I’m just starting out as an investor and want to focus on wholesaling as a starting point. I want to make sure the steps I have listed below for Wholesaling a REO or any property is correct. Can any seasoned investors help me out by taking a quick look at the steps and giving me feedback. It would be greatly appreciated.
Find property and have real estate agent make offer (offer is contingent on financing and inspection)
Get an accepted offer
Start looking for buyer
Provide the bank with 1% earnest money and proof of funding (transactional funding) within the required time frame.
Inspect property and start title work
Once I find an interested buyer, negotiate price, collect 1% earnest money, and allow buyer to do his/her due diligence on the property (i.e.: inspection).
Close on property doing a back to back closing.
Am I correct, leaving anything out, or over complicating the situation?
That’s a fairly good skeleton outline… however, it would take a seminar to fill in the gaps…
Have you studied any wholesaling courses?
If not, I would definitely attempt to get a copy of Ron LeGrand’s wholesaling course. There’s gotta be an inexpensive copy on Ebay. You can fill in the blanks much more efficiently at the same time you seek feedback here.
Let me outline some issues that you need to address…
1, Get to know the REO gatekeeper agents. They are the ones that pretty much dictate if YOU are going to get a deal, or not, or even a chance to bid before stuff gets to the MLS.
2. Your goal should be to get to pre-MLS properties.
3. Agents on craigslist are often advertising these properties.
Some things your competition might be doing…
Offering the entire price as the binder/earnest deposit…
Offering no financing contingencies…
Making full price offers that beat you out of the deal, only to renegotiate the price during escrow down to a genuine wholesale price. Difference? You lost the deal, even though you offered the exact price the winning bidder ultimately paid…
Waiving/shortening inspection periods / contingencies… (this means you assume the house needs everything, and an inspection is just an exercise); of course not excluding structural failure/damage you might find during the due diligence. Waiving inspections, does NOT mean waiving due diligence.
Back to back closing (double-escrows) require a title/escrow company that knows what they’re doing and is willing to do them. You don’t always have a choice of title/escrow companies…and some banks get cranky over this issue…if not flatly not sell to you if they discover this is your plan…
There’s a lot more, but I’m outta time… :banghead
Get LeGrand’s stuff off Ebay, if possible. Maybe join your local REI club, if they maintain an investor library, and borrow their copy…?
Thank you so much for taking the time to give me some feedback.
I already joined my local real estate club but the first meeting is not until the 14th, can’t wait to attend. I also picked up Steve Cook’s wholesaling for quick cash from a friend and I just signed up for Ron’s gold membership, which gives me access to his wholesaling course.
I also placed an ad on craigslist stating that I am looking for an agent experienced in working with investors and selling REOs. I haven’t received any responses yet. Later today, I plan to put the same ad on Trulia’s website.
Based on your feedback, I am most concerned about competitors offering the full purchase price as an earnest money deposit. My funds are very limited and I won’t be able to compete with this. Do you know of any transactional funding sources that will fund the earnest money deposit?
Also, can I ask one more question (I know I’m pushing it :biggrin)
As I’m watching and learning the market, I’m noticing that there are two areas that contain the most NODs and REOs. However, one of the areas seem only to contain NODs and REOs while the other area has NODs, REOs and an okay inventory of housing for sale at market value. I am focusing on the second area. My thinking is that the second area provides the best opportunity for me not only to find a good deal but also find an end buyer. In the first area it seems as if the demand for property is very low and I’m fearful that even if I get it under contract I won’t be able to find a buyer. Am I correct in my thinking?
There are transactional funding sources out there but you will need money to get the transactional funding from them. It is very hard to closed a deal with no funds.