Advice: Can a likely REO be up for Wholesale?

You will see many houses like the home you described. When the property has that info in the window, it means the bank is doing its due diligence on the house. The due diligence period can sometimes take up to a year, depending on the bank and the market. If there is a large amount of foreclosures in your area, they may take a long time to put them on the market. They do that so the market isn't severely damaged by the lower priced sales. It will eventually be listed.
You can contact the agent on the sign in the window to let them know of your interest. But until the bank is ready, you probably won't be able to make an offer on it.
When it does become available, you can offer on it at that time. If you have kept in contact with the agent on the sign, he/she will likely call you.
One thing to remember, you cannot assign REO's and most short sales. You will have to double close it, or create an LLC with your end buyer and sell them your interest in the LLC for your assignment fee. I have heard of using a land trust to accomplish the same thing as the LLC, but I have little knowledge of how they work.
It sounds like there is some good opportunities in your area. Keep looking for properties, start making offers and get your buyers list put together (most important).
Good luck,
Jim

Carol Stinson has a step by step of doing land trusts. Great information to have!

Hope I'm not mixing you up, but just to try to glean through your post properly, you are saying the property I have described is still being examined by the bank that foreclosed on it? If so, that would keep me from moving on it, correct?

What's more, the strategy I suggested originally would not work? From what I gather, you say I couldn't lock up the property and pass it along to another investor for a property of this type. I have a vague recollection at the moment on the "Double Close" (I think it was called a "simultaneous close" in my book, which I believe I was originally suggesting from the beginning and may have misinterpreted in the original post), and the LLC strategy you mentioned seems a little foreign to me, so would you mind elaborating a little more for me, please? Again, I am looking to do two things: move quickly to profit quickly, and avoid making any mistakes. Any more concise advice you could offer might help me meet those ends.

Forgive me, I'm new here...who is Carol Stinson and where might I go to see what you are suggesting?

Contact a local RE attorney or ask around at your local REI club. This is a very well known strategy and has been practiced for years by savvy REIs.
Land trust or LLC. Get the property under contract in the name of a trust or LLC and sell that entity! No rocket science needed here!

Michael

I believe I had the same basic idea in mind when I wrote the original post here, so I'm confident I may already have the right idea...your contribution to the thread may validate what I'd already had in mind, sir, so thank you.

Just for good measure, I will share the information I have gathered on the property so far, and I will let you all chime in to see if I have the right idea, or if I may be missing a critical step in the process (or if I could skip a step that is unnecessary). Remember three things: This would be deal number one for me so I have the knowledge but no experience to speak of, I've little money and weak credit due to my time in college, and I am looking to profit as swiftly as possible -- hopefully well within the course of the next couple of weeks. OK -- here's the deal:

1. Earlier today, I reviewed some of the cell phone pictures I took of the REO in question -- in response to the first replier, I recalled that the foreclosed property has a "FOR SALE" sign on the door, so I assume the realtors have already done their due diligence and the property is ready to move.

2. Apart from the security barricades put up around the doors and windows, my cursory glance at the property could find no real flaws and the house looks pretty good from the outside. One glaring negative factor (in my opinion) was the fact that the home had no back door or back porch -- a potential bargaining factor to get the price cut down some.

3. I've made contact with a family member who works as a contractor this morning, who will attempt to get me in touch with a home inspector and/or appraiser to hopefully accompany me on the eventual walkthrough of the inside -- perhaps their trained eye could strengthen my bargaining position more if they notice something.

The general plan I have for this property is to lock the deal up on a contract; seeing as I have virtually no money to buy the property itself, I would open a fairly wide window to close on the property and request the assignment clause in the deal. From there, I would hunt down potential buyers, hopefully reaching one willing to accept the property for a finder's fee. Again, there are three good opportunities on this block -- I've just selected the most promising of the three that would need minimal repair to pass along and would likely be enticing to other investors.

But going back to Michael for a moment -- I seem to have been on the right track with what you suggested, and I hope I was. I recently found a card for an attorney so perhaps I should get in touch with him and ask if he specializes in real estate and call provide some help. The REI club is something I'm just learning tonight -- I'll try to see if there is one near me in the Chicagoland area, hopefully.

Please, people -- if I am wrong about any of this, let me know. If you think I'm looking okay so far, let me know. If you have good tips, anecdotes, or advice for me, let me know. I will keep my eyes on this thread to stay informed before I move, but I don't want to wait too long. More than that, I don't want to screw this up.

