How to wholesale a REO property?

Question

Last year I started getting into Real Estate as a wholesaler. I wholesaled a few properties last year but this year I wanted to get into wholesaling REO properties. I contacted a Real Estate agent and he put me on his list of REO properties he sends to me on a daily basis.  I see alot of good properties on this list. Can anybody give me some solid advice on where to start when wholesaling REO properties? Some do's and don'ts. Thanks for you advice in advance.

Michael Noto · Answer

@Marcus Tanner If you do not plan on closing on the property and just plan on assigning the contract it will be very difficult (in most cases not possible) to wholesale REO properties.

Even if you plan to actually buy and close on the property, make sure to read the bank addendums.  Most have clauses that restrict the selling of the property for a certain amount of days.

Manolo D. · Answer

@Hadley Benoit Pretty sure banks have seen that as well, and if it does, it would have said in the fine print that owners must have held the company for 12 months or will not change share holders in 12 months, or something like that. That's a pretty easy fix loophole, I'm not a banker or underwriter, even I have thought about it. Second issue is, since the LLC is fresh and no assets, if I was the bank, I won't sell to someone that could not afford it, so you need a backing most likely personally and not from another entity. Or, just say I'll consider other easier offers that has less risk of defaulting.

Marcus Tanner · Answer

@Michael Noto Thanks again for the input. I greatly appreciate it. Sounds like I would have to make the call on a case by case basis depending on the bank I'm dealing with and what's stated in the addendum. Maybe having some Buyers in place that would be interested in the property would help.

@Hadley Benoit I heard about transfering the LLC ownership over to your Buyer.

Michael Noto · Answer

@Marcus Tanner Sure, transactional funding can help you close a deal, but what then?  How long of a term will the transactional funding company give you to pay them off?  Again, it gets back to the specific bank addendum for the properties you are considering.  They will likely have a restriction on how quick you can sell the property to a new owner once you take ownership.  This is something you want to have in line before putting wheels into motion.

@Hadley Benoit The issue I see with what you outlined is a different person will be signing at contract acceptance and closing.  Again, it gets back to the specific bank you are dealing with and their tolerances for this kind of activity.

Marcus Tanner · Answer

@Michael Noto Thanks for the advice. I have been watching a few videos and reading up on where investors are using Transactional Funding to close deals. Is it possible to use Transactional Funding with REOs?

How to wholesale a REO property?

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