Flipthisreo

Table of Contents
GENERAL REO QUESTIONS What is an REO? Where can I find REOs to offer on? Do I need MLS access? Should I get my license? How do I search for REOs in the MLS? What if I cant get MLS access? Should I tell the agent that I plan on wholesaling the property? My agent sent me a list of properties, but I cant tell which ones are REOs. Why do investors need a wholesaler anyway? How do you select your target neighborhoods? How do you tell what a good deal is once you select a target neighborhood? MAKING THE OFFER How do you decide which properties to offer on? How do you decide how much to offer? How do you estimate repairs? Do you make offers on properties without going to look at them first? Im thinking of making 100s of blind offers on REOs, is this a good idea? Can I use my own contract when submitting an offer on an REO? Do I need an earnest money deposit when offering on an REO? How were you able to come up with a deposit when you were broke? Do I need to submit multiple deposits when making multiple offers? What happens if all of my offers get accepted at once? Do I need a proof of funds letter if Im making a cash offer? Will all banks accept a proof of funds letter from a transactional lender? How can I structure my offer so I can back out and get my deposit back? Do I get my deposit back if I back out using my inspection contingency? Is it true that most banks include an inspection period in their addenda? How long should I give myself to close? How can I write my offer so it has the greatest chance of being accepted? 2 2 2 2 3 4 5 5 6 7 7 9 9 10 12 13 14 15 16 16 17 18 19 19 20 22 22 23 23
How long does it take for the bank to respond when you make an offer? The listing agent is asking for highest and best- what does that mean? If your offer is rejected, do you resubmit it? If so, how long do you wait? How many offers do you have to make, on average to get an acceptance? How many offers do you make each week? How do you track them? FINDING THE BUYER What are the best ways to find a buyer/build your buyers list? How many buyers should I have on my list before I get started? What questions do you ask your buyers when you are screening them? How do you get the buyer inside the property to view it? What should I tell my buyer if they ask me if I own the property? What if my buyer sees the property on the MLS for less my asking price? Do you get a deposit from your end buyer? If so, how much? What contingencies do you put in your contract with the end buyer? How do you screen your buyer to make sure they are for real? What happens if my buyer backs out of the deal on the day of closing? If my buyer backs out of the deal, can the bank force me to close? Can my end buyer use conventional financing? SETTING UP THE CLOSING Can you assign an REO contract to your end buyer? If you cant assign the contract, then how can you wholesale your REOs? Do I have to use the banks title company to close my REO deals? How do I find an investor-friendly title company? What if I cant find a title company to do a simultaneous closing? Who is responsible for paying the closing costs? How long does a typical REO deal take from start to finish? DEAL ANALYSIS Can you give examples of some of the deals youve done? If you were starting over, what are some action steps you would take? Any words of encouragement for a Newbie?
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Congratulations on your purchase of Flip This REO! I realize that there are a gazillion real estate investing courses on the market, and I thank you for choosing mine! For those who do not know me from my blog, my name is Stephani Davis, and Im a full time wholesaler in Tampa, FL. I quit my job as a bartender on January 1st of 2007, and have been wholesaling houses for a living ever since. The real estate market in Tampa started on its downward spiral shortly after I began my wholesaling career, but instead of throwing in the towel like many others did, I decided that I was going to take advantage of the tremendous opportunity that the REO market was presenting. I ended up closing on my first REO wholesale deal in January of 2008, and since then, Ive been a party to nearly 40 REO wholesale transactions. As many of you know, Ive chronicled my real estate journey over the last three years in my blog, Flip This Wholesaler. Since flipping my first REO in the beginning of 2008, Ive received hundreds of emails and private messages from readers who have questions about the mechanics of flipping REO properties. Ive come to realize that there is quite a bit of confusion among aspiring wholesalers about the exact process of flipping an REO, and this uncertainty seems to be keeping many people on the sidelines. A few months ago I decided to go through all of the emails and messages I have received over the last couple of years, pick out the questions that were asked most frequently, and answer them all in one fell swoop. The end result is the eBook that you are reading today. My hope is that this book will answer the questions that you have been wondering about wholesaling REOs, and give you the kick start that youve been needing to get off the fence and into the REO wholesaling arena! OK, are you ready? Lets get started with the questions.
2009 FlipThisWholesaler INC. All rights reserved
GENERAL REO QUESTIONS

Q1: What is an REO?
An REO is a property that has been foreclosed on by a lender, and that the bank has taken back into their possession. REO stands for real estate owned by the banks.
Q2: Where can I find REOs to offer on?

