If you’re a wholesaler and have been considering jumping into the REO arena, you’ve probably already figured out that you’re not going to be able to assign your purchase contract to your end buyer like you would on a regular wholesale deal. Ninety-nine percent of the banks will include a “No-Assignment” clause in their contract which will prevent you from doing so.
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REO Wholesales are Still Possible!
Because of the bank’s restriction on assigning contracts, many wholesalers are under the impression that there is no way to wholesale these deals at all. This is far from the truth, and while there may be a few more hoops to jump through when wholesaling REO properties, there are still several ways to get these deals to the closing table.
Over the next five weeks, I will be covering five different strategies that you can use to wholesale your REO deals and get around the bank’s “No- Assignment” clause.
Conducting a Simultaneous Closing
Today I will be talking about using a simultaneous closing, which is the way I have been closing my REO wholesale deals for the last two years.
When a simultaneous closing occurs, there are two separate transactions taking place, often referred to as the A-B transaction, and the B-C transaction. The A-B sale refers to the transaction between the wholesaler and the bank, and the B-C sale refers to the transaction between the wholesaler and their end buyer. When doing a simultaneous closing, the end buyer’s funds are used to fund both the A-B sale as well as the B-C sale, so as a wholesaler, you are not required to bring any cash to the closing table.
Because the banks will stipulate in their addendum that the title work for the A-B sale be done at their title company, you will need to coordinate that closing with your title company, who will handle the title work for the B-C sale.
Once the bank’s title company has all of the closing documents prepared for the A-B sale, you can request that they be sent to your title company where you will be signing all of the documents for both transactions.
The closing for both deals will be held at your title company, and once all of the documents are signed and both deals are funded, your title company will wire the funds for the A-B sale to the bank’s title company and Fed Ex them the signed closing documents.
In order to close your REO wholesale deals in this manner, your end buyer will need to be paying cash, or using a hard money lender who will have no problem with the fact that the property is being flipped on the same day it is purchased from the bank. You will also need an investor-friendly title company on your side who is familiar with simultaneous closings.
If you are unable to find a title company in your area who will perform a simultaneous closing, don’t worry- there are four other methods you can use to get your REO wholesale deals to the closing table. I will be going over each one of those methods in the coming weeks, so stay tuned..