Do you have the ability to close on the property you intend to wholesale? Putting a home under contract without the ability or intent to close, especially for those people about to lose their home to foreclosure, has very serious ramifications, legally and ethically.
Many states have strict laws meant to protect homeowners in the foreclosure process and the consequences for not following these laws to the letter are steep.
Working with sellers in pre foreclosure is a serious business. My recommendation is to find an investor or professional in your area that you can partner with until you're knowledgeable enough in this area to branch out on your own.
@Victor Zelada
Very general question; do you have any knowledge or experience in short sales? Wholesaling properties would require contracting these pre-foreclosures with the permission from the owner (homeowner retains ownership of the property until it is auctioned off), negotiating a purchase price directly with the bank (dependent upon liens) and then selling the contract you retained from the bank for the purchase of this property to another investor.
You will require a network of investors as these banks give you a time frame to close on this property at the price you negotiate (thus losing a deal after working months to get would be a major disappointment).
Experience in cost of construction is a plus; gives you better leverage when negotiating with the bank.
Short sale negotiators would be a major plus as they understand exactly what the homeowner is required to fill out and provide.
Most short sales tend to take 3-6 months to negotiate and contract.
@Bart Charkow no i dont have much knowledge on foreclosures and pre foreclosure property i would like to get more in depth about it but i would like to pick up as much information and knowledge as i can. I do appreciate the information and knowledge your providing because i dont just want to jump into something without knowing what to do.
Do you have the ability to close on the property you intend to wholesale? Putting a home under contract without the ability or intent to close, especially for those people about to lose their home to foreclosure, has very serious ramifications, legally and ethically.
Many states have strict laws meant to protect homeowners in the foreclosure process and the consequences for not following these laws to the letter are steep.
Working with sellers in pre foreclosure is a serious business. My recommendation is to find an investor or professional in your area that you can partner with until you're knowledgeable enough in this area to branch out on your own.
Find yourself an investor friendly title company or attorney that can do double-close deals. This could help you when you have the list of properties you retrieved in the bank.
If you are ever in Missouri, we teach free classes on foreclosures (and online REO sales)! Our Ohio and Texas teams also have events to learn.
I am in Missouri and the foreclosure process occurs very quickly (just over 60 days) since it is a non-judicial state. This makes it hard to have time to negotiate or even to buy a foreclosure in time before the auction occurs. *Judicial states have much longer times before the sale - a minimum of 90 days up to 2 years due to the courts involvement.
One idea for non-judicial states is to network with buyers and offer things such as -- "If you buy foreclosures and realize the rehab work is just too much for your team, I'd be happy to buy it!" And then wholesale the properties after they were purchased. It would allow investors a feeling of security to know they have a way out of an awful project and allow you a way to grab deals!
Plus many times if you buy a REO (bank owned property) or property through a short sale there is legal documentation in the sale contract that states that the buyer cannot assign the contract. So an assignment of a short sale or a bank owned is a not go - you could get it under contract in some sort of entity and then sell the entity for the assignment fee, but that's a lot more work that you may want to do.
On the other hand, getting short-term transactional funding to fund the deal so you can own it for a week or a couple of months will let you market the property however you see fit and if its vacant its' really easy to do a good cleaning on the property and then list it for sale in MLS - we do this with many of the houses we buy and sell it as a fixer-upper retail sale for about 20 to 30% more than we would get if we just assigned the property. Transactional funding can often mean the difference between a $10k assignment fee, more likely a $5k and a $20 to $30k profit if we buy it, clean it, and list it.
@Victor Zelada I agree with @Patrick Sweeting, you absolutely want to learn this entire process before you jump in and start putting preforeclosure properties under contract unless you have the funds to close on the property in the event you are unable to find a buyer in enough time. Also do your homework on the different ways to stop a foreclosure. If the seller applies for a loan modification, Dodd-Frank says that the bank must halt the foreclosure proceedings until that loan mod request is processed. It is not likely that they will be granted the loan mod but you may have bought yourself enough time to get the property under contract, title cleared and an end buyer located.
Preforeclosures can be a great deal source but you absolutely need to know what you are doing. Hope this helps!
you bring up a good point I did not see it that way, I have seen classes for 1,000 - 5,000 and that's the kind of money I don't have at the moment. where would you recommend I would be able to find information on wholesale with forclosures I don't know any professionals or investors around my area ?