After a property has been foreclosed on and taken back by the bank, most REOs end up listed with a Realtor on the Multiple Listing Service (MLS).
Q3: Do I need MLS access if I want to make offers on REOs? Should I get my license?
If you plan on pursuing REO properties, I HIGHLY recommend that you either get your license, or befriend someone who has their license so you can become their assistant and gain access to the MLS. This is the route that I took, and it made my life MUCH easier. Instead of having to rely on someone else for comps, lockbox codes, listings, and submitting multiple offers, I was able to do all of it on my own. Being licensed will also allow you easy access to any REO properties you wish to get inside of and offer on, and will make it much easier for you when it comes time to get your prospective buyers into the houses when you have a deal under contract. Another upside to having your license is that in most cases you will be allowed to take a commission on the properties that you close on. While you may elect to give your side of the commission away to the listing agent in order to sweeten the offer, its always nice to have the option of making a commission on top of the profit you are making on your wholesale deals.
While it is certainly possible to find a buyers agent who is willing to send you listings, show you houses, and make multiple offers for you on REO properties, I can tell you from experience that it is an uphill battle trying to find an agent who is willing to do all of this for you, especially if you are brand spanking new and dont really know what you are doing. If you dont have the time, money, or inclination to take the required Realtor classes and get licensed, you can do what I did and become a Realtors assistant. It varies by locale, but in many areas, Realtors are allowed to have an assistant who is allowed MLS access. This worked out perfectly for me as I was not in the financial position to pay all of the fees involved with getting licensed, nor did I have the time to take the required classes.
Q4: Once I get MLS access, how do I search for REOs? Is there a way to search for REOs specifically?
All MLS systems are set up differently, so you may have to do some tinkering around in order to figure yours out. With some systems, you can simply add a field to your search that will filter out all of the REOs for you, while others do not have that capability. When I do my MLS searches, I like to make them as broad as possible, so I dont miss out on anything. To make sure that I am getting all of the REO listings available, I do a search for ALL of the listings in my target area that fall within the price range I am looking for. So, when I search, I search for all single family properties in Tampa that are priced at $60,000 and under (I choose the 60k and under price range because this is what my investors/end buyers are looking for). This search usually results in roughly 250 properties, most of which are short sales and REOs. 250 listings may sound like a lot, but it usually only takes me 30 minutes or so to run through all of the properties and decide which ones I want to offer on. Most REO listings will usually say something like, bank-owned or corporate
2009 FlipThisWholesaler INC. All rights reserved 3
owned in the remarks section, and will often include information about what documentation is required to be submitted along with the offer (proof of funds, pre-qualification letter, copy of earnest money check, etc.) Most REO listings will also include information about the banks addendum that you will be required to sign once your offer is accepted. If you want to narrow your list of properties, you can do a keyword search in the MLS for bank owned or corporate owned. Just keep in mind that not all of the REO listings will include this verbiage, so you will be missing out on some opportunities by doing this. After a month or so, you will start to learn who the REO agents are, and will be able to recognize an REO listing right away just by seeing the agents name on the listing. Once you have recognized who the REO agents are who are doing the most business, you can simply run a search for their listings.
Q5: What if I cant get MLS access?

Truth is, you can. Keep working at it and don't give up- gaining MLS access will be a huge help for your business, and will make the entire REO wholesaling process much easier for you. Until you're able to obtain MLS access, however, you will either need to find a Realtor who can send you listings and submit your offers for you, or you can use an online source such as Realtor.com or ZipRealty.com where you can search for listings on your own. While the information provided on these sites is nowhere near as detailed as what is available on the MLS, they still provide plenty enough information to get you started. If you decide to use a buyers agent, and plan on making a large volume of offers every week, you may have to do a little digging before you find an agent who is willing to submit them for you. Keep in mind that the agents do not get paid until you get an offer accepted and to the closing table, so many of them are not going to be too thrilled at the prospect of making a bunch of low-ball offers.
You need to find a hungry agent who is willing to play the numbers game, and is not afraid to insult the bank with your offers. These agents exist, but it can take time to find them and it can be a challenge to keep them motivated once you do. A good place to start looking for an agent would be at your local Real Estate Investor (REIA) meeting. Ask around to some of the active investors and wholesalers, and see if they can give you a referral.
Q6: Should I tell the real estate agent that I am planning on wholesaling the properties I get under contract?
NO! Realtors are looking for BUYERS, not wholesalers, and most are not going to be too excited when you tell them you plan on looking for another buyer once you get a property under contract. Do yourself a HUGE favor and do not discuss your wholesaling plans with the real estate agents. Most agents frown upon wholesaling, and many will try to discourage your efforts when you tell them of your intentions. The Realtor does not need to know all of the details of the transaction, so its often best to keep them to yourself. Just make sure you do your part and get the deal to the closing table once you have it under contract, and everyone will be happy.
Q7: I had my realtor send me a list of properties, but it doesnt say anything in the listing that would indicate that the property is or isnt an REO. The only information in the listing is the address, price, and pictures of the property. How do I tell which ones are REOs?
This is where having MLS access comes in handy. If you are using a buyers agent to send you listings, many times they will send them in a format that only
gives you limited information about the property. You want to be able to see the full listing, which will include all of the realtor remarks/comments, and in most cases, will let you know whether the property is a short sale, bank owned, probate, etc. The full listing will also include the contact information for the listing agent, which your buyers agent probably does not want you to see. You can request for your agent to send you listings with all of the details, remarks, etc, but sometimes they are not willing to do so. If you don't have MLS access yet, just make sure you're working with investor-friendly agents who are willing to provide you with the information you need.
Q8: Why do investors/buyers need a wholesaler to get deals off of the MLS? Cant they just go on the MLS and get the deals themselves?
Many people have the misconception that the really great deals are just hanging out on the MLS waiting for someone to come along and snatch them up. The reality is- there is a ton of competition for the really great deals, and you have to be lightning fast to get them. The other way to get great deals off of the MLS is to create them yourself by offering lower than list price on properties that are not already priced attractively. The majority of the REO deals Ive put under contract were not great deals at list price, but rather, became great deals when the bank accepted my low offer. It often takes 20 or 30 offers (sometimes more), before you get the bank to take one of your low offers, and many investors are not willing to put in the time to do this. Getting great wholesale deals off of the MLS takes time, patience, and persistence, and many of the investors would rather have a wholesaler out doing the legwork for them. The majority of the buyers I sell to fall into this category- they are busy with their rehabs and rentals, and do not have the time
to scour the MLS. Instead, they come to me for deals, which creates a win-win situation for both of us.
Q9: How do you select your target neighborhoods?

