Bulk REOs - 12% on the dollar - Advice wanted

So I sent the guy who has these properties a non-compete, non-circumvent clause in order for him to provide more information on the properties. He has put me in touch with his partner. I haven't spoken to his partner yet because I'm not sure how to proceed. Does anyone have any recommendations? The price tag $200,000 doesn't intimidate me. I just am intimidated by the whole 18 "REO houses at once" thing!

Any bulk REO experts in the house?!
-Steve

This sounds like it could be a great deal. You may want to do your due diligence and review each house in the bundle. Determine the location, ARV of each home, the avergae cost for repairs per home and try to guess how long it would take to flip a few of the homes after there are repaired. You may end up only needing to update, fix and flip 5 to 6 homes to get all your money back and then the rest can be rentals, flips, etc. Just be sure of the condition of each home because repairs may vary from home to home. Good luck with this potential deal. Believe and Achieve! - Joe

Hey Joe,

Thank you for the note. I'm nervous because I've never bought an REO before. Is there anyone here that has experience with purchasing REO's or better yet a bulk / package REO?

A few questions I have.
1. What's the deal with these "intermediaries"? I know it's better to be working directly with the bank, but the deal is that I'm working with this guy now.

2. Is it possible to get financing when purchasing REO's Seems like purchasing from the lender that the lender would be happy to finance since they get the loan work right?

3. Or maybe financing is available for some of the homes? For example, could I go in and pay cash for some of the homes that I'd like to quickly flip so that I wouldn't have to contend with seasoning issues since there would be no mortgage on these properties?

Any help is appreciated. Any REO experts interested in partnering up? Thanks again Joe!

Hey Joe, A word to the wise. Make sure that the property belong to the lenders. Some people sell properties that do not belong to them. It is important that you hire a lawyer to make sure these are legit agreements. If all is well this will be a great opportunity for you. Another thing have you ever considered partnering with someone? Just looking out for a fellow family member. Good Luck.

Sandra

Hey Sandra,

Thank you for looking out for a family member. This forum has such a great community feel to it.

You said "Hey Joe" but I'm Steve but anyway...

Yes, absolutely I would like to partner with someone with more experience because there are many gaps in my knowledge. I don't have all the details to the property yet. They want pof and loi before they will release all the details.

Thanks again for your support and let me know if you're interested in partnering.

-Steve

Do your due diligence to have someone (or yourself) go and physically look through these properties they're handling. Definitely find out whether they're actually representing the lender. Don't want any surprises or to find out that you purchase a complete burn out property. Find out what liens or other encumbrances (if any) are on these properties. I wouldn't see why you couldn't obtain financing--or pay cash for "killer deals" for that matter--if there's a large amount of equity in them.

Joe has the right idea, Check out the homes if possible and make a list of repairs on each one and estimate the costs. make sure they come with clean titles ( no liens). If it is all legit then maybe use a HML to buy them and do repairs.Most HML'S will lend 65-85% of fmv and 100% of repair costs as long as it doesn't go over ARV.
depending on their value you can now sell off some and pay off the HML. The rest will be for you to decide what to do with.
hope that helps.
p.s. Where are you located that you can get that many homes for that price?

good luck
Richie.

Hey Richie,

The properties are in Alabama. I'm in the panhandle of Florida. Yeah seems kind of crazy to me too that the properties are so cheap. Thanks for the reply. Sorry for the stupid question but is there a quick and painless way to confirm clean title short of ordering full-fledged title searches. (I thought banks satisfied liens on their REO's. Is that not the case? At any rate, I agree, I need to do title searches.)

Thanks again guys. this forum is awesome.
-S

Good to know that u r not far from me and I am from Escambia and Santa Rosa counties. Good luck on your deals !!

Warm regards,

Paul T. La Moy

I have received offers similar to what you are looking at. As yet I have not pursued the foreclosures in this manner. Many of the "good" properties have been carved out. Banks sell large pools of properties similar to this. This type of property purchase is called a tape of properties. Carving out means to take a few properties out of the whole. The chance is that if you got to the heart of the properties you may find that there were actually 50 properties originally for sale. With all that said. The best thing to do is to do your due diligence.

That's to their determination whether they willing to pay off all or any liens the property might have. Primary mortgagor trumps all other mortgagors with the exception of delinquent taxes then the city or county (depending upon which the property is located in) becomes primary lien holder. Of course, you may know this already, concerning the latter part.

Before a bank can sell the property they take back as a mortgage regardless of what position they are in they must pay off all liens and encumbrances. Without these lien pay offs the property cannot get clear title and thus cannot be sold. Rest assured that the properties in REO status have cleared liens. This is one of the reasons banks will want to sell the property in pre-foreclosure because banks want to avoid the cost of paying the liens.