Thanks again, Michael -- appreciate your input

I would call the agent on the sign to see if it is listed. That sign on the door is like a prevue. They put those little signs on the door or front window on just about all REO's. As I said above, that little sign could be on the house for a long time before they actually list it.
You will not be able to assign an REO. In twenty years, I have never been able to get that removed.
As far as getting them to come down on their price because of needed repairs, the banks usually don't care. They have done their due diligence and have priced the repairs into the price. Having said that. Sometimes, if the house has been on the market for a long time, they may be more negotiable. This is more applicable to banks.
Government entities are less likely to move much on their prices. I've found the sweet spot for HUD properties is about an 8% reduction off listed price. On occasion they will go lower. HUD is probably the most negotiable. Freddie Mac will work with you a little. Fannie Mae will typically not budge. It's their way or the highway.
After your inspection, if you find major issues, you can try to renegotiate. But as I said, it is difficult to get them to change their price or their contract terms. I think I've been able to make that work a couple of times and I've been involved in the purchase of hundreds of REO's.

Hope this helps.
Good luck,
Jim

amadoninvestments - as Jim pointed out above, you won't be able to add an assignment clause. In general, it will be their contract you have to sign, it will specifically state the contract is not assignable, and any alteration to the contract will make it void. You'll probably have to go the LLC route as mentioned above.

One other key point and probably the most important, make sure the numbers work. You need to get the property at a substantial discount. Of course, that's the opposite of what the bank wants.

Good luck!

- Tom

A bit disappointing, but that's why I am here. Being that I am trying to get deal #1 under my belt and out of the way quickly, these are the very pitfalls I am trying to avoid. Still a bit down that my original plan can't work, giving me a little less time to devise a new strategy.

That being said, I've done some research and found a few local REI clubs, as was suggested by user michaelmangham. I suppose it may be the only option I have now, so I will try shooting them an email and see what comes of it.

Anything I should know about the LLC path? Again, hadn't planned on that path and will need to refer back to the material for a refresher, but in the short term, what would an LLC encompass in a nutshell? Who would need to be involved? How fast (or slow) is the process?

Explain this as simply as you could for me, please...

Also, I am a bit at a loss as to where I should look to find good real estate attorneys in my area -- are there any good resources to find them that I may be overlooking? Perhaps a website, or a section of the newspaper?

Again, I appreciate any input.

Hello everyone -- seeing that the REO strategy I had hoped to use would not be feasible at this time, I have opted to abandon it for the time being and seek out another path forward. Again, my window of opportunity is shrinking since my personal deadline is creeping closer.

Luckily, I went out through the neighborhood again this morning and found three other properties, seemingly more fruitful than the previous three I had mentioned before. One of which was a rehabbed property that was literally behind my back the whole time, and another was a two-level home that is in pretty great shape.

I'm beginning to wonder if my original plan to assign properties would work better with one of these two homes rather than the REO I first came here about? What do YOU all think? Could it work this way for one or both of these homes in my area, or am I missing the forest for the trees again? Please advise...thanks

I hope I haven't annoyed everyone...no new advice in a few days from anyone.

Anyway, as I stated above, I'm going to move off the REO to another property I found near the area. I believe I may have found another investor in my area and will likely have to partner w/ him and cash out on it fast, as suggested by michaelmangham.

Is there anything I need to know before I go in on this? For instance, one of my earlier messages stated how I've had some trouble seeking out a RE attorney, so I may have to draft my own contract for the potential partnership and get it notarized since I haven't been able to find an attorney to draft one. Ill-advised? Best I could hope for? Also, anything special I need to know in "selling the entity" or just basically go by the honor system?

The other investor, while only having been involved in RE for--in his words--a few months, has apparent connections to a mentor in an REI club that he will get me in touch with tomorrow morning. I already have questions drafted for the mentor and will likely broker a three-way partnership to make this move as quickly as possible.

Again, it seems to be the best way forward at this time, so I would really appreciate some last-minute input and advice from any of you before I move forward. If I don't hear from anyone again, I can only hope that your silence would indicate I'm on a good path right now, because I am not so sure.

Thanks

as again you can use the LLC or the Land Trust! Carol Stinson is on the Insiders Elite site that one pays to join, however, you can join for under $30 a month by clicking on the link from the homepage.

One problem that you might come across on already rehabbed projects is that there is not enough profit to be made wholesaling since someone has already bought the house at a low price and wants to make a nice profit from all they have put into it.