I choose my target neighborhoods by finding out where the most investor activity is, and then jumping in. If you are just getting started, I would recommend going to every investor meeting that you can, and networking with as many active investors and wholesalers as possible. If there are buy and hold investors or rehabbers present at the meetings, find out what areas they like to invest in, what type of properties they are looking for, and what prices they are willing to pay for those properties. If there are wholesalers at the meeting, ask to be added to their buyers list so you can check out the deals they are selling and see what parts of town they are working in. If you have MLS access, you can do a search to find out where the most investor activity is taking place. You want to look for neighborhoods where there are an abundance of cheap, cash sales, as these will most likely be investor sales. I usually do this once every month to stay on top of the current trends in my market. This not only lets me know where the action is, but also gives me a better picture of what investors are paying for homes in those areas. Once you have spent some time doing these activities, you should have a pretty good idea of where some of the investor hot-spots are. You want to go where the action is, so these are the areas that you will want to focus your efforts on.
Q10: Once you select a target neighborhood, how do you figure out what a good deal is in that area?
After you have selected a target neighborhood, my recommendation is to devote at least one month to getting to know this area like the back of your hand. You need to study the recent investor comps in the neighborhood (these will be
the lowest sales) to find out what prices the investors are paying for deals in this particular area. Once you have a list of the recent investor comps, print it out and go drive by the properties one by one. Going out and physically looking at the houses will give you a much better idea of why some houses are selling for more, and some houses are selling for less. If you are just looking at numbers on a computer screen or on a piece of paper, they most likely are not going to make much sense to you. If you want to learn the values in a neighborhood, you really need to get out and see the properties with your own two eyes. It may seem like a hassle to do this, but I promise you, the knowledge you will gain in the process will be well worth the effort. While you are out looking at the comparable sales, make it a point to call any For Rent signs that you see, and ask the landlords if they are looking for more rentals in the neighborhood. If so, find out exactly what they are looking for, and what prices they are willing to pay. This is a great way to build your buyers list, and also to get a better feel for what the going rate is for rentals in the area. You also want to be networking with other wholesalers who are doing business in your target neighborhood. Pay close attention to how they are pricing their deals, and make sure to follow up with them to see if they were able to get what they were asking. If they have deals for sale, ask if you can help market them. This is an EXCELLENT, risk-free way to get your feet wet. By marketing their deals, you will not only become more familiar with the neighborhoods, but you will also get a chance to interact with buyers and find out what type of deals they are looking for. After you have spent a month or two doing these activities, you will start to get a feel for what constitutes a good deal in this particular neighborhood. This is something that can not be taught in a course or at a boot camp. Every market is different, and there is no cookie cutter formula for determining what a deal is that is going to work in all markets across the board. If you want to be a successful investor or wholesaler, then you absolutely MUST get off your butt and start learning what constitutes a good deal in YOUR market. This will take some time and effort on your part, but like I said, if you are willing to put in the work, the knowledge you gain as a result will be well
worth your efforts.
MAKING THE OFFER

Q11: How do you decide which properties to offer on?
In my market, there is a ton of competition for REO properties, primarily from other wholesalers. Most of us have automatic email notifications set up in the MLS, so when a great deal hits the market, it gets emailed to our phones instantly. As a result, when a hot deal hits the MLS, every wholesaler in town knows about it, and there are often 10-20 offers on the property within a few hours of it being listed. I have never had much luck going after the deals that just hit the market- theres way too much competition, and I am not willing to get into bidding wars with every other wholesaler in town. Instead, I target the properties that have been sitting on the MLS for several months, particularly the ones that have not had recent price reductions. Once the DOM (days on market) goes past 90 days, you will find that the banks are much more willing to negotiate. Properties with high DOM are the ones that I tend to focus on, and the ones that I have gotten the biggest discounts on. I do even better with the properties that have been on the market for several months AND need a substantial amount of repair work. This combination is a recipe for getting a huge discount from the bank. The majority of the low-ball offers that Ive had accepted were on properties that had been sitting on the market for many months, and that needed a full-blown rehab. While there is always a chance that the bank will accept a low-ball offer on a property in good condition with low DOM, your chances of getting an acceptance are MUCH greater if you go after the junkers that have been languishing on the market for several months.
Q12: How do you decide how much to offer? What percentage of ARV (after repair value) are you making your offers at? Can you give an example of how you would come up with an offer if you were working in a neighborhood that you were unfamiliar with?
I do not ever look at the retail comps (comparable sales) when I am determining how much to offer, so ARV is not something I take into consideration when I make my offers. Instead, I look at the investor comps, which will be the lowest sales in the neighborhood. These sales will let me know what investors are currently paying for properties in a particular area, and will give me a good idea of where I need to be with my offers. For example, lets say I saw a property on the MLS thats in a neighborhood Im not familiar with. Its been listed for 200 days, and I want to make an offer on it. The list price is 69k. The first thing I would do is run a search in the MLS for properties that have sold in the last 30 days in this particular neighborhood. Lets say I end up with 5 properties which have sold for the following amounts: 89K 99K 110K 55K 53K 49K After quickly glancing at these numbers, my guess would be that the going rate for an investment property in this neighborhood would be right around 50k. This, of course, is just a ballpark figure, and is going to depend on the type of construction of the property, the condition it is in, the number of bedrooms and bathrooms, as well as the square footage.
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To get a better feel for the neighborhood, I would print out the list of comparable sales and go drive by all of them. I would also call other wholesalers and ask them if they had recently sold any properties in this neighborhood and if so, I would find out what price they ended up getting for them. While I was driving around looking at the comps, I would also call any For Rent signs that I saw and ask the landlords what prices they would be willing to pay for rentals in this area. After doing all of this, I should have a pretty clear picture of what constitutes a good deal in this neighborhood, (lets say 50k). When I go to make my offer, I would back out my wholesale fee of 5-10k and come up with an offer amount of around 40k. This is assuming that the property condition was similar to the other investor comps that I had driven by. If it was in much better condition than the other comps, I might offer a little more, and if it was a complete gut job, I would offer less. As you can see, coming up with your offer amount is NOT an exact science. There are formulas that you can use as a guide to arrive at your offer, but they are going to vary from location to location. In your market, investors may be looking to purchase properties at 60% of retail value, and in another market, they may be paying 70%. Your job is to find out what investors are paying for deals in YOUR market, and then go find deals that fit the same criteria. As a beginning wholesaler, figuring out what to offer is one of the most difficult and confusing aspects of wholesaling. When I was first getting started, it would take me hours (sometimes days) to determine the amount I should be offering on a property. Now that I know many of the neighborhoods in my city very well, it usually only takes me a few minutes to come up with an offer amount. This is a skill that takes time to develop- it does not happen overnight, so be patient. Once you start becoming more and more familiar with your target neighborhoods, it will become much easier for you to spot a deal.
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Q13: How do you estimate repairs?

