I was reviewing Cam Dunlap’s Proof of Funds Letter program for wholesaling REO’s. What happens when an offer you make on an REO is accepted, but you cannot find another buyer to sell it wholesale to? Are you locked into buying the property, or can you get out before the close because you don’t have the funding if you don’t have the buyer?
If the “contingent upon obtaining financing” is your escape clause, how specific does that escape clause have to be. Can you just write “contingent on obtaining financing”, or do you have to write in the specific terms of the financing? Thanks for any help you can give.
If the bank accepts your offer, you are obligated to buy it. You can use those clauses when you are buying from a homeowner. But there is a different contract that is involved when you are buying from the bank. If you cannot fulfill on your obligation to buy, you will lose your earnest money deposit.
Kallen, thank you for your answer. Can the bank try to sue you to force the sale, or do they just take the earnest money and move on? I just wouldn’t want to be in a situation where I put my family finances in jeopardy by not being able to find a buyer to wholesale the property to. I know that between home owners, I have seen buyers forced to close when they tried to get out of the deal for no legitimate reason.
A friend of mine has made a few offers on REO’s contingent on financing. While his offers were not accepted, the banks did not indicate that his offer was disqualified because of the finance contingency. Just wondering if that is a hard and fast rule or if it depends on the bank and the property. Thanks.
If you want to be taken seriously by a bank, you need to come to the table with cash in hand. They are not going to accept a contingency offer. If you want to play it safe, first, deal with homeowners, not lenders. You might want to also consider using options to score some deals. Quicker, easier, and safer for you.
Proof of funds letters will work fine for making the offer. I use them all the time. The problem with trying to wholesale REOs is that most banks if not all “that I’ve delt with” will require the buyer on the offer to close. Most will not allow assignment. That were your use the transactional closing funds like Cam offers. Now with VA you can take title in a different name thats on the offer but you need to be alittle creative to wholesale those. If your wanting to wholesale stick to homeowners, less hassle to wholesale.
There are tricks to wholesaling REOs you just have to be careful. Plus your really gonna confuse the listing Realtor if they are not use to wholesalers.
Key Bank will allow a 30 day contingency as long as you put a non-refunded EM deposit in their escrow of $3500. Key bank is doing the same as a broker do when they do assignment a property.
Traditional clauses you would use with a FSBO won’t work withe bank. If you are going to try to wholesale REO’s, it best to have a back up buyer in reserve so you don’t have to scramble if the first buyer backs out