Making Wholesale Offers on an REO, Knoxville, TN
Wholesaler · Knoxville, TN · Member since 2016 · 247 posts · 76 votes
Making Wholesale Offers on an REO, Knoxville, TN
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Mindy JensenPro Member
BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes@Benjamin Barredo , I don't wholesale. Everything I've ever read from people who do say that you cannot wholesale an REO. You would have to double close. Check into transactional funding - but make sure the property can be resold quickly. You don't want to discover a 90-day FHA resale restriction after you close on your end...
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- Real Estate Agent · Knoxville, TN · Member since 2016 · 27 posts · 12 votes9yIf you are getting these listings from an automatic alert from the MLS, these properties have most likely been listed with a service such as Hubzu and you will have to follow directions on bidding with your realtors help (some of these sights require a realtor to register to bid, some you can bid on yourself). Their are several companies that handle these but the bid is going directly to the bank thru them and ultimately must be approved by them. The banks use these services to get the most exposure and best return. Typically, they have their own purchase and sale agreements. It does have a few 'outs' or contingencies, but not as many as you might have on a typical PSA.
- 9yMindy JensenPro MemberBiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
@Benjamin Barredo , I don't wholesale. Everything I've ever read from people who do say that you cannot wholesale an REO. You would have to double close. Check into transactional funding - but make sure the property can be resold quickly. You don't want to discover a 90-day FHA resale restriction after you close on your end...
- Specialist · Pensacola, FL · Member since 2016 · 16 posts · 7 votes9yBenjamin Barredo most of the time you have to show proof of funds before they will even let you bid.
- Wholesaler · Knoxville, TN · Member since 2016 · 247 posts · 76 votes9y
Well, I can get proof of funds. Really, I feel like I'm at a stand still until I build my buyers list. My list of 12 buyers turned into a list of duds. I know that Davanna deal I had wasn't marvelous but damn it, it was a decent deal and any investor that had some experience could've made a decent penny on it or at least got a very cheap rental property at 60% of market (after repairs). But not a one of them moved on it. I feel like if I had at least 20 more buyers I would've sold it. Maybe not, but still, I need more buyers. I'm going to drop bandit signs all over town this weekend. I'll make them out of poster board and magic marker if I have to but I'm putting them up.
Sorry, went off on a tangit. Anyway, I can get proof of funds but I need more information from buyers (back to the bigger list). It seems like none of them want to be specific about what they're looking for but also no deal I throw at them seems to "fit" their "open" criteria.
Sorry again. Off topic.
I can get proof of funds but I won't make a move like that until I know I have serious investors with cash to buy. I don't want to get stuck with having to buy one of them. Still, I'm starting to lose my motivation with wholesaling. It's very frustrating and turning into a full time job that's costing me more than it's paying me. I really just want to come up with the money to buy my first rental investment so I can start BRRRR my way to early retirement.
- Real Estate Investor · Shelton, WA · Member since 2013 · 369 posts · 639 votes9y
@Benjamin Barredo If you have the proof of funds, then you have the funds. If you have the funds and its a deal, buy it. Once you buy it, clean it out, clean it up, and put it on the market at a "wholesale" price.
I figured out very quickly that practice of "assigning" contracts is for the most part..garbage. I asked myself, why in the hell am i doing all the leg work of finding and negotiating deals.. the absolute hardest part of flipping houses... for a measly $5k?? You might do a handful in a year, but is it really worth all that time and effort for what amounts to table scraps?
It's WAY more profitable to find those off market deals, buy them, clean them out .. the ole "lipstick on a pig" method..and then market them to whomever you want, and however you want.
No jerking around the sellers, no weasel clauses, no double closings, no deals blowing up at the closing table. - Wholesaler · Knoxville, TN · Member since 2016 · 247 posts · 76 votes9y
@Account Closed I know you're right. The problem is I don't have the capital for actually purchasing the deals myself. The proof of funds is a "shady" thing that after posting that I looked into and it's basically a fake proof of funds to get a deal. I had to do a little research into how it worked. There are websites that will provide the proof of funds but if the "wholesale" falls through then they take the deal and I lose it (they give the proof of funds based on the deal). It's garbage.