As a wholesaler, it is always a good idea to learn as much as you can about the costs involved in a rehab, but it is not an absolute necessity to have every single cost nailed down to the penny. When I was just getting started, one of my greatest fears was that I was not going to be able to estimate repair costs accurately. I had no prior rehab experience, and the thought of learning the costs involved in rehabbing an entire house was extremely intimidating to me. What I soon found out was that the rehab costs on a property for one investor can vary GREATLY from that of another, depending on their exit strategy. Some of my buyers fix the properties and sell to retail buyers, while others do the minimal amount of repairs necessary to get them ready for a renter. In the first scenario, the rehabber might pay 12k to get a property ready to retail, while the landlord might only pay half as much to get the property in rentable condition. For this reason, when I am presenting a deal to my investors, I do not usually include an exact number for a rehab estimate- instead, I give them a general idea of the condition that the house is in, and let them come up with their own rehab estimate when they go out to inspect the property. Most of the investors I sell to are seasoned pros, and they are not going to rely on my numbers anyway- they prefer to do their own due diligence. If you are a complete novice and would like to get a quick education about how to estimate repair costs, my recommendation is to approach a rehabber at your local REIA meeting and ask if they would be willing to show you around one of their rehabs and give you a rundown of the costs involved. Make sure to compensate them for their time- the education you get will be well worth the money.
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Q14: Do you make offers on properties without going to look at them first?
Sometimes. If I am making an offer that is way below list price, and I know the neighborhood well, sometimes I dont bother going out to look at the property until I get a good counter offer back from the bank. For example, say there is a property listed for 100k, and I know I need to get it for 65k in order for it to be a good deal. I might start out by making an offer of 50k or 55k, just to see if the bank bites. If they drop their price substantially, then I will go out and look at the property and counter back accordingly. Most of the houses listed in the MLS have multiple photos, so you can usually get a general idea of what condition the property is in just by looking at those. Google Maps is also a really great tool you can use to get a feel for the street that the property is on without actually having to drive out and see for yourself. If I am making a blind offer on a property, I will check the pictures in the listing, as well as Google Maps, so I have a better feel for what I am offering on. I dont recommend making blind offers (or any offers at all, for that matter) until you have taken the time to study the neighborhoods that you are making the offers in. You need to know what constitutes a good deal in your target neighborhoods BEFORE you start making offers. Otherwise, how will you know how much to offer? Let me give you an example of what I mean: Lets say you havent done any research at all and you are going to start making offers on properties in the Sulphur Springs neighborhood of Tampa. You see a property on the MLS that is listed for 60k. Its a 2/1 700 sf frame house that looks to be in decent condition. You decide that you will toss out an offer of 30k, thinking that if the bank were to accept your offer of 30k right off the bat, that you would have a screaming deal since you are able to get it at
50% of list price. If you would have done your homework and talked to a few investors and/or wholesalers who are active in this neighborhood, you would have found out that theres no way you are going to be able to unload a 2/1 700 sf frame home in Sulphur Springs for 30k. Depending on the condition of the property, you might be able to get 20k, but not much more. If I were to have seen that same listing, I would have skipped right over it, because I know my buyers would want to buy that house for around 20k, meaning I would have to get it for 15k or less, and theres not much of a chance that the bank is going to drop their price from 60k to 15k. Do you see the point Im trying to make here? If you do your homework first, and spend some time getting to know a few of the neighborhoods intimately, it will be MUCH, MUCH easier for you when it comes time to make offers!
Q15: Im thinking about making 100s of blind, low-ball offers on REOs just to see if anything sticks. Do you think this is a good idea?
I think this is a horrible idea. I know a lot of people are looking for the easy way to make money in this business, but there really is no way around the fact that you are going to have to get out in the streets and get your hands dirty if you want to be a successful wholesaler. Now, Im not saying its impossible to get a deal or two by chucking a bunch of random, low-ball, offers at the wall, but you are most likely going to piss a lot of agents off in the process, and end up wasting a lot of time- both yours and everyone elses. Like I mentioned in the example above, if you havent taken the time to learn your neighborhoods, it makes it VERY difficult to make offers that make sense.
Even if you are offering 40 or 50% of list price, and your offers get accepted, there is still no guarantee that you have a deal. If you start getting offers accepted and then backing out of them because you cant find a buyer, you are going to quickly burn bridges with the REO agents, and that is the last thing you want to be doing. It might take more effort up front to do your due diligence and learn your neighborhoods, but once you do it, you will be able to make your offers with much more confidence, and your acceptance rate will increase dramatically. It took me a long time to figure this out, but once I decided to start learning neighborhoods, and finding out exactly what the active investors were looking for in these neighborhoods, things became much easier for me, and I finally started getting offers accepted and closing deals.
Q16: Can I use my own contract when submitting an offer on an REO?

