How to approach a wholesale transaction when you buy a REO.
In the first place you have to get around the non-assignment clause that most banks have in their contract. When I buy foreclosures, I either double close or I make sure I have the money (from multiple hard money lenders) to wholesale my deals even if I have to close on them before I actually found a buyer.
With that being said, I focus on foreclosures that have been on the market a good while - 100 days or more really. Seems to be a good point to make offers when the banks are ready to negotiate.
I also always get thirty days before I have to close. I start marketing the property before I sign the papers, just a habit I have. Meaning, once the realtor tells me I have the property I immediately start marketing.
In a large city there will be a lot of REO agents but only a few of them move most of the deals in the area. You definitely want to build a relationship with these people. You will know you are talking to a big REO dealer when you make a low ball offer and they don’t even blink. They want you to do it because they know that the more low offers they will submit, the faster the bank will negotiate, the lower the price will get and ultimately the property will sell faster.
A lot of the small time realtors are morons and don’t understand this. They think they are the bank and tell you the bank wont take the offer before they submit it. I am quite direct and explain to them that they just need to do their job and let the banks decide. I try to be nice, and most of the time I am, but every now and again I get pissed at them and have to verbally smack them around. It helps when they know you close all your deals and that you do a bunch of them. But if you are just starting out I don’t recommend this approach.
Another thing I do when dealing with REO’s is I make a bunch of offers. I will tell you that right now 99% of the deals I pick up are foreclosures. You just can’t beat the discounts the banks are willing to give because there are so many foreclosures out there. Most homeowners just can’t or won’t come down like the banks.
Tags: Foreclosure
