REO Q's & A's

Drew thanks. Is there any other way I can invest in REO's other than POF and EM?

If you are planning on buying an REO using an LLC, then selling the LLC to another buyer can you use POF letter from lets say coastal funding, or another "transactional funding" lender? Same with the E.M., can you have a contingency that the E.M. is to be deposited after the let's say, inspection period has expired or to the banks require the money that day? I am trying to get going on this as well and would greatly appreciate the answers.

Richard
Bothell, WA

Some banks are not allowing their properties to be purchased in an LLC. They have gotten wise to this way around a non assignable contract strategy. They want to be sure the deal closes and closes to the entity or person that is on the contract! Most of them require earnest money, they want to make sure you are buying, not locking up the property and then trying to find a buyer because you have no money, then give it back if the plan does not work. They have been there and done that and its harder and harder to get them to do it anymore. (not that it can't happen) Here is how we do it if we want to wholesale (just flip at closing) the property. We have lenders asset managers and listing agents calling us because we produced with no bs or silly contingencies.
1. We use a transactional funding company
2. We use their proof of funds
3. We provide a earnest money check. If you have no money you can fund this with a credit card, friend, relative or private money.
4. We have a buyer in place that we know is real. Usually a non refundable earnest money check on our contract to sell. Minimum $5,000. That quickly separates the bs from the real buyer!
5. We do a double close.

I am sure there are other ways to do this, but I know in the real world this works well in the real world with most lenders.

Hope this helps,
Michael Mangham
MD Home Acquisitions LLC

That is great advice. I appreciate it. My concerns with a double closing is if my end buyer backs out at last minute after I already closed on the A-B part. Then I would be in a world of hurt. As far as E.M. I don't have or can't even borrow that kind of capitol yet. What if I find a property that is just as is amazing deal, one the banks appraiser put a very low price on a great property? Is their a way (other than just bird doggin) to have my buyer and myself on the property, he puts all the money up, and then I can quit claim the deed to him after closing? I am new into this whole REO deal and I know their is great money, but I am just scared to death of the double close.

Richard
Bothell, WA

Thanks to all of you who shared your knowledge. I have learned from it

To me it sounds like you should pursue motivated home owners and get them under contract(way easier than dealing with REOs) FSBOs, tired landlords, pre foreclosure. Than assign the contract to your buyer. Make some money and then pursue REOs. After you do a few deals with home owners you may not want to pursue REOs! If you can find a buyer that will work with you on a REO as you stated than why would they not do a double close? Have them put down A $5,000 non refundable earnest money check (you use their money to cover your earnest money), they will more that likely show up at closing with $5,000 at risk. If they complain, explain that you can not risk them backing out and if they really don't want the property, than don't do the deal. You do not want to work with an investor that has no money and just wants to tie the property up while he searches for his buyer!

Another note: When doing a double close using transactional funding the lender will not wire his money to cover your A-B purchase until the B-C is funded. There is no way for you to close and be left hanging with the property, the lender will not fund unless your buyers funds are in escrow! Your earnest money is at risk only. Usually your buyer comes in FIRST, does his paperwork (B-C) then you close using the transactional funding (A-B) next. You would think its the other way around but it is not. Done deal, walk away with a check!

Good luck,
Michael Mangham
MD Home Acquisitions LLC

That is great advice and I appreciate the clarity of how the double closings work. I have been working on FSBO's for the last 3 months and I have litterally put out over 300 offers. I am not getting a good reputation even though sometimes what I ask for is just a bit under the asking price because there is great money already in the home just to no avail. I have no agents now. The few I was working with are done and they just don't want to do the assignments anymore because "they don't work". So I am doing this from scratch again. I am not discouraged but desperate. I want to work an angle that is easier to find motivated sellers (i.e. bank). Homes are selling quickly up here so I need to find a greater resource for equitable propeties.

I will do more research into the REO's, but again I really appreciate the process information. That actually makes me feel more confident about it. Thank you again.

Richard
Bothell, WA

I am just starting my wholesaling career and I have a cash buyer who says that they do deals in bulk (They like to buy 5 properties at a time!) My situation is I have found five REO properties that fit their buying criteria and I'm quite sure that I will be using transactional funding. Do I put contracts on these properties then get my transactional funding in place?

You will need your transactional funding ready before you make offers. Banks will require proof of funds with your offers so you must sign up with a lender first. Contact a lender and ask for funding, get set up, then you will learn how this works!

Good luck,
Michael Mangham
MD Home Acquisitions LLC

well i almmost always stop by a good thread to say thank you and no doubt in my mind this was a must stop, thanks alot everyone for the info Keep it UP!.. Luis

Thanks Michael!!!! What lender would you suggest?