I am only wholesaling to get to the point where I can buy the deals legitimately and flip them, rehab and flip them, rehab and rent them, etc. I just need to come up with that initial bank roll to get a small SFR at 50% of market and then refi so I can get more. And more and more and more.
But yes, I completely agree with you. I am finding that Wholesaling is more of a job than I want it to be. I know that my first deal is just around the corner and I'm not going to give up on it but I at least know that this niche is not something I plan to do for the long term. It's a means to an end. Hell, in June I'll likely be able to get a HELOC on my new house and use that to enter the buy and hold (BRRRR niche) and then I'll be off to early retirement.
- Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes9y
You will need a relationship with a valid lender to get POF. Most will want to know the details before they agree to give you POF. I have a few buyers that are regular customers for my HML. I provide them POF but they have proven their experience and integrity. I would never give POF unless I was prepared to fund the deal. Every borrower has to have skin in the game so that I know they won't go into a bad deal, find out they screwed up, and walk leaving me with a mortgage and note and potentially a property that I cannot get my funds out of. Forget the shady guys offering POF. You don't want to work with dishonest people. If they are dishonest out of the gate. do you think you can trust them? It sounds like you need to start saving and enter into RE when you are properly prepared.
- Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes9y
BP just did a poll yesterday asking how landlords obtained their first property. It appeared nearly half paid cash and the other half turned their primary residence into a rental when they moved.
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes9y
The retirement I see ahead is in a jail cell, you'll be retired alright!
Unless you have the ability and intent to close as agreed stay away from trying to deal with banks!
All banks will have an addendum to a sale contract, in that I have not heard of one allowing you to assign a contract, many will add a 30, 60, 90 day hold restriction.
As Mindy suggested, you need transactional funding if there isn't a hold provision, or a lender that will carry you over the term required, good luck with that at 100%+ funding.
I agree with Lloyd, basically, learn real estate and you won't be spinning your wheels.
The FBI investigates bogus lenders, use them with a bank (or anyone) and they'll look at you too!
Providing false or misleading information to an insured lender is bank fraud, you do not have to be successful in obtaining funding or conducting any business with them, just an attempt is all that is needed.
Weasel clauses, is for those with the intent to deceive, bandit signs are for those willing to ignore laws at their whim to conduct business, neither are ethical and that pretty much sums up the integrity of wheeler-dealer wholesalers.
Calling leads "deals" and buying under market value, take Lloyd's advice, learn real estate. Good luck :)
- Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes9y
The guru garbage and all the frauds and scammers on BP are promoting unlicensed brokering by the minute. Most will fail. Those that deceive sellers, those that walk if they cannot close, and those that are successful in shaving off thousands of dollars and pushing the property on to a buyer thereby screwing the seller are as Bill Gully stated, a public nuisance. Follow the BP threads and you will see all the cheerleaders putting on their uniforms and promoting this garbage. Why do I not like unlicensed brokers? They skirt laws, play real estate agent without any oversight, etc. I have seen victims of these scammers. I have never met one of these frauds that would sign a contract that they try and deceive sellers with. One of these frauds even posted on BP how to make sure HIS buyers were legitimate. They truly are, at best, a public nuisance. Throw in the FACT that many operate illegally, and what does THAT tell you about their integrity? Most will do ANYTHING for a buck! I have no problem reporting them to the Florida regulators if they are violating the law. Many have an "entitlement" attitude that they can do as they please and break any laws they don't agree with. Many victims of these frauds learn the hard way. Any smart agent won't fall for the tricks and deception so common with these scammers. Neither will a bank. This is why SMART agents as well as banks ask for POF. When I ask someone for POF, I demand a bank statement in THEIR name.
