getting out of an REO contract if U cant find a buyer by closing

It depends on the bank as far as what contingencies they will allow. However, most standard contracts (even with REO's ) will have a financing contingency, that says if you don't have financing lined up by X-X-X date, then the contract will be void. When we make an offer, our initial offer always has contingencies, such as "subject to partner's approval," "subject to inspection," and "subject to financing." Hope that helps a little. Just remember-- with REOs, the banks often want most of that verbiage removed when/if they counter. However, the financing is one that is standard.

Are you planning to double close on these REOs?

yes and we have to provide a proof of funds with the offer so doesn't that kill the "my financing fell through" escape or not? If not then That is what use.

I don't know the answer legally so would ask someone who knows for certain to answer. But I would think that there might be a reason that you would need the money you have shown in your proof of funds for another reason and so therefore can't use it for this deal. Be kind to the realtors and all involved and try not to burn any bridges if you can.

Happy Happy New Year Everyone!

FSBOs aside, you will always have to have POF with your offer. If there is a financing contingency, then yes, you can still get out of the contract.

Example: You want to buy a house. You go to a bank to get pre-approved and since you have a decent job, you are pre-approved no problem. So you submit this with your purchase offer. A few days later, you lose your job. Your financing just fell through. Contract is finished.

Also, in order to get your earnest money back if you are using the financing contingency to exit contract, you will need to provide the seller with a letter from lender that you were declined for financing. At least, that's how it is here.

Do you have the Proof of funds and earnest money needed to make offers on REOs.
Are you planning on wholesaling them or doing the fix/flip yourself? You may need to have transactional funds lined up if you plan on wholesaling.

We use the inspection contingency only, since our offers are for cash. If you offer cash there is no financing contingency. Are you trying to get an REO under contract using your on financing? Remember a hard money loan offer is a cash offer. What we have seen lately is that any other type of exit clause is instant Death of our REO offers. REO lenders (banks) do not play the subject to my moms approval game. Get on the phone and get it or don't submit the contract is the attitude these days and rightfully so.

Tip of the day: Make sure you have your buyer lined up in advance or a deal so strong buyers will seek you when you market the property.

Hope this helps,

Michael Mangham
MD Home Acquisitions LLC

if you don't have a buyer and/or your own cash & the ability to hold the property until a buyer comes don't make offers on REOs. Trying to weasel out will just cause you to loose your credibility with realtors & banks.

I am going to move into Florida in the near future, have done a little research, but I will ask your advise about what I plan to do there. I value your opinion, maybe we can do something together there in the future!

Michael Mangham
MD Home Acquisitions LLC

I do have proof of funds using transactional funding and I will be flipping the properties. I just dont want to not get a buyer and have the funding pulled and not have a way out of the contract. also as you probably know the funding company will not actually fund the deal until I have a buyer under contract. So no buyer no funds and I dont want to be stuck in the contract with no funds. Do I just have the funding company send a letter stating that the funding fell through? I would like to understand this before I proceed any further, this is the one part I have not been quite sure about.

Thanks so much for the help!!!

Bryan

I agree with Gary & Jill. You don't want to get a reputation of falling through on your contracts. However, you do want a way out of the contract just in case. Are these local bank-owned properties or Fannie/Freddie Mac? In my experience, we always have our agent put in every one of our contingencies in our first offer (even assignability), and we have never had a flat out rejection. We have had counteroffers 100% of the time and they will say which wording needs to be removed from the contract. Then you can counter accordingly. Assignability is the only one that always needs to be removed. Point being that you will have a contingency left in your contract. If they want all contingencies removed, you don't have to accept their counteroffer. Also, even if there is an "as-is" addendum, you can still have an inspection clause.

Do you have a solid buyers list with their criteria? If not, I also wouldn't make offers on REOs without that. Unless I was prepared to close with hard or private money. Always enter with an exit strategy!!

One last thing, I would read some of Joe & Stacey Jurek's (Indiana Joe) posts on REOs and making offers. They are a wealth of knowledge! Good luck and keep moving forward!

you have the your buyer & transactional funding lined up; despite that some banks are not accepting that, but assume everything is OK. As Mike said the inspection contingency is really all you need because all foreclosures need some kind of work, some more than others. You just get a roofing contractor to inspect, get a written estimate for the roof replacement & submit it ... the bank will let you walk & refund the EMD because they are not going to drop the price an additional $ 5K to 10K on the property. You're out the the deal & still look good the RE agent.