Two words for you buddy "Lien Check". I am not trying to scare you from the deal but I would cross scan a third of them to make sure the title is clear. Make sure the homes are really REO, and not a quick dump off for some one who is knee deep liens. I live in New Orleans so the type of deal you have is common here but the homes are always gutted. Your deal if legitimate, is as good as a black jack hand in which you have the ace of clubs and the queen of diamonds, it 's the reason we got into the business.

Have your own title company, view no less then 8 of them, do a ride along with a appraiser driving by the homes undetected, and lock up the deal in the morning. Deals like this never happen to me, so don’t let this be your fisherman tale of the one that got away.
TJ FROM THE 9TH Ward of New Orleans

You're wrong on this one pal; I approach one property (own by corporation) they refuse to pay $15k water lien owe to Atlanta Watershed Management Dept on a very cheap REO I could have gotten for under $5k if they had otherwise choose to pay the encumbrance on the title. I didn't have $15k so I didn't follow through with the deal. And if you've read the addendum paperwork carefully if they (Lender/Seller) don't cure the defeat on the title before the closing than responsibly falls on to the Buyer whether & if they will accept the title as is. I've attach an Addendum to Contract for Sale to show exactly what I'm talking about.

http://www.rasmusrealestate.com/listing_photos/BankAddenda/1538.pdf

There is a great chance that this is real so go for a drive. If the people giving you the REO package is legit they will have no problem getting with you and letting you do a walk through. Check out all of the properties not just a % of them. You do not buy a pair of shoes from looking at them through the window or before you try them on, do you? Do your due dilligence and check out the properties. Do your homework. That much of an income is worth the effort, for if it is too be, it will be.

erh

Great day,
NodramaRealEstate from what i was able to read...If it is to good to be true,Most likely-It is not!The info was crazy you were given,And when you buy wholesale...You take the good with the not so good.
(Your name says it all,No Drama)

Forgive the wrong identification. You are among very experienced individuals, who have been reading and researching things of interest in order to acquire additional knowledge. Remember no question is stupid. You could ask any question at any time. However, answers to some items could be acquired through the DG search engine on the left. Anything else, feel free to ask. I have no problem teaming up with you, however, it would be better doing so with someone from your area. I am way over on the other side in New York. However, feel free to PM me at anytime. Good Luck and God Bless.

Sandra

First of all, thank you to everyone for the great info. This is an awesome community.

Having said that, is there anyone near Birmingham, Alabama that would like to partner up on this REO bulk package? I have spoken to the broker and feel a lot more comfortable with the legitimacy of "the deal" so to speak. The bank is desperate to unload these homes so that "cherry-picking" is allowed. I have been extremely busy and haven't had a chance to look at these houses but using Google Maps "street view" the neighborhoods look OK. If I "cherry pick", the price will be a little higher, but still $20,000 a piece for these homes still seems like a great deal.

Let me know if there's anyone with more experience or that lives near Birmingham that would be interested in partnering up on these.

Thanks!
Steve
www.nodramarealestate.com

Atlcamel wrote:

You're wrong on this one pal; I approach one property (own by corporation) they refuse to pay $15k water lien owe to Atlanta Watershed Management Dept on a very cheap REO I could have gotten for under $5k if they had otherwise choose to pay the encumbrance on the title. I didn't have $15k so I didn't follow through with the deal. And if you've read the addendum paperwork carefully if they (Lender/Seller) don't cure the defeat on the title before the closing than responsibly falls on to the Buyer whether & if they will accept the title as is. I've attach an Addendum to Contract for Sale to show exactly what I'm talking about.

http://www.rasmusrealestate.com/listing_photos/BankAddenda/1538.pdf

Thank you for your comment. I appreciate your addition to the post. Your comment however does not make my comments "wrong". However, you have set only to confirm my information and add a little as well. From reading your post I have noticed 1) that the property is a corporation owned. In general, real estate owned (REO) usually refers to bank owned properties. 2) your post notes that liens must be paid. Whoever pays the liens they still need to be paid. Banks understand this. Most, not all, and maybe this is where I miss spoke, banks will pay off the liens because A) they need to so they can close B) they understand the value of paying off the liens to make a seamless transaction C) if the bank does not pay off the liens many investors and buyers will ask them to anyway as part of the closing.

What can we learn from this then?
Make sure the liens are cleared. If not account for the liens in your offer and financing or even better ask the bank to clear them as part of the transaction.

Again, thanks for the information and the addendum.