- Broker · Logan, UT · Member since 2013 · 1k+ posts · 1k+ votes9y
It looks like there's quite a bit of frustration here. Rather than jumping down your throat, maybe some constructive advice might be helpful.
There are serious investors everywhere who will gladly pay for your efforts to bring them great deals. Everyone says if you find the deal, finding buyers is not a problem. But it sounds like you are not adequately exposing your deals to real buyers. First, if a buyer can't tell you what they want, they are not going to pay cash when it comes to crunch time. Second, in our REIA's, there are always great people who will work with you and make sure you get compensated for your efforts.
Starting with little to no money in this business is really hard. It sounds like you are paying your dues to get there through sweat. Keep at it. Perseverance is what creates success in this business.
So start going to your REIA's regularly and repeatedly. Make yourself known. Ask for help. Meet private lenders. And stay away from trying to wholesale REO's until you can close on your own. If you have a couple of deals under your belt through partnerships or straight wholesales, by the time your HELOC is available next summer, you will just be that much farther along.
If you brought me a deal in my market that was truly 60% of market after repairs, I would make sure you made some money on it.
Good luck!
- Wholesaler · Knoxville, TN · Member since 2016 · 247 posts · 76 votes9y
@John Thedford I am definitely going to use my first residence as a rental but obviously after just making my first mortgage payment, I'm not there yet. I should, however, be getting back a big tax return that should be enough to either partner with someone on a multifamily or have the down payment for a small single family. I think I got my wife almost bought into the idea. I asked her, would you rather have $4-$5 grand in 2 months or $10+ grand in 6 months to a year. She didn't answer but I saw the wheels turning. For $4 grand I could've bought the 2/1 I was trying to flip and cover a construction loan to do the repairs and refinance in 6 months with a minimum of $10 grand pulled back out of it. I definitely agree on the guru junk. I have had quite of few promises, paid for a few "secrets" and learned that it's the same advice I read on forums or things I've figured out on my own. I have the kind of personality that wants to see progress quickly but I have to keep reminding myself this is a long game.
@William Hochstedler Great advice. I know it's just around the corner. For one, I'm not dropping thousands of marketing letters a month so I'm not going to see the action of a few calls a week. I'm sending maybe a few hundred a month. That include my D4$. My new thing is researching expired MLS deals and seeing if they belong to a mom and pop. If so, I'm sending them letters too. I haven't even done my second round of mailers yet so I don't know why I get so frustrated. I'm still in the beginning stages being in just my third month. But yes, I know it's there. I'll definitely let all of you know when I get there too. Thanks.
- Oklahoma City, OK · Member since 2015 · 96 posts · 55 votes9y
You mentioned that you can't find good buyers... I agree with what most have said about the good deals... when you start to find really great deals, they will come.
However, I would say... if you really feel that the 12 or so buyers you found are duds.... think about how you found them. Have they said they are buyers or have you had an agent run a report on cash buyers in a certain neighborhood that you target? Have you brought your deals to your local REIA? Have you posted them on the BP Forums?
If you've done all of the above... what has the feedback been? Why no interest? Price too high, bad location, etc. Take what they tell you about the deals you are presenting and learn from it.
Ask actual buyers, not those that say they are buyers but bonafide buyers (with companies or names that are listed on the tax accessor's website so you know they have bought and are repeat buyers) about deals they have bought and ask why they bought them.
Take the out to lunch. Pick their brain. Ask them how they make decisions - do they use wholesalers or do they use other methods to acquire properties? If they use other wholesalers, take them out to lunch and try to learn from them.(sorry, it's lunchtime where I am and I guess I am starving..) Ask what they look for in properties and how they have been successful. What formulas they use, how much their markups are. Always try to be of value to people and they may be open to sharing their secret sauce.
Think about partnering with local investors that want access to more deals... maybe they can pay for marketing and you can close them. I don't know. Just get creative.
Good luck!
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