Deposit money and REOS
Member since 2009 · 26 posts · 0 votes
When dealing with REOS, what are some ways a wholesaler can get around having to front deposit money on the offer to the bank before they assign the contract?
First banks won't allow assignments and second good luck trying to get banks to forgo the deposit.
and third, guru no money and no credit "secret strategies" are not going to work on REO properties.
Choose a differnt avenue to wholesale.
Mr_Investor
Lawton seems like a I'll take but won't give kind of guy, or you guys hurt his poor feelings and so he had to stick his tongue out.
I answered the assignment question on another post you will see it soon if you haven't already..
As for the upfront money thing I have had some success with just stating in the offer that I would deposit $ into escrow as ernest money within three business days after written acceptance is received.by me.
To bad in order to post I had to give "Lawton The Giver" the opportunity to read it and maybe benefit but that's life.
But Phil, you forgot about the hidden secret to place nothing down and just assign the contract on REO properties!
I've come to find that the no assignment clause can be worked around using a land trust. It involves buying the property through the trust.
The other option is to purchase the REO in a newly created LLC, and sell the LLC (with its single REO asset) to the end buyer.
As for getting around paying the deposit as the wholesaler, put a stipulation in the contract that the EM will be paid within 48 (or 72) hours of binding contract, and that gives you at least 2-3 days to find a buyer and have him put the deposit down (and much more time than that if you started marketing before you got the property under contract).
There are plenty of strategies to successfully wholesale REOs. Not worth the effort from my standpoint, but certainly there are people who do it very profitably.
I always state that my actual EMD will be deposited into escrow within 3 days of contract agreement, but that does not really give you as the wholesaler much time to find a buyer when you are new at this game.
I agree with J Scott that while there are strategies to make this happen with REO's, it is very difficult and not really worth the effort in many cases.
Well since we're in the Wholesaling Forum, I'm going to have to disagree, Will.
Wholesaling is selling discounted property to other investor's who are buying with cash or cash equivalent (hard money, commercial loans, & line's of credit). Commercial bankers don't typically care if its a new LLC or not and hard money lenders won't either. Now the investor having a long history and proven track record may be required, but each bank's requirements are different.
Now I wasn't selling an LLC, but I just sold a house to a new investor and the lender (the commercial department of a local bank) had no issue with the property being in his brand new company's name. Now, of course, he had to personally guarantee it anyway, and obviously its going to be based on his personal credit, but the point being that the bank had no issue with it being in a company name.
Ryan,
Perhpas in YOUR business model, wholesaling means selling only to cash money buyers or HM financed buyers, but that is not the ONLY way to wholesale properties. This topic was discussing how to wholesale REO's and there is not just one way or method to do it and most of us have agreed that wholesaling REO's is much more difficult and complex than dealing with an owner where you can buy sub2, short sale, etc and wholesale it.
Will,
You seem to focus on the issues of wholesaling that would be completely trumped by defining wholesaling in the normal model, or as you put it, MY model.
I find it interesting that you focus so much on those issues. I have a suggestion. If your model doesn't work, then maybe you should change it. See MY model works. In MY model, you don't have the issues that you spend so much time focused on. MY model comes from years of not only reading and learning about wholesaling but from DOING it.
I am curious how well your model is working for you. How many properties have you assigned to other investors in the last year or two or five? How many properties have you double closed to other investors? How many REO's have you done either of these strategies with?
I could be wrong, and I'll be the first to admit it if I am, but it seems to me that you like finding how the quarterback could have thrown the ball better or how the halfback could have cut harder, but I question how much time you've actual spent on the field in the game with wholesaling.
Ryan,
I don't intend on debating with you on this issue. My only point was that wholesling REO properties can be more difficult than other strategies. That is all.
I have also clearly stated in other wholesaling topics that "I am by no means a wholesaling expert"
With that said, I was only agreeing with J Scott that the original posters strategy may be too difficult for a starter.
We have also had a previous discussion on the definition of wholesaling. Some call it flipping, and I even refered to a deal that I sold to an end buyer which you then corrected my terminology and called it retailing.
That is all fine and thanks for the proper phrase education. Regardless, it is of very little importance what you choose to call it or how you or anyone else chooses to define "wholesaling"
Again, I have not closed many wholesale deals as I am not a wholesaler by trade. I am a buy and hold, I spec build, land development, and more. If I get a deal that I can wholesale, will I pass it up, of course not.
It is clear you have extensive expereince in this fields and that is a great benefit to all when you share it.
Hitting me up for my resume and claiming I am wrong for whatever reason does not help me or anyone else here.
I am not really clear on what you are attempting to prove to me.
I think wholesaling REO's is a pain I rather wholesale motivated seller homes than REO's.
For REO's I rather buy and hold or buy,rehab and sell.
And I agree with Will wholesaling REO's isn't a strategy I would start out. I would start out wholesaling properties still owned by motivated sellers.
Exactly my point. I was attempting to explain my opinion that wholesaling REO properties for someone new or even seasoned is much more difficult than working with homeowners who are desperate and my experience was called into play.
If we can get back on track with the topic, it is, how can you wholesale REO properties and avoid placing EMD funds.
The bottom line is that wholesaling REO's are different than a normal deal in two main ways:
1. Banks normally don't allow assignments, so YOU choosing the title agent is essential (i.e. one who will do double closings)
2. You will need to provide earnest money and proof of funds.
There are also alternative strategies (selling the LLC or land trust) which I have no experience in so I won't comment.