The best source is private homeowners so using bandit signs is a great way to find these. Best wishes!

amadoninvestments - Tammy's comments above are spot on! Working with motivated FSBO's is the easiest way to go.

Don't take the lack of responses as anything bad; at least for me I don't log on every day. The site is for asking questions and learning, so ask away if you have more questions!

- Tom

Thanks to femailceo and TDSPropertiesVT -- I recall a couple properties that were "For Sale By Owner" or at least seemed not to be up through a realtor. Will visit those properties as soon as I can and review the options there.

So far, my greatest issue thus far (apart from the aforementioned startup capital and credit weakness) is finding an investor in my area fast enough; I've had some migraines in trying to reach one investor through one of his apprentices, and many of the Chicagoland REI clubs are insanely far from the city itself, presenting me with some logistical issues in reaching them. If anyone has any resources for finding investors I may be overlooking (Yellow Pages, magazine publications, etc.), feel free to share, folks. Also hoping to get a reply from an RE investor just over the state line in Michigan -- got a good feeling about her, but nonetheless wondering if crossing the state line to find a potential investor is a good idea or not...

On another note, I finally got a callback from one of the realtors on one of my local properties and thinking if there are any subtle differences in attempting a simultaneous close through a realtor as opposed to negotiating directly with the buyer. The property in question is going for over $100K, and needless to say it got me salivating a little. Again, just consulting with all of you to avoid potential pitfalls I may not be seeing...

Hope to hear back from someone about any of these matters soon -- Thanks

No reason to worry about buyer over the state line. Buyers can be found in a multitude of places, but I think getting to a local REI club is your best bet. Try the following link to find buyers. http://www.deangraziosi.com/real-estate-forums/marketing-buyers-and-sell...

negotiating with the seller directly is the best way to go as you can determine all the terms etc together.

Hope this helps; best wishes!

Thanks very much, femailceo; this list may be useful. Still having trouble finding prospective buyers in my area (actually heard back from the out-of-state investor yesterday evening), but at least I can keep pressing. Hope the effort pays off quickly. Of course, I'm not beneath accepting proposals from anyone on this forum from the Chicagoland area... 'til then, the search continues.

Thanks again, femailceo -- very nice of you to give what little help you can

Going to the FSBO properties to collect info soon -- I wanted to ask a question about the matter of contracts...

I've been on the hunt for an RE attorney; I've sent out some correspondence, but haven't heard back by now, which means I will likely have to draft my own contract and just get it notarized, then protect the contract until I sign it off to a new buyer.

Would this be workable? Should I ask if the owner themselves have a document prepared from their end (in the event they have the means to do it)? Is there a contract template I should follow, or maybe even a draft of one I could download and print from here that I don't know about? Again, trying to avoid any pitfalls I may not be seeing, because I don't want to create a document that can't hold water legally or is amateurishly drafted so that a legally-binding assignment can't occur (or a potential buyer won't respect the terms and give me my cut).

Maybe I'm just being overly worried about the little details, but I don't want to screw this up my first time out. Any helpful advice would be appreciated.

If you do any deals that are not FSBO then you will probably be using a standard state contract. Here in Arkansas they are numbered contracts, but I don't believe that is the case most places. I would ask your realtor for a state approved contract. In any case, when you work with a realtor they will have one to sign, so no problem there.

As far as FSBO you could use the one on this site, and then the title company that you close at would make sure that everything is legal eagle. You could also use an attorney to look at a contract for you in this way you stay compliant with your state laws. As far as having an owner provide one I personally think this would make you look as you are not very professional or knowledgeable, so I would skip that route. Best wishes.

Recently checked out the FSBO -- come to find it is a split-level home (one building, split in half betwixt two owners, one of which is selling). Not what I anticipated, but there may be a buyer for it, so I may still give them a call. Unless anyone could give me a reason not to.

The other FSBO I will have to examine later, but I got lucky and found a bunch more properties up for sale. Of course, my issue is finding buyers at this stage, not properties. I'll keep it up and await anyone's input on anything I've already stated about.

Thanks in advance

I assumed as much about dealing with a realtor, that they would have a contract prepared upon the reaching of an agreement. Found a good number of properties today being sold through a realtor, so that seems like less of a problem knowing that now. The only thing I have doubts on is the assignment strategy for a simultaneous close (being that I can't close on these properties of my own accord w/o a partner of some sort), but I may have to weigh that out later. May have to save those deals for later.

