Timing of a REO Purchase

5 Replies

My partners and I are going to be making some offers on some REO properties this week. Some of my partners have the bulk of their available funds tied up in a 401(k) right now. When paying cash, how long does the closing process take? Should they have their money out ASAP or do they have some breathing room?

@Adam Sechrist ,

Well, you'd need a bit more than a week, but better to get started on this:

Look into moving your retirement funds into self-directed accounts. You'll be able to invest your retirement funds into real estate deals rather than borrowing against them (you can only borrow up to 50% or $50K, which ever is less).

Seek out someone who can help you avoid the issues and maximize your flexibility and returns.

@Adam Sechrist  

I'm in the middle of my first REO flip project so I don't know if my situation was the norm or not but in my experience you have plenty of time. I made my initial offer on the REO property on March 22. There were multiple bidders so there was a series of "highest and best" requests from the bank's realtor. It seemed to take a week or more between each request for the bank to review the offers. When I finally did manage to close the deal it took several more weeks for the bank to get all of it's affairs in order. We didn't close until June 6th. About 11 weeks in total.

This was an all cash deal and two things were needed that could have blown the deal if we weren't prepared. 

First was proof of funds. For me this was an investment account that showed a balance higher than our offer. That money wasn't accessible overnight but it proved we had the means to make a cash offer.

Second was a 10% earnest money deposit within 3 days of acceptance of our offer.

@Adam Sechrist It will mostly depend on the bank holding the Asset and the Asset Manager. I've purchased several REO assets and the timeline and requirements have varied on each deal. My most recent REO which I got from a Bank of America portfolio closed very quickly. They wanted Highest and Best offers only by the given deadline date. Proof of funds at offering price, EMD was left to the submitter, I gave an EMD of 25% to show I was serious about this deal. We closed in 37 days from offer date

@Tom W. very good insight. Thanks!

@Ray Johnson interesting. Seems like it's not as quick as working directly with a person, but I suppose it's what we should expect when dealing directly with the bank. Thank you very much!

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