No. Most of the banks will require you to submit your offer on a specific contract that has been approved by the Board of Realtors in your state. Where Im at (Tampa) they use the FAR (Florida Association of Realtors) As-Is contract. This is something that is going to vary by locale, so your best bet is to simply ask one of the REO listing agents which contract is acceptable when making offers on REOs. Once your offer has been accepted, the bank will send you their addendum which is basically a brand new contract that contains all of their stipulations. This addendum will override all of the terms in the initial contract, so be sure to read the fine print very carefully before you sign it. Some banks will require you to include their addendum with your initial offer. If this is the case, it is usually detailed in the realtor remarks section of the listing. To get a copy of the required addendum, you will have to contact the
listing agent and have them send it to you.
Q17: Do I need an earnest money deposit to make an offer on an REO? If so, how much is needed?
If you are going to be making offers on REOs, you are going to need an earnest money deposit. I normally offer 1k when making offers, but sometimes the banks will want more. If the bank requires a specific amount as an earnest money deposit, it will often say so in the Realtor remarks section of the listing, although sometimes they will just counter your offer with a higher deposit amount if they want more than what you are offering. Although the required earnest money amount will vary with each different lender, usually $500-$1000 will suffice. Keep in mind that the larger your earnest money deposit, the more appealing your offer will look to the bank. They definitely take notice when you are putting up 5k or 10k as an earnest deposit, and are often much more willing to negotiate when you do so. If it is not in your budget to offer a large deposit, dont worry, you can still get offers accepted by offering a smaller amount. If you have the cash available, though, it will definitely give you a competitive edge and make your offer stand out to the bank.
Q18: I read on your blog that you were broke when you first got started wholesaling REOs. How were you able to come up with an earnest money deposit if you were broke?
On my first few deals, I was able to quickly find an end buyer, get a deposit from them, and then use their deposit to give to the bank. I was able to pull this off because I already had a few cash buyers lined up and waiting for deals. I did my homework- knew exactly what type of properties they were looking for, what areas they wanted to buy in, and what prices they were willing to pay. When I was making my offers, I was making them with
these buyers in mind. Once I got a verbal acceptance from the bank, I would call my buyers and have them go by the property to let me know if they would be interested. By the time the bank got all of the paperwork to me (which sometimes takes several days), I already had a contract and deposit from my end buyer, and was able to use that deposit to give to the bank. This was not the easiest task to pull off, and I would NOT recommend trying to do this unless you have a back-up plan in place. There is always the possibility of your end buyer changing his/her mind about the property, or requesting to have their deposit held in escrow. If this happens, you are going to have to come up with the deposit yourself, unless you plan on backing out of the deal. If you back out of the deal, you are going to have a very angry REO agent, who is probably going to toss your offer in the trash can next time you send one in.
Q19: What if I want to make multiple offers? Do I need an earnest money deposit to submit with each offer?
No. I have made hundreds of offers on REOs, and have never had my earnest money check deposited BEFORE my offer was accepted. If you are working with a buyers agent, let them know that you plan on making multiple offers, and do not wish to have a separate check written out for each offer you make. You can also write the following clause into your offers, Earnest money to be deposited upon acceptance and ratification of offer. This way you do not need to worry about coming up with a deposit until you get one of your offers accepted.
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Q20: I want to make multiple offers on REOs. What happens if I get all of them accepted at once?
If you get all of your offers accepted at once, you are most likely offering too much. You should be making your offers low enough that if one or all of them were to get accepted, you could unload them quickly. If they are truly good deals, and they all get accepted, this should be a good thing! If you are unable to handle more than one deal at a time, and you get several offers accepted at once, you can simply explain to the listing agent that you will not be able to move forward with the deal because you got another offer accepted on a different property. The agent is probably not going to be too happy about it, but they cant force you to sign the banks addendum if you dont want to. The addendum is technically a counter offer anyway, since it contains all new terms and conditions from the ones that were outlined in your original offer, so you are well within your rights if you elect not to sign it. This is not something you want to make a habit of doing, but if youre in a pinch, it will get you out of having to sign contracts on multiple properties if you are not able to do so. If youre still worried about getting more than one offer accepted at once, you can always put an expiration date on your contracts. Most of the time the banks will ignore an expiration date with regards to giving you a response to your offer (they like to take their sweet old time getting back to you), but if you happen to get more than one offer accepted at once, and the expiration date has passed on the offers, you do not have to move forward with the deals if you dont want to. Again, this is probably going to tick the listing agent off, but it is still a legitimate way to avoid having to contract multiple deals at once if you are not capable of doing so.
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If you still dont feel comfortable making multiple offers, you can simply make them one at a time, wait for a response from the bank, and then move on to the next one.
Q21: I want to make a cash offer on an REO and the listing agent is telling me I need to submit proof of funds with my offer. Is there any way around this?
