I am new to the game, although I’ve been contemplating doing this for years! I have recently found some REO properties that I want to flip. I have no money of my own so I was going to do a double closing. I’ve been reading a lot about them and I’m not sure I have the expertise to pull this off. I know I need a title company to help, but I have a couple of questions: 1) How do I market the property to the end buyer without him/her finding out what the sales price is?
2) How do I sell the property without owning it?
3) How do I get the end buyer to put the money is escrow?
4) How do I show proof of funds to the bank?
I’m sure I have a lot more questions, but I’ll start with these. Any help you can give me would be greatly appreciated. Thanks!!
The problem you have is that the bank will not accept your offer to purchase unless you can present yourself as a qualified buyer. With no proof of funds, the bank will reject your offer to purchase. After that, all the other questions are moot.
Flipping houses can be made a lot easier with REO properties, because banks want to dump them as soon as possible. REO properties are real estate that a bank could not load off their booksnot even through auction. This is good news for investors, because the bank will be more than willing to sell their REO properties well below the market just to get them off their books. However, investors need to pay close attention, because almost all REO properties are sold as is and if someone buys a home without proper inspection the benefit may be forfeited. The first thing to do is to check the REO listings from lenders and find properties that you can afford to purchase. Then make sure that a complete inspection of the REO properties is made to assure that any numerical calculations that you have made will hold up in the end. Think about how much money you have, to make improvements on the REO properties you’re about to purchase, how much you will pay for the properties and how much you can sell them for. The most common mistake made in flipping REO properties is underestimating the improvements needed due to an improper inspection. Therefore, do not ever skimp on the inspection. Once the numbers make sense, you’ll be well on your way to flipping that house!
Do yourself a BIG FAVOR, have some buyers lined up ahead of time. Then use transactional funders for the POF. Your’re taking a shoot in the dark if you don’t have buyers. Herbster
If a bank excepts 100k for home its not going to appriase for more because the bank/ seller has already done a bpo, run comps, ect and knows what the value of the home is.
So how are you going to sell the home for more than it will appriase for?
The double closing or wholesaling of property is for the investor with a lot of connections. Part of your issues are going to be finding another investor willing to buy and close on the property. That means he/she will need cash or finacing It will not go FHA. You will have to buy it so cheap so to allow them to buy is very cheap. If your buyer does not come through and you cannot close you will lose your escrow $ , you will lose your realtor who at that point worked for free and the bank will not deal with you since the property was taken off the market for the time you said you needed to close. If you can find a backup plan such as a hard money lender (not so easy) if your buyer skips you can still buy but you would own it for a while.
Just because the bank is asking for $100k does not mean that is what you have to offer… Depending on who owns the bank you can ask for 82% - 92% of the asking price without getting to much resistance… if the house is already below market and you are able to drive the price down 10% - 15% more then that is where you make your money…
example… if the asking is $100k and you put it under contract for $85k then sell to a buyer for $90k… you get a $5k fee and the end buyer still gets a house less then what the bank is offering…
So, just because the BPO comes in and sets the price… does not mean that that is the actual price…
I do agree with herbster… you are much better off having buyers lined up before you start looking for deals…
You can get proof of funds by using transactional funding. Just go to Yahoo.com and seach for transactional funding and you’ll find companies that can provide you with a proof of funds letter.
The goal is to purchase the property at a discount. Key word discount. Now with that being said, the appraised value, is not the After Repair Value (ARV). Once the property is repaired, it can fetch a higher sale price or with enough spread you can flip or wholesale to an investor. There has to be enough food for everyone to eat.