Banks refusing contracts w/assigns

Bird Dogs, Wholesaling
1

Some questions and a note:

I have been running into the problem of banks refusing contracts with assigns. I realize a double closing is a way around this. I hesitate to do a double closing on my first wholesale deal though. Is there another way around it? Tedjr?

Second, I have realtor finding me properties and she is predisposed to finding nice foreclosures in newer neighborhoods and I was wondering if anyone has had any success with these types of foreclosures. It appears to me that the volume of TRULY distressed peoperties in these areas (even though they are REOs) may not be sufficient to build a business on even in a city the size of Dallas. Any comments?

Incidentally, I closed on the house I posted the other day in need of private financing. It is a rehab at $195 with a lowball hard money ARV of $270. I think an independent appraiser would come in closer to $300k, especially after we HVAC the 500 sq ft addition (I realize additions are not the most attractive thing for flips but it is a good floorplan with the addition). We got a private investor to put up $14k to cover our shortfall the day of closing. It was close. Already have a retail buyer in the $290k range. Should net $35-50k after repairs and paying back hard money and other private money. Hopefully all goes well. ;D

2

Howdy DFW INC:

Most REO sellers will go out of the way with addendums and the like to make sure their property is not being tied up by a newbie who can not close the deal. They have been burned in the past. I am not saying all new investors can not close a deal but the banks do not want their property tied up for months for $10 while investors try to flip them all over the paper and internet and end up backing out over and over. Most banks are asking close to top dollar and are not coming off the asking price very much, at least here in Austin and other areas as well too. I just looked at a few where a homeowner could buy and fix and get a good deal not not even a dollar profit for a rehab investor by the time you figure hard money costs and carrying costs and the other expenses associated with the resell.

I have found a few REO’s that were good deals but they were in terrible condition needing $50,000 plus in repairs and reconstruction. Newer properties in nice areas that only need carpet and paint and being market at top dollar less a few grand for repairs.

Congrats on you rehab. I too needed $10,000 at the last minute and got it from a fellow REIclub member. It worked out great. Looking for another bigger deal at the present time while I finish a few small ones.

3

DFW,

No a bank/lender will not accept an offer with an “and/or assigns” or anything similiar attached to it. Simply, they want to close with whomever is making the offer because that is who is qualified (they will want a verification of funds and/or preapproval letter, too) to buy the place.

I have realtor finding me properties and she is predisposed to finding nice foreclosures in newer neighborhoods and I was wondering if anyone has had any success with these types of foreclosures. It appears to me that the volume of TRULY distressed peoperties in these areas (even though they are REOs) may not be sufficient to build a business on even in a city the size of Dallas. Any comments?

1st, your realtor should be “predisposed” to finding whatever types of properties that you’ve asked her to locate for you. If she is not looking for what you’re wanting, then she’s not a help to you.

2nd, do you truly want to find “truly distressed properties,” ie major rehabs? Are you ready to deal with that kind of property?

3rd, if you think you can’t build a successful REO buying business in a city with a population of 1.2 million, then you probably need to rethink you business plan and/or your choice of business. I’m not trying to be rude here, just practical. REI is not easy. If it was, then everybody would be doing it and making tons of money. I live in a city with a population of 40,000 and the total of the surrounding areas only come to about 300,000. The majority of my purchases have been MLS listed REO’s and I’ve built a very successful business.

And no offense to anyone on this either, as everyone has there niche area, but I’ve heard the “REO’s are always listed at retail. REO’s aren’t a good deal. REO’s would negotiate.” This all goes back to the “this is not that easy” quote. IF you’re planning on buying REOs or making them a part of your buying options, then you have to learn how to present offers that WILL get accepted. Sure, not all offers will get accepted, and the lower the offer is, the less chance that it will get accepted, but REI is all a numbers game anyway. I’d rather make 100 50% of value offers and only get one deal, than make 10 90% offers that do get accepted.

Of course, my hopes are that the majority of investors will continue to think that REOs are bad deals, as it makes my job much easier. :slight_smile:

Raj

4

So what other alternatives are available to purchasing Reo property if you already have a retail buyer interested? So this means it is impossible to do a double closing on such a deal as this?

5

No, it’s not impossible to do a double closing. It’s impossible to assign the contract. If your retail buyer has no seasoning financing lined up, then you should have no problem with a double closing.

Raj

6

Thanks Ted and Raj for the insight.

My realtor is acting as both a mentor with respect to learning real estate values and as someone who will find me the properties I want. She just doesn’t seem to understand what I think is true after reading Steve Cook’s course and these boards - the lower to mid level properties are more plentiful and provide the means to make more money. Her guidance is also skewed by big dollar signs. If I have a high end part-time investor buyer who wants me to bring him deals, she obviously would rather have them buy 2 $175k rental properties, rather than a few smaller rehab projects. But, I would make the same money on the larger houses as I would on the smaller ones and there is more volume in the lower realm.