No, not really. If you are making a cash offer, the bank is going to want to see proof that you actually have the cash to close. Most banks will not even look at your offer unless it is accompanied by your proof of funds. If you have the cash in your bank account to close the deal, you can submit a copy of your bank statement as your proof of funds. A statement from a line of credit will also work, as will a letter from a private lender. If you do not have access to any of these resources, you can obtain a free proof of funds letter to submit with your offers from a transactional funding source such as FundThisWholesaler.net. There is no credit check or income verification required to obtain a proof of funds letter from FundThisWholesaler.net- all you have to do is go to the website, click on the Proof of Funds tab, fill in the required information, and a proof of funds letter will be emailed to you instantly. I will go into more detail about transactional funding later on in the eBook.
Q22: I heard that some banks will not accept a proof of funds letter from a transactional funding source when I am making a cash offer. Is this true?
Yes, it is true. Most banks will accept them, but some will not. Each bank will have different requirements as to what they will and will not accept as proof of funds when you are making a cash offer.
Some banks do not consider transactional funding or hard money to be the same as cash, so they will not allow you to submit a cash offer using a letter from either of these sources. In such cases, there is not a whole lot you can do to change the sellers mind, so unless you can come up with a proof of funds that is acceptable to them (a bank statement, for example), you will have to either move on to the next deal, or submit your offer using a financing contingency instead of making it a cash offer. Like I mentioned- every lender is going to have different requirements regarding proof of funds, so your best bet is to just submit the offer and see what they say- after all, the worst that can happen is that they say no. When I first started making offers, I was using a generic letter from a national hard money lender as my proof of funds. This worked most of the time, but sometimes the listing agent would come back and inform me that the seller would not accept my offer as a cash offer because my letter did not satisfy their criteria. In such cases I would just resubmit the offer using a financing contingency instead. Eventually, I started using a statement from one of my Dads lines of credit. This worked just fine even though the name on the statement was not mine. There were very few times that anyone questioned me about it, and on those rare occasions, I just explained that the statement belonged to a money partner that I use on all of my deals. This answer always satisfied the seller, and I never had a problem submitting any of my offers this way.
Q23: I do not have the ability to close on a deal if I cant find an end buyer. How can I structure my offer so that I can back out of the deal and get my earnest money back if I cant find a buyer?
Most people are going to tell you that you should not be offering on properties if you do not have the ability or intention to close on them. While I agree 100% with this sentiment, I know that many of the people reading this eBook do not
have the ability to close on a property unless they find an end buyer to wholesale it to. I was in the same position when I started making offers, and because I did not have the ability to close on deals unless I found an end buyer, I would not put anything under contract with the bank unless I had a buyer lined up to purchase it first. I accomplished this by shopping my deals to my end buyers while I was still negotiating with the bank. If I got a good counter offer back from the bank, I would call up my buyers and have them go out and look at the property and let me know what their number was. Once I knew what price they would pay for the property, I would go to the bank and counter them back accordingly. For example, lets say I made an offer of 60k on a property that was listed for 100k, and the bank countered my offer at 75k. Because I had already taken the time to study the neighborhood that this property was in and to line up a few cash buyers who were looking for deals in this area, I knew that 75k was a pretty good price. At this point I would call up my investors and ask them what they would be willing to pay for the property. Lets say one of my investors told me they would pay 75k for it I would then go back to the bank and make a counter offer that would leave room for me to profit on the deal. There are plenty of people who will tell you that you should NEVER give out the property information before you have the property locked up with the bank because you run the risk of your buyer going around you and cutting you out of the deal. While I acknowledge that there is a risk involved in doing your deals this way, I was willing to take my chances because I did not want to put my name on a contract knowing that I was just going to back out of it if I couldnt find a buyer. If you are worried about your buyers going behind your back, you can always give them a general description of where the property is located, how many bedrooms and baths it has, and the general condition it is in, and see if it is something that they might be interested in. Then, once you have the signed
contracts from the bank, go ahead and give them the physical address of the property. Your other option is to put the property under contract, and add an inspection or financing contingency to your offer to protect yourself in the event that you can not find an end buyer. If you decide to go this route, just keep in mind that if you start putting deals under contract and then backing out of them using your inspection or financing contingencies, you are going to quickly develop a bad reputation with the REO agents.
Q24: I plan on adding an inspection contingency to my offers, and then backing out before the inspection period is up if I cant find a buyer. Will I get my earnest money deposit back if I do this? If so, what do I need to do to get my deposit back?
Like I mentioned in the previous section, I do not advocate running around tying up properties and then backing out if you cant find a buyer. Nevertheless, here is your answer.. Yes, you will get your earnest deposit back if you cancel the contract before the inspection period is up. Usually you will have to submit something in writing to the listing agent and/or the title company letting them know that you are cancelling your contract because the property didnt pass your inspections. Make sure to read the banks addendum carefully, as it will usually state exactly what you need to do if you want to cancel due to failed inspections.
Q25: I heard that most banks include an inspection period in their addenda. Is this true?
Yes, most of the time, the banks addendum will include an inspection period, usually ranging from 3-10 days. Because the banks addendum supersedes the terms in the initial contract, this means that you could decline an inspection period in your initial offer, but then end up getting one anyway. Not all banks include an inspection period in their addendum, but most do.
Q26: How long should I give myself to close?

