I’ve been in the REO wholesaling arena for several years now, and as a result, have received many emails from aspiring wholesalers who have questions about the process of flipping bank owned properties. Following are answers to some of the most frequently asked questions that I have received about REO wholesaling.
- Can I add “and or assigns” after my name on the purchase contract and then assign it to my end buyer?
No! The majority of the bank’s addenda will include verbiage that prohibits you from assigning your purchase contract. There are several ways around this, however, which I have detailed in a 5 part series that you can read here.
- Do I need an earnest money deposit when making an offer on an REO?
Yes! When making offers on REO properties, you will need an earnest money deposit to submit with your offer. $500-$1000 will usually suffice, although some of the banks will ask for more. Offering a large earnest money deposit is a great way to make your offer stand out, so if you have the funds available and you want to get the bank’s attention- offer a big deposit!
- Do you tell the listing agent that you are wholesaling the property?
I don’t recommend telling the listing agents that you plan on wholesaling the property once you have it under contract. Just make sure to honor the contract that you signed and get the deal to the closing table. It is not necessary to divulge the details of the second transaction to the listing agent.
- If I put an REO property under contract and can’t find a buyer, can I just back out using my inspection contingency?
Yes, you can do that, but it’s not something I recommend. If you sign your name on the contract, then you should be prepared to follow through whether your buyer backs out or not. If you make a habit of putting properties under contract and then backing out of them, you will develop a bad reputation with the REO agents in short order, and your offers will soon find their way to the round file.
- Once I have an REO under contract and am marketing it to end buyers, what should I say when they ask me if I own the property?
Tell them the truth- that you have the property under contract and will be purchasing it from the bank on the same day that you are selling it to them. There’s nothing wrong with what you are doing, so there’s no need to lie!
Hopefully this article finds it’s way to those of you who are interested in wholesaling REO properties. If you have further questions about the REO wholesaling process, feel free to post them in the comments section and I’d be happy to answer them for you!
Photo: Laura K. Gibbs