Need help with REO deal

Your BIO is not filled out so I do not know what state you are in.
Can you use a title company to close or just an attorney?

1. This is not or should not be a hard money loan. This should be transactional funding. Flash cash so to speak. With a cost of no more than 2%.

2. Do you have REAL cash buyers on your list?

3. Is this a deal for your buyer? What is the ARV? What are the rehab/remodel
costs?

4. Do you know what a "Dry double close" is?

5. Does the lender or their agent have any idea that you are flipping this property?

6. Do you have your own investor friendly title company and attorney on your team?

7. When signing a contract on a REO the "clock" does not start until the lender signs and returns the contract.

I work with a company that approves transactional funding on the spot and can transfer money within three days. Of course you must have a real buyer in place. Check out the presentation below.

Finally, image a pilot, doctor or even a MacDonald's employee learning their business in 3 days! You are on the right track by taking action!! This is how your will truly learn the business.

Michael Mangham
Mentoring/Team Building Nationwide
MD Home Acquisitions LLC

Michael, Thanks for your reply, my statement of “hard Money” was misstated and should have been stated as Transactional funding, you are correct.

I do have what I believe to be , as per phone conversations with, for what that’s worth, a list of about 15 cash buyers doing rehabs that vary in amounts from 15k to 60k and beyond. I don’t really know how to qualify them any further except to place a deal in front of them and see how it goes. I do know they are active in the market I am in, via deals posted and exchanged through an REI portal I use in the area.

Our two deals we are working are both REOs.
A quick look at the numbers is as follows on one deal

$84,300
ARV: $190,176
Rehab est.:$50,000
$55,000 profit potential

Our agent knows we are working on the double close, we have spoken to and are comfortable working with the tile company our agent has in place, as they are well versed in the double close.

I don't know what a dry double close is. This is the first time I have ever heard the term, and if it is something I should know and understand can you point me in the right direction.

First of you have forgotten closing costs, commissions, utilities, taxes, insurance and any money costs in you profit projections. What you listed is Gross profit. Always go by NET profit.

These are average and can be negotiated, Based on your $190,176 ARV

Commissions 6% =$11410.56
Closing costs 3% = $5705.25
Taxes = ? Say $500
Utilities based on a 3 month hold = $250
Insurance $ = $1000
Money costs to your buyer ????
Any cost overruns or buyer concessions???

$18865.81 In selling, holding costs plus any money costs. I usually just figure all of the costs at 10% plus money costs.

So your buyer/investor sees this:
Sell it for $190,176
Selling holding costs= $19,000
Rehab costs= $50,000
Buy it for $ 84,300
You fee?? = $7500

$29,376 NET profit to your buyer. This is a good deal. Around 20% ROI. Minus any money costs your buyer may have or concessions or selling price reductions.

The dry double closing is when you use your buyers money to fund the a to b. You close the b to c first, then the buyers money funds the a to b, minus your fee of course! No money costs when done right.

Michael Mangham
Mentoring/Team Building Nationwide
MD Home Acquisitions LLC

But, as usual Tina comes in and will ad to this:
Don't forget, you can lock this up and do this, then use the TF if needed:

•Get the 14 days Due Diligence agreed to. At least 10 days.
•The clock doesn't start until return the executed contact to you (as MM said).
• NOW, put the basics together on the property and send to EACH of your 15 buyers at your negotiated price + your fee ($3,000 - $7,500)--
• tell each one you are giving them 1st crack and you need an answer in 24 hrs.
• ALSO put it out on the net-- postlets, CL whatever you like-- as a CASH deal
• whomever gets back to you first, get a signed side agreement with them

Here's what I do on REO's:
• my buyers fund directly to escrow / title as a third party, escrow closes
• I Quit Claim the deed to them using an exemption for the Recorder's Office to "recognize true ownership" with me as the AGENT for the buyer and the Buyer as the Principal. Check with your local County Auditor for what will work in your area. You can also have a letter presented to escrow from your buyer that requests the QC Deed be done through escrow within say, 48 hrs of closing
• No TF
• No double closing
I've done numerous deals this way.

Hope this helps!
Tina

Wow thats some good info. Im was just looking to try to lock a property at .65 arv then try to assign for around 5,000.

I really want to thank both Tina and Michael for the words of wisdon. I hope I am smart enough to figure this out. I know I am really, but some days its hard to find the diamonds for all the broken glass I feel I have been walking through

Tina,

Thank you for your posts as well as Michael. I have have a question reguarding your method to dry close. Would you mind explaining a little further the quit claim process between you and your buyers.

You have the contract in your name or company name. You also have another contract with your buyer to purchase the property at a higher price this is your finders fee? or are you doing it outside of closing, therefore your buyer is buying it at the exact price you have it under contract?

Second the buyer brings his money to escrow, you use his money to purchase the property and put the title in your name. Then you just quit claim deed the property to your buyer? Am I missing something? Do you have the buyer put a lien on the property so his money is still secure?

I am very interested and love following your posts. I as well turn a lot of DG students to follow you as well, since you have found the way through the fog.

I agree N3Q

Thanks

Mike Kessler
Advisor

Hello Mike,

Thank you for the referrals and the kind words. I know I've explained this a few times on the site, though I'm not too good at bookmarking and storing links, so here goes.

First of all, you're right and not missing anything.

(I'll use "him" throughout-- no offense, ladies!)

The Short version:
A. Lock it up
B. Wholesale to a buyer, have buyer fund it
C. Get paid
D. Transfer the deed

Details:
1. I lock up the deal, as normal, in my LLC

2. Negotiate the deal and my fee

3. Draft a simple Transaction Agreement (TA)

4. Sometimes I get my fee and Earnest Money Deposit (EMD) reimbursement up front, upon executing the TA. On other deals I get my fee when I turn over the keys, or record the QC. In either case I submit an invoice to get paid.

5. In all cases the buyer funds the deal. Some wire directly to escrow, some prefer to send the funds, my fee and the EMD reimbursement to my account and I fund.
- This may seem odd to many of you, but I've found it a very friendly, easy world with true investors. There is one gent not comfortable with doing the third party wire or funding to my account-- in his case we draft a letter from him to escrow instructing escrow to do the Quit Claim within 24 hrs of closing, and with that letter in place, he does the 3rd party fund. The TA outlines all this and protects the buyer to the extent that if I get hit by a bus, my partner in the LLC will conclude the deal, and vice versa.

6. Using a simple Agent/ Principal Agreement I go to the County Recorder with a Quit Claim Deed and an Exemption Declaration Form and file-- no State Transfer Tax-- $17

7. It might be a little unorthodox, but it's worked a few dozen times with super pro investors and new investors a like. Check with your County Auditor, THEN tell your Realtor and let your Agent handle Title.

Hope this helps.