Even though the banks will normally need between 30-45 days to get the title work done, they still like to see that you are able to close the deal ASAP, and thus your offer will be much more appealing to them if you are offering a quick closing. I normally offer to close in 5 days, knowing full well that theres no way the bank will be able to get the deal closed that fast. Most times, when I am offering a five day closing, the bank will change it from 5 days to 30 when they send me their addendum. If you dont feel comfortable offering a quick closing, then go ahead and give yourself as much time as you need, although you probably do not want to go over 30 days, especially if you are making a cash offer.
Q27: How can I write my offer so that it has the greatest chance of getting accepted by the bank?
Cash offers carry FAR more weight in the eyes of the bank than financed offers do, so if at all possible, try to make your offers cash as opposed to using a financing contingency. Just to give you an example- the listing agent on the last REO I got under contract told me that the bank had an offer that was 11k higher than mine, but they accepted mine because it was all cash, and the other offer included a financing contingency. Bottom line- if you want to be competitive with your offers- you need to be offering CASH. The banks also like to see offers free of contingencies. If you must use an inspection contingency, try to keep the inspection period as short as possible. If you make an offer with a 30 day inspection period, the bank is not going to take your offer too seriously. Try to keep it under 10 days if at all possible.
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Large earnest money deposits are another way to get the banks attention, particularly if you are making a cash offer with no contingencies. Nothing says you are serious like a large, non-refundable earnest money deposit. One last way to increase your chances of getting an accepted offer is to give both sides of the commission to the listing agent. I can tell you from experience that many Realtors will often go the extra mile to get your offer pushed through if they know they are getting two sides of the commission as opposed to one. When I first started making offers, I was submitting them through a buyers agent, thus giving the listing agent only half of the commission. Eventually, I ended up taking the advice of a very successful REO wholesaler, and started making my offers directly to the listing agents instead. Doing this made a noticeable difference in my acceptance ratio (for the better). Keep in mind that many REO listing agents will not be willing to show you properties and/or write up contracts for you, so you will need to have your ducks in a row if youre going to be submitting offers directly through them. When I make my offers to the listing agents, I write up the contract myself and submit it along with my proof of funds letter and a copy of my escrow check. I make it as easy on them as possible, so they are essentially collecting a double commission for doing next to nothing. If you want to submit your offers directly to the listing agents, and do not know how to properly fill out the contracts, my recommendation is to use a buyers agent until you become familiar enough with the contracts to fill them out on your own.
Q28: How long does it take the bank to respond when you make an offer?
Usually they will get back to you within 3-7 days, but sometimes it takes longer. A lot of times, if the bank rejects your offer, the agent wont bother to call and tell you. If a few weeks have gone by and you havent heard back, its probably safe to say that your offer was rejected.
I usually wait 3-4 days after I make an offer, and if I havent heard anything back, I will make a follow-up call to the agent to check the status. Aside from getting the status of my offer, I also use these calls as an opportunity to chat with the REO agents and build rapport. Building relationships with the REO agents is something that you should ALWAYS be working on. Once you have proven yourself to be a credible buyer, the agents will often go out of their way to convince the asset managers to accept your offers, and will also give you a heads up on new properties that are coming on the market, as well as price reductions that are about to be made. Having access to this information will give you an edge over your competition, and will allow you access to deals that are not available to everyone else.
Q29: I made an offer and the listing agent came back and said they want my highest and best. What does that mean?
Many times, especially when a property hits the market at a really good price, or when there is a substantial price reduction, there will be multiple offers submitted on the same property. In these instances, the listing agent will inform everyone who made an offer that the bank is looking for their highest and best. Once everyone submits their highest and best offer, the bank will review all of them and select the one with the most attractive price and terms. Many people will get into a bidding war mentality when this happens, and often the property will get bid up way over list price. Just make sure to stick to your numbers, and dont offer anything more than what you feel comfortable with when they ask you to submit your highest and best.
Q30: If your offer is rejected, do you resubmit it? If so, how long do you wait before you resubmit?
When I make an offer on a property and it is rejected, I keep resubmitting the same offer (or sometimes a lower one) every 3-4 weeks. I keep offering on the property until either I get it, or someone else does.
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I have scored some of my best deals on properties that I have made repeated offers on. I have had banks flat-out reject my offer one month, and then accept a lower offer from me the next. You just never know when the bank is going to change their mind and be willing to drop their price, so be sure to keep following up with your offers until the property is gone.
Q31: How many offers do you have to make, on average, to get an acceptance?
It depends on how well you know your market and how strong you are making your offers. When I first started making offers on REOs, I made over 120 before I scored my first deal. This was mostly due to the fact that I didnt really know what I was doing, hadnt taken the time to study my market, and was making my offers way too low and including too many contingencies. I was basically just shooting out random, low-ball offers and crossing my fingers in hopes that I would get lucky. This was an EXTREMELY ineffective approach, and I soon realized that I needed to take some time to learn a few neighborhoods and line up a few buyers before I started making offers again. Once I started becoming more familiar with market values, and figuring out what prices investors were willing to pay in certain neighborhoods, I was able to make my offers with much more confidence. I soon dropped the contingencies from my offers, and as a result, my acceptance rate got much better. I went from getting one offer out of 120 accepted, to getting an average of 1 in 20 accepted over the course of the next year. This improvement was not just a coincidence- it was the direct result of me taking the time to study my market and find out what the active investors were looking for. There is definitely a learning curve that you will have to work through, so dont
get discouraged if it takes some time before you get your first offer accepted and to the closing table. This is normal, and its something that every wholesaler goes through in the beginning.
Q32: How many offers do you make each week? How do you keep track of all of your offers?
My goal is to make 3 offers every day, although sometimes I get lazy and fall short. Like many other aspects of real estate- making offers is a numbers game, so the more offers I make, the more deals I close. I use a simple spreadsheet that I created in Microsoft Works to help keep track of my offers. I have 7 different columns that I fill in every time I make an offer: Property address Listing agent Lockbox code List price Offer price Result (rejection, acceptance, counter, etc.) Date of offer It only takes a minute for me to fill in the required information, and doing so helps me stay on top of all of my offers, and also makes it easy to keep track of when its time to resubmit offers that were previously rejected.
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FINDING THE BUYER

