Rental Property Investor · Queen Creek, AZ · Member since 2013 · 368 posts · 191 votes
I am relatively new to wholesaling, my question to anyone is: is there a way to have any lenders fund the earnest money for an REO wholesale deal? If not is there any possible way to get the EMD without using my own funds
Basically if your credit is good, get a personal loan. Perhaps it is more practical just to use a loan from a friend family or associate.
However I have to ask, How big an EMD are we speaking about? If you can't afford a $1-2,000 Earnest Money Deposit then perhaps step number1 is to develop some savings.
Also if you are buying directly from owners and not listed properties, then you can offer a very small EMD, say $100. Good Luck - Ned
Basically if your credit is good, get a personal loan. Perhaps it is more practical just to use a loan from a friend family or associate.
However I have to ask, How big an EMD are we speaking about? If you can't afford a $1-2,000 Earnest Money Deposit then perhaps step number1 is to develop some savings.
Also if you are buying directly from owners and not listed properties, then you can offer a very small EMD, say $100. Good Luck - Ned
A 10% EM makes you look more serious, but isn't rquired. However, they will require evidence of either cash for the purchase price, or a strong preapproval letter.
If you're being asked for 10% EM, you're probably writing your offer as "cash". Unless you have a bank statement in your name showing you have the cash, don't do that. Get a preapproval letter from a lender and write your offers as financed. That's not as strong, but more realistic. You need a letter from a legitimate lender, too, not just something off the internet. Banks are wise to those.
Yup, as Jon mentioned, 10% will be required for a cash offer. If you make a financed offer, banks will generally accept as little as $500 or $1000 in earnest money.
J Scott Jon Holdman that seems very odd to me. Cash deals are more likely to close, especially on an REO because the condition may not qualify for financing. So why would a bank want a higher deposit for cash?
One more reason why banks are stupid in my opinion. - Ned
J Scott Jon Holdman that seems very odd to me. Cash deals are more likely to close, especially on an REO because the condition may not qualify for financing. So why would a bank want a higher deposit for cash?
One more reason why banks are stupid in my opinion. - Ned
It's the same reason I ask for higher earnest money when I sell to a cash buyer -- I know they have the cash and if they don't, they're not a real cash buyer anyway.
Well, I'm not a mind reader so I don't really know. I assume its because people have written cash offers when they didn't actually have any cash. Those deals fell through, so banks started pushing back. They figure, I think, that if you really have the cash, putting down 10% isn't an issue.
Banks have put in place a ton of steps to specifically thwart wholesalers. Banks hate wholesalers. They figure if there's money for a wholesaler, they should get that money. Whether that's right or not, IDK. But clearly banks have a big problem with wholesaling.
OK good point Jon Holdman and J Scott. I think the same way. If they have cash they can afford a higher deposit. If they balk at the higher deposit then maybe they don't have cash. So I guess I could have answered my own question. Thanks.
As to stupid, I'd say that the preceived problems are attempted to be Solved from the Top, Uniformally, to Protect Investor Deposits and it comes out on the street as STUPID. :)