Wholesale REO's
Just curious if any of you ever wholesale REO's? I guess it just all depends on how cheap you can get it? I've seen some REO's almost FMV and others almost 50%FMV. If you have or can wholesale an REO, do you take ownership or assign or whichever the lender will allow?
I thought this would be a good way to build up some capitol!
Thanks!
Sickdog
Its beginning to become very difficult to get REOs at a resonable discout to make it worth it to the investor. Banks are more aware now of what they can get for a property, and usually have a realtor that they work with in trying to get top dollar for the house.
But to anwser your question, if a contract is written properly, just about any type of property (with the exception of a HUD) can be wholesaled. Its just a matter of whom wrote up the contract, and If they made it assignable.
Another thing you need to keep in mind, is that FHA lenders WILL NOT allow "flips" They want to see title seasoning of at least 6 months in most cases, so thats somthing to consider. So if you do flip, your best bet is to flip to an investor, or a cash buyer
Birddog1
Thanks for the reply, ment to get back to this sooner but have been real busy!
Look at this scenario and advise me if you can or anyone else if it would work.
1 Find REO for 50k, FMV 95k needs 20k in rehab.
2 Offer 50k, with say $500 ernest money, contingent on roof and termite inspection, I get access to the house now to begin my "rehab", and have sixty days to close.
3 The bank accepts.
4. I begin my marketing campaign with an ad for a handyman special, FMV 95k
needs 20k rehab, Sale price 65k, or 60k for all cash.
5 Get a buyer.
6. Assign them my right of contract at closing
7. Get the "white" meat 10k-15k at closing.
Since the deed was never actually in my name, would an FHA buyer be able to buy, or is this still a seasoning problem?
Am I on the right track here or is there something I'm missing? Do you wholesalers typically use your name when making an offer or a land trust, LLC, etc.. . How does that effect your success or lack of when flipping or purchasing an REO? And finally, if this scenario is on track, do the banks selling the REO really care who ultimitely buys the place as long as someone on the day of closing shows up with a check for the agreed upon price?
Thanks folks!
Sickdog
Hey,
Wholesaling is wholesaling, so how you obtain your properties is irrelevant to the investor. (FYI, I don't consider this scenario Wholesaling. I think it is Flipping.)
In your scenario ($95 FMV, $20k repairs, your "selling price" at $60k), there is no room for the investor's profit, it is all in your pocket.
$95k FMV
- $20k repairs
- $5k carrying costs and financing costs
= $70k x 75% = $52.5k
Thanks Bruce, for responding!
So if this scenario is considered "flipping" then would it be considered "wholesaling" if I were to put it under contract, take deed to the property, then re-sale it to an investor for say 3k-5k more than I paid?(depending on the deal and the numbers of course).
Thanks!
Sickdog
Sickdog,
You will find many different responses to the difference between the Flippers and the Wholesalers. You can flip properties to a FHA buyer the next day. They are called guidelines not laws, I am closing on a property for an investor 03/18/2004. He bought the property on 12/29/2003. That is not six months. There are guidelines but banks will take deals that make sense.
Usually when wholesaling the "wholesaler is paid at the close, his or her fee is placed on the sellers side of the HUD.
Lori
[addsig]
Hey,
"Words, words, words...."
Birddogs, scouts, flippers, wholesalers and rehabbers are just different titles people use to describe what they do in RE. There is no law requiring one title versus another.
For me:
Birddogs/Scouts--Find properties. No contact with sellers and no contracts. They receive around $500.
Flippers--Sign contracts with sellers, but have no plans on closing. They sell the contract to someone else. They receive a couple thousand dollars.
Wholesalers--Sign contracts and close on the properties. Depending on their exit strategy, they receive $5k to $500k.
Rehabbers--Sign contracts and close on the properties. They generally sell (or rent) to the retail public.
You can mix and match to your hearts desire, but you must leave enough on the table for the next level.
