Wholesaleing REO's

15 Replies

I am new and just starting out. Had a few ideas on getting started with REO's. One is to wholesale them. Does anyone have an experience with this? I have heard the secret with REO's is to keep making offer after offer.

Any advice is greatly appreciative.

I wholesaled a couple REO's. I had to double close on them since the banks normally do not allow assignments. I also did not have the bank pay for title insurance so I didn't have to disclose any title premium pass-throughs. Other than that wholesaling an REO is like wholesaling any other property.

can you give me an example of wholesaling a REO from beginning to end including prices?

My numbers won't be exact, but I had a bid accepted on a HUD REO for 23K. That day I got a contract to sell it from an investor for 28K. HUD specifies a certain title company and title agent. I contacted that agent and asked if she was okay with me double closing on the property. She said that was no problem. I specified that I did not want HUD to give me a title policy so no disclosure was required to the seller. When I closed 30 days later (HUD specifies when the closing will be) I signed papers buying it from HUD and selling it to my buyer, and the buyer came in a couple hours later and signed papers buying it. The next day, the title company gave me a check for the difference between what I owed from buying it and what I made from selling it.

How do you go about purchasing REO's from HUD? What's the step by step procedure for doing so?

A packet? I'm not sure what he's talking about, but you will need to find a realtor in your town that knows how to submit the offer to HUD. You have to have a realtor do it. I would suggest that you just use the realtor that lists them for HUD. You can find which ones are available through the hud.gov site. It's kind of hard to finally get to the website where they show the property in your area so it may take some diligence.

Did you ever offer a review on Susan Lassiter-Lyons course on REO's? I think it costs $95? I have purchased many courses, and I am a serious full-time investor, but I am cautious about buying now. What did you think?

@Joseph Ball , you are cautious about buying a $95 course or buying REO's? If you are trying to learn something in this business $95 is well worth even the smallest nugget you might pick up from the course. It may be junk but $95 is a good risk versus reward in my book. At the same time, I'd spend a couple hours surfing the REO's section here on BP. I would guess that you will receive far more information right here for free than in that course.

If your caution is with buying REO's, why? A deal is a deal. I don't care much where I get them from as long as they hit my numbers.

Ryan, did you need to come to your first closing with a 23k check to close?

Originally posted by Jeremy Mcdaniels:
Ryan, did you need to come to your first closing with a 23k check to close?

I'm sure Ryan will correct me if I'm wrong, but yes, he would have had to show up with $23K. That said, the money may have been his or it may have been borrowed -- there are some lenders (transactional lenders) who specialize in loaning money for double closing situations.

What about the commission to the HUD listing agent? That must eat into your bottom line right? What type of commissions are seen on HUD purchases?

Originally posted by Mike Nelson:
What about the commission to the HUD listing agent? That must eat into your bottom line right? What type of commissions are seen on HUD purchases?

Since the commission is paid by the seller, it does not eat into your bottom line (at least not directly - you might argue that the fact that a commission is being paid causes the seller to ask for that much more in the asking price).

Generally speaking, banks that are selling REOs are receiving numerous offers and so they have most of the leverage in the sale. The last REO we bought had 12 other offers on it.

The banks also are interested in moving the property off their books as quickly, easily, and cheaply as possible. That typically means they're looking for offers that:

* are all cash
* are AS-IS contracts
* have no other contingencies
* have a closing date that's sooner than later

Unfortunately, sometimes the banks put the property out on the market and get into a contract when the title is not quite marketable yet. When this happens, they'll ask for extension after extension until the issues -- like code violations, municipal or utility liens -- are cleaned up enough so they can close.

The banks are usually pretty slow at cleaning up title issues, compared to doing it yourself. We just bought 2 sets of triplexes, one via auction and the other via REO. They each had the same kinds of title issues -- we cleaned it up in 3 weeks, but the bank took 3 months to clear the same types of issues. This video explains exactly what happened with those two properties: http://www.youtube.com/watch?v=xx-zj6vxVOU&feature=g-upl

The moral of the story is... if you have a pretty flexible financial scenario set up for the REO deal, you'll be fine. If not, make a backup plan in case your closing gets delayed by weeks or even months.

Originally posted by J Scott:
Originally posted by @Jeremy M. :
Ryan, did you need to come to your first closing with a 23k check to close?

I'm sure Ryan will correct me if I'm wrong, but yes, he would have had to show up with $23K. That said, the money may have been his or it may have been borrowed -- there are some lenders (transactional lenders) who specialize in loaning money for double closing situations.

Jeremy Mcdaniels, no, I actually did not have to bring my own money. On some REO's when I've had to use different title agents I have had to fund it, but my title agent does not require me to bring my own funds on double closings.

@Mike Nelson , as @Steve Babiak shared, the seller pays the commission, and, yes, it could be argued that you are paying for it anyway. I have an agent who will sometimes cut her commission on HUD's so we can make our numbers work.

@Brandy Griffin is right on with her post.

Even though the asset managers working for the banks normally give non-contingent cash buyers a built-in inspection period in their disclosures and even though the asset managers couldn't close in 10 days even if their life depended on it, if your offer is a non-contingent cash offer with a quick closing it looks a lot better than someones who is not.

I've beat out many competitors even though my offer is cheaper because mine is stronger.

Originally posted by Ryan Webber:
I wholesaled a couple REO's. I had to double close on them since the banks normally do not allow assignments. I also did not have the bank pay for title insurance so I didn't have to disclose any title premium pass-throughs. Other than that wholesaling an REO is like wholesaling any other property.

Could you explain the benefits of non-disclosure of title premium passthroughs.

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