :D I mean that really isn't to shabby if you consider the numbers. The point is that eventually one of the strategies will work. You just have to choose what works BEST for you! If you have the money, great! That's even better for you AND the bank. If you don't or if you like OPM better, than those resources are also available in Cali...they just aren't as easy to access like they are in other states.

Hopefully this helped a bit...I just never see any advice from California and things can get a bit tricky :/

Originally posted by Douglas Christian:
What I would say to you is that you put the deal together and if A is the bank and B is you and C is your buyer with the money. What you do is go to C and let them agree to your price and do the contract. Then you close the deal with A-C and the difference comes to you as a mediator or Consultant.

If it walks like a duck, and quacks like a duck... That sure sounds like brokering to me. What is it, other than calling yourself a "mediator" or "consultant" that keeps this you from being an unlicensed broker with this arrangement?

Originally posted by Douglas Christian:
There are about 70% of the people on BP are WHOLESALERS, WOW.

Where did you come up with those numbers, Douglas? :eyes: