So, you hear a TON of hype about REO’s but you have no clue what they are? REO stands for “Real Estate Owned”. These are properties that go back to the mortgage company after an unsuccessful foreclosure auction. You also hear that many investors make a killing on REO properties. What you hear is very true!! There are some things you need to know about REOs before you get started.

First, is it possible to wholesale an REO? Absolutely, but be prepared for some twists and turns. First off, most banks will not allow you to assign REOs so you’ll have to make sure you have a buyer lined up.

Here are some tips from my sources mentioned below:

One way to get around this is to do a simultaneous close. A simultaneous close is when the closing between you and the bank and the closing between you and the end buyer take place at the same time. Both closings are funded with your buyer’s money so you don’t have to go to the table with any funds. You’ll have to shop around for a title company that will do this. Don’t get discouraged if you can’t find a title company that is pro creative real estate. This is another reason that networking is very important in this business. Ask around to some other wholesalers and see who they use.

You can also buy the property in an LLC or a land trust. You then sell that LLC to your buyer at closing for whatever your assignment fee would be. Steve Cook explains this in detail here: http://www.flippinghomes.com/articles/readarticle.aspx?artid=19

You can also use a hard money lender to borrow the funds to close the first transaction then close with your buyer on the same day. This is a double close. Check with your HML for fees and points. You’ll have to structure your deal around those to take in the extra costs.

Not only are these ways to wholesale REOs, you can also use these methods to wholesale any unassignable contract. It sounds complicated, but once you do deals like this a few times and get used to it, it's really not a biggie. 

References:

http://flipthiswholesaler.blogspot.com/2008/06/can-you-assign-reo.html

http://www.realestateabc.com/homeguide/reo.htm

http://www.flippinghomes.com/articles/readarticle.aspx?artid=19

Sorry guys!! I know I haven't been posting much, but I've been busy with Fast Cash Tip #1.

I know I’ve been going off of the wholesaling sequence lately, but there’s just so much to share with you! Real estate investing is such an exciting journey if you have a passion for it like I do! I’ll get back on track soon. In the meantime, here’s a HUGE tip. This is something that you can do in between wholesale deals…or while you’re marketing your wholesale deals to put some extra green in your bank account!

Instead of putting phantom deals on craigslist or where-have-you, why not market a real deal by helping out another wholesaler (with their permission, of course)? Not only will you be helping other wholesalers find buyers, you’ll be building your buyer’s list, gaining more experience, and putting a little bit of cash in your pocket. The general rule of thumb is that if you bring the buyer, you split the assignment. How to split it is something you’ll have to work out with the wholesaler that you’re marketing for.

Now, there are different ways to do this. You can do it just like I’ve explained or you could bump up the assignment 2-3k if there’s room. That way, they’re still getting their full assignment fee and you’re getting the difference between your marketing price and theirs.

One tip to make the process even easier:

When you find buyers, make sure that they can show proof of funds. That way you’re not wasting anyone’s time and you know that financing isn’t going to be a problem. There are numerous buyers out there that will have a serious interest in the property and then find out later that they can’t get financing.

Which brings me to another point. DO NOT stop marketing the property until you have a signed assignment agreement from a buyer. This applies to your own wholesale deals as well, of course. If you stop marketing at the first buyer who shows  interest, you may be wasting a lot of time if they don’t end up being the end buyer for your deal. Make it easier on yourself and the original homeowner (we don’t want to piss them off either) and make sure you bring qualified buyers.