These two factors are not big enough factors, in my own experience, to deter new or experienced wholesalers from trying to wholesale REO's. That is unless you don't have earnest money and/or proof of funds. If you have earnest money and access to proof of funds then REO's can be a good option for a wholesaler.
Do they take significantly more time and effort? NO!!!
Do they take a small amount of more time and effort? YES!!!
But finding any wholesale deal takes a lot of time and effort, and throwing away a lucrative option because it may take you an extra hour of effort for each deal that actually goes through is down right stupid in my opinion.
My point in questioning your resume, Will, is that you are giving strong advice in something that you have no real experience in. People look at the number of posts under your name and presume that you know what you are talking about, but for this particular topic, you don't, and from what I've read, neither do you, Mr. Investor. Neither of you have much if any experience with wholesaling REO's or even normal deals and yet you both are trying to lead new wholesalers to the wrong conclusion.
My issue is really to protect new investors on the board who are taking your advice without a grain of salt. Not that you don't have a wealth of knowledge in different areas of real estate, but you seem to give a lot of wholesaling advice that goes against what many REAL wholesalers are DOING.
You don't ask a car salesman how to wire a house. You ask an electrician. If you're a car salesman and you find yourself giving electrical advice that goes against what an electrician is saying, you should probably rethink your advice or at least preface your advice with "I don't really know what I'm talking about but I've read/heard somewhere that . . .".
2. You will need to provide earnest money and proof of funds.
Stop busting my balls and just post your experience on the subject. If you don't agree with me fine, post your side. Don't attack my credibility or level of experience. Believe me, it reflects more poorly on you than it does on me.
This to me is someone giving strong advice not to do something. Obviously, the fact that assigning REO's with no earnest money is just about impossible was already adequately addressed, but the comment that I quoted above was in general reference to wholesaling REO's.
My statement about you not knowing what you are talking about is based on your and Mr. Investor's statements in this topic that REO's are much more difficult to wholesale and are not worth it. Mr. Investor even advised that as a new investor he wouldn't start out with REO's.
But as I pointed out there are only TWO minor differences in wholesaling an REO and a normal house, and those two differences are not significant enough to pass up a very viable and cheap way to find deals for any new investor.
Now that combined with your UNDYING preoccupation with traditional financing issues in wholesaling, just really seals it for me in questioning your understanding of wholesaling. You don't seem to get the whole CASH buyer model of wholesaling, and you are not very open to the idea that YOUR model of wholesaling is not the traditional model of wholesaling. I've never seen or heard of ANY wholesaling guru teaching to sell to buyers using traditional financing. It just doesn't make sense for very obvious reasons that you consistently point out, and yet you still don't shift your ideas about it.
And letting the truth be told, whether you like it or not, what the guru's say about wholesaling is 98% accurate. You don't need much if any starting capital. You don't need good credit. You don't need financing capabilities, and you can do it with no risk.
Now, yes, with REO's, specifically, you do need earnest money and proof of funds, but I have never heard a guru say that you could get into an REO with no money out of pocket and assign it.
And frankly, Will, I love busting your balls, and I'm not sure if I can stop myself from the continuous temptation.
Wow thanks for dragging me into this.
Hey Ryan before running off at the mouth let me tell you that me and Will have what we humans call OPINIONS which like aholes everyone has one.
Notice in my statement that "I" AND "I" wouldn't start off whoesaling REO's and "I" would only buy REO's for buy and holds or buy,rehab and sell. It's my opinion and I'm entitled to it. Each and everyone in this fine community we call BP each have different opinions that is what makes this site so wonderful. Each and everyone that is here can take what we say with a grain of salt and make up their own minds. It's what makes this site #1 in my opinion and yes there is that word again OPINION golly gee.
Water's fine. Jump on in. :D
I just like to be extremely clear what your OPINION is based on. When your opinion is based on experience, then I think everyone can benefit. When its based on pure speculation then I think it can become destructive to other people's understanding if they don't understand that.
People come on here and get advice that can drastically alter their lives, and I deeply respect the responsibility we all have in communicating our OPINIONS in that environment. I understand that most people don't take that responsibility as seriously as I might, but I still feel part of my place in this fine community is that to the best of my understanding the knowledge that is communicated is held to the highest standards of accuracy and clarity.
So as you put it, Mr. Investor, we all have our opinions, and mine is that we should all be very careful in how we present those opinions to other people, so as not to cause another person to stumble on our imaginations.
So the investor can provide the earnest money and the POF, correct?
2. Where can I find info on deed restrictions?
The investor meaning you or your buyer? You as the wholesaler will provide the initial earnest money and pof, unless of course you got a buyer in that 2 or 3 day period of time where you delayed the earnest money. In that case you would be using the buyer's earnest money for your transaction with the bank.
You will still need proof of funds.
Fannie Mae is the only one I've seen do deed restrictions and you will get that info with the 5 thousand page addendum that you will have to sign if they take your offer.
I have many questions on this topic. Maybe one of you fine gentleman can enlighten me on several of them. Relatively new to being on the buyers or wholesalers side of things so please bare with me. Bird-dogging is primarily what I do.
1. Is the EMD refundable once made?
2. How much money for EMD do banks typically ask for?
3. If I don't find a buyer to assign or double close with what will happen?
[quoteRyan Weber]we all have our opinions, and mine is that we should all be very careful in how we present those opinions to other people, so as not to cause another person to stumble on our imaginations.
I just like to be extremely clearReally?!?