funding foreclosure acquisitions

6 Replies

Newbie here, trying to gather all the info I can on my new journey.  My question has to deal with foreclosures/reo properties. I know that most institutions want their money ASAP.  If I found a property that was a good deal and the numbers came in right to make a profit after rehab, could I use hard money to make up the difference in cash I don't have ? Any other avenues of financing I should be considering  when dealing with foreclosures ? Thanks in advance for the help

Hi William,

In my 3 years working with REO, I haven't yet come across anyone who has used hard money to purchase a foreclosed property. However, plenty of buyers have purchased them through traditional financing. The only downside to financing is that if there are multiple offers on a property, the bank will 9 times out of 10 go with a cash buyer who can close the quickest.

Good luck!

Dan

You can and should use Hard Money to fix and re-sell foreclosures.  That's what they are made for.

Banks care about the highest sales price, not the financing type. They have a responsibility to accept the highest offer unless they have a very good reason otherwise. For instance, if the house has no furnace and there's a higher FHA offer, then it will not be accepted because they already know the financing will not qualify.

Two completely identical offers, one cash and one hard money .. yes cash is superior.  However, if the hard money offer is even a little more, it will likely be accepted over cash.

@Phil Z. To an owner of a house (bank or private) the offer is cash. You don't specify when buying a house if it is hard money, you put it down as a cash offer. If proof of funds are required, your HML should provide you with a statement for that.

@William Ackiss You are able to use the hard money to help with the purchase. I don't know if it will give you too much of a leg up other than it will be a cash offer. REOs don't typically close quick even if you have a cash offer. The quickest I have ever been able to do with cash is 21 days. The banks aren't quick.

are you talking about bidding at the court house steps on a sherrif sale or post foreclsoure OREO purchases from a lender ?  huge difference..  99% of the time you need cash at court house.

Post sale any type of approved financing works.

Banks care if you are trying to finance your purchase. It's all cash to them, all the time, always but, it's when they get their cash, and what hoops they have to jump through to get their cash that matter more. FHA and VA financing are not the bank's favorite avenues for cash because of multiple factors but primarily because, VA won't allow the buyer to pay for a lot of closing costs and for VA and FHA, they want that property in turn key condition. Banks want to sell as is.

If you are trying to buy foreclosures or REO's, great. Hard Money or cash from you makes no difference to the bank.

Originally posted by @Ryan Blake :

@Phil Z. To an owner of a house (bank or private) the offer is cash. You don't specify when buying a house if it is hard money, you put it down as a cash offer. If proof of funds are required, your HML should provide you with a statement for that.

@William Ackiss You are able to use the hard money to help with the purchase. I don't know if it will give you too much of a leg up other than it will be a cash offer. REOs don't typically close quick even if you have a cash offer. The quickest I have ever been able to do with cash is 21 days. The banks aren't quick.

Hard Money offers should not be written up as Cash.   Hard Money is a type of financing.  However, you don't have to include a mortgage contingency, but you should be truthful that a lender needs to approve the loan, which often includes a required appraisal.

Hard Money proof of funds is a Loan Pre-Approval Letter.   Cash proof of funds is a bank statement.