Just discovered the "Forms and Docs" section, so I will take a look at this page (thanks for alerting me to its existence, femailceo) and see how they hold up here in IL. I'll keep up the hunt for an attorney as well--I know I'll need one, but many of the ones I'm aware of deal in personal injury as opposed to RE. And yes, I never trusted the notion of allowing the buyer to draft the contract and was inclined to skip it anyway; your advice really just cemented my premonition. Will do more property hunting, including the other FSBO in my area, first thing tomorrow.

Thank everyone for being so patient w/ me. It's important I get this right, and I am absorbing every bit of insight you are sharing here. Thank you.

Just got back from my sojourn minutes ago -- found a few more properties before I got to the FSBO I mentioned earlier, and I have a pretty good feeling right now.

The FSBO I visited was a ranch home up for sale for well over $250K -- I will definitely be in touch with the seller soon. Not only that, by dumb luck, I saw a second FSBO literally right around the corner from the ranch home; no price was posted, but one could assume that I might go for a similar amount.

Now locking up the deals and passing them along via assignment seems very much possible Hope I get it right in the upcoming days

Again, I welcome anyone's insight in the meantime. I may hold off on making the calls until tomorrow, giving myself time to approach this carefully.

Just got off the phone minutes ago with one of the two owners of the FSBOs -- he tells me he'd had trouble moving the property (it had been downgraded from over $200K to its current $180K), and he is currently renting the property out to recoup.

The owner of the other FSBO (the one going for nearly $260K) has yet to respond to my messages. Still awaiting reply after leaving a new voicemail today.

Gonna see what opportunity lies on the third FSBO (the split-level property), if any.

But yeah, I'm back to where I started. Had hoped to meet a personal deadline this month and failed. Still willing to get to that first deal, but nonetheless stung by recent events. I suppose my next step will have to be growing a potential buyer's list, a process I started earlier today. Wish me luck.

At first glance, it may be easier to go through short sales and auctions to find that foreclosed home you want. In many cases, it is, especially if you have been in the game long enough. Anyone who prefers to take low-risk investments may want to explore the option of buying bank-owned homes.

Bank-owned properties are almost always properties that for one reason or another, failed to sell at auction. This means that the bank was the highest bidder and it reverts to the bank. This means that the bank is in charge of upkeep and other maintenance, making it a huge liability and an additional financial burden.

Buying Bank

By going online or directly to the bank, you can find a listing of any REO properties currently up for sale. Contacting the loss mitigation department usually does the trick, since it often has the listings.

Buying bank-owned property can be a little tedious, since tons of paperwork may be required by the lender before you even get to put in a bid. There is a hidden advantage in this that allows you to negotiate prices and even fees or closing costs. You can negotiate for big discounts, especially if the property has been difficult to turn over or has not moved in years. A smart investor knows how to turn this to his favor.

In many cases the bank is very eager to get rid of the property and can offer you prices well below market value, as well as some interesting low financing offers if you happen to need a little to finance the home or its repairs. The bank here is in a position where it wants to get rid of liability. The amount of foreclosures in previous years means that many banks have a huge listing of homes, increasing their liability and loss.

You also do not have to publicly compete for the property. Auction bids can drive up your price, especially if you come up against someone who wants the property as much as you do. Many investors contact the lender with a specific property in mind. The bigger the listings, the less competition you have to face.

Another advantage is that many of the hidden costs you may have to face when buying foreclosed homes in another way are already solved. Many REO homes are lien, judgment or tax-free, since the bank has already taken possession of property. This means you do not have to pay additional fees on the home, the way you might do for other forms of sales.

The final advantage to buying REO is this: You never need to evict or deal with the previous owner. There will be no emotional scenes because the bank has already gone through the eviction process. All you have to do is buy and move in.

Just a warning: Many repossessed homes come “as is.” This means that the bank can sell them even if they are in dire need of repair or in bad condition. Before settling, make sure your contract includes an inspection and conditions that hold the bank liable for repairs or inconsistencies. Many banks provide a document with inspection results, but these can be dated as far back as five years. athomson

Your tips could prove useful later, sir -- I had to revise my strategy lately and take a stab at a couple of wholesales. Unfortunately, I didn't meet my personal deadline, but I will press on (don't really have a choice) regardless.

But yeah, there appears to be a few good REO opportunities in my area, and your advice seems pretty straightforward. I'll be sure to refer back to them later when I am able to move on them.