Q33: What are they best ways to find a buyer/build your buyers list?
I recommend having a few solid buyers lined up BEFORE you start making offers. Nothing is more stressful than getting an offer accepted and then having to scramble around looking for a buyer. Having one or two investors waiting in the wings for deals will make the wholesaling process much easier on you. Following are the methods that I use on a continual basis to grow my buyers list.
Handwritten Bandit Signs

This is, by far, the most effective strategy I use to find buyers. I use 1218 blank, white, corrugated plastic signs, and write on them with black or red permanent marker. I get my signs from a local sign shop, but there are plenty of online sources, such as Banditsigns.com, where you can order blank signs on the cheap. One of my typical signs looks like this:
(Ive found through trial and error that adding the phrase Cash Only is a great way to weed out the tire kickers.)
Once I get a property under contract, I place between 10 and 20 signs in and around the neighborhood where the property is located. If I dont have any deals of my own to market, I will sometimes contact a few of the other wholesalers in town and see if they have properties that I can market for them. These signs ALWAYS get my phone ringing. Once your phone starts ringing, you want to make sure that you arent just giving out the property address and then hanging up. You want to get as much information from the caller as possible. Find out what type of deals they are looking for- what part of town they like to invest in, the price range they want to be in, etc. Even if they dont wind up buying this particular deal from you, you will want to add them to your buyers list and call them up next time you get something that fits their criteria. If youre going to be using signs to market your deals, make sure to check your local ordinances, as some areas have restrictions on where signs can and can not be placed.
Research Cash Sales in the MLS

If you want to know who the active cash buyers are in a particular neighborhood, do a search in the MLS (or have someone do it for you) for recent cash sales. Like I mentioned earlier, all MLS systems are set up differently, so you may have to play around with yours to figure out how to search for cash sales. In my MLS, there is a field that you can add to your searches termed, Sold Terms. This allows you to see how a property was purchased (e.g. cash, conventional loan, private lender, etc). When I do my searches, I usually only go back 2 weeks, and I look for the lowest cash sales in the neighborhoods that I am working in (these will most likely be investor purchases).
Once I get a list of the houses that have recently sold for cash, I take a drive out to each of the properties. Nine times out of ten there is either a rehab crew on site, or a For Sale or For Rent sign in the front yard. If there are people working on the house, I will stop in, introduce myself, and leave a business card. If there is a For Rent or For Sale sign in the yard, I will call the number and strike up a conversation with the investor to see if they are looking for more homes in the area. If so, I find out what type of deals they are looking for and then add them to my buyers list. If you want to keep your buyers list as fresh and current as possible, I recommend doing this at least once every month.
Utilize Other Wholesalers

Many times, when I am not able to unload a deal to any of my own buyers, I will call up some of the active wholesalers in my market and ask them if one of their buyers might be interested in the property. Probably half of the deals I have closed over the last 2 years were JV deals (joint venture deals) with other wholesalers, where either I found a buyer for one of their properties, or they found a buyer for one of mine. How you structure your deal when another wholesaler is involved is totally up to you- you can do a 50/50 split, or you can tell them the price that you need to net, and have them add their fee on top of your price when they market it to their buyers. If the other wholesaler is a licensed agent, you can pay them their fee as a commission when the deal closes. If they are not licensed, they can simply put the property under contract with you, and then assign that contract to their end buyer and collect an assignment fee at closing.
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Call For Rent Signs in Your Target Neighborhoods

One of my favorite ways to find buyers is by calling For Rent signs in the neighborhoods where I am trying to sell deals. Most of the investors I sell to are landlords, and calling For Rent signs is one of the best ways I know of to find more landlord buyers. When I call the investors, I am totally honest with them- I tell them I am a wholesaler who has been getting some great deals in the neighborhood, and was wondering if they were looking for any more rentals in the area. If so, I find out exactly what type of deals they are looking for, and ask them if it would be OK if I gave them a call next time I have a deal that fits their criteria. While cold calling investors might seem a little intimidating at first, it will get easier and easier the more you do it. Ive made a lot of money selling deals to investors who I found in this manner, so I always make a point of calling any For Rent signs I see when I am out looking at properties.
Craigslist.org
Theres no cheaper or easier way to build your buyers list than by posting your deals on free online classified sites such as Craigslist.org. If you dont have any of your own deals to advertise, you can contact some of the other wholesalers in your area and ask them if you can market one of theirs. When I am marketing a property on Craigslist, I try to post at least two ads each day until the deal sells. Craigslist wont let you post duplicate ads, so you will have to change the wording a little bit if you want to post more than once daily. My Craigslist ads usually look something like this:
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INVESTOR SPECIAL. MUST SELL! Great deal in South Tampa! 3/2 1200 sf concrete block home. Needs minor cosmetics Asking 45k CASH ONLY Call 813.123.4567 for details. If you dont have any of your own deals to market, and you cant find any wholesalers who have deals for you to sell, you can always place a generic ad on Craigslist that says something like this: CASH INVESTORS WANTED! Local wholesaler seeks CASH BUYERS to purchase investment properties at 50-60% of market value. Call or email Steph for details: 123.456.7890 The great thing about Craigslist is that its free, so you can always switch up the wording in your ads to see what works and what doesnt. Keep in mind that ads can be hit or miss, so dont get discouraged if you post an ad and dont get any responses. If you are consistent and make a habit of posting one or two ads daily, you will start getting calls and emails, and your list will begin to grow.
Attend Your Local REIA Meetings

REIA meetings are a great place to network with other investors and wholesalers in your market. There are usually at least one or two active buyers at these meetings, and you want to do your best to connect with them. Try to find out as much information from them as possible about the kind of deals they are looking for- what areas they prefer to buy in, how much are they willing to pay for houses in those areas, etc.
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If there are other wholesalers at the meetings, introduce yourself and see if they have any deals that you can market for them. Like I mentioned earlier, selling deals for other wholesalers is a great, risk-free way to build your buyers list, get to know new neighborhoods, and possibly make some money while youre at it.
Call We Buy Houses ads or signs

When I was just getting started, I would grab a paper or hop on Craigslist and go down the list of We Buy Houses ads, call all of them up, and introduce myself to whoever answered. I was intimidated at first, but after awhile I became very comfortable doing it, and I ended up making a lot of good connections while making those calls. Many times, the ads were placed by other wholesalers, and this is one of the ways that I was able to build the large network of wholesalers who I joint venture with on deals today.
Q34: How many buyers should I have on my list before I start making offers? How many buyers do you have on your list?
When it comes to your buyers list, keep in mind that quality is much more important than quantity. I know of wholesalers