Quote:
On 2004-03-17 13:14, tinman1755 wrote:
Sickdog,
Usually when wholesaling the "wholesaler is paid at the close, his or her fee is placed on the sellers side of the HUD.
Lori
--------------------------------------------------------
You are joking right??
Best Riches,
Jeffrey Adam
[addsig]
Quote:
On 2004-03-18 04:09, JeffreyAdam wrote:
Quote:
On 2004-03-17 13:14, tinman1755 wrote:
Sickdog,
Usually when wholesaling the "wholesaler is paid at the close, his or her fee is placed on the sellers side of the HUD.
Lori
--------------------------------------------------------
You are joking right??
Best Riches,
Jeffrey Adam
No,
that is how it is stated in most of the contracts I have seen. , when there is only one close. It is usually the difference between the price the wholesaler got the property for and the price the wholesaler is selling the property for. Of course, if you do a double closing than there would be two HUDS
Lori
Lori
_________________
real estate investor since 1988. I like to find creative solutions for my real estate headaches before they become problems. Most importantly, MOVEMENT DOES NOT EQUAL PRODUCTIVITY[ Edited by tinman1755 on Date 03/18/2004 ]
Tinman:
So you are saying that the Department of Real-Estate in PA is allowing sellers to pay wholesalers a commission thru the sale which is shown on the HUD-1???
I find that very hard to believe! If that were the case, anybody would be able to go out and sell real-estate without a license!
Best Riches,
Jeffrey Adam
[addsig]
Quote:
On 2004-03-18 23:50, JeffreyAdam wrote:
Tinman:
So you are saying that the Department of Real-Estate in PA is allowing sellers to pay wholesalers a commission thru the sale which is shown on the HUD-1???
I find that very hard to believe! If that were the case, anybody would be able to go out and sell real-estate without a license!
Best Riches,
Jeffrey Adam
The seller is allowed to pay anyone out of their proceeds. That is not against the law. I have seen real agents and people who have the option get paid on the HUD. The HUD is a federal document, I can't think of a better place to put it. I would not accept a fee that was not on the HUD. This could mistakingly be called a kickback. I also do not accept cash for any deal. I like to keep everything documented. But that is just me.
Lori
[addsig]
How do I know who between you two is knowledgeable and who is not?
Tinman:
We all know that Real-Estate agents and lenders get paid on a HUD-1, Hello!
So you are saying wholesalers in your
area are getting paid on the HUD-1 in your area as a commission paid by the original seller? Even if they are not an
agent? The PA Dept Of Real-Estate allows that? That amazes me!
Best Riches,
Jeffrey Adam
[addsig]
Jeff,
Why can't they get paid on the HUD?
[addsig]
IAMBack:
They can get paid on the HUD if you put it as a referral fee. This creates problems sometimes though because the local DRE if a complaint is filed will
say the wholesaler is receiving a commission for selling real-estate.
They come down pretty hard.
Best Riches,
Jeffrey Adam
[addsig]
Jeff,
Are you saying that it is illegal to be a wholesaler? If it is not on the HUD, how can you proof without a doubt that this actually happened?
No its not illegal to be a wholesaler, but it is illegal to get paid a commission without a license! If you know how to
wholesale correctly you "assign" your escrow and collect your fee. You then
claim it at the end of the year. Your wholesale buyer is going to 1099 you anyways for an expense incurred to
purchase property.
The problem with putting yourself on the HUD-1 if you are not an agent is you are revealing to the original seller that you sold it to someone else and also the
Department Of Real-Estate can come down on the wholesaler for getting a
commission without a license if the original seller complains. I know a guy this happened to!
So all you new wholesalers out there I would advise you to "assign" and then collect your fee, do not put it on the
HUD-1 as a referral fee if you are not an
agent as the Department Of Real-Estate in your State will be all over you sooner
or later.
Best Riches,
Jeffrey Adam
_________________
"The only place success comes before work
is in the dictionary."
[ Edited by JeffreyAdam on Date 03/19/2004 ][ Edited by JeffreyAdam on Date 03/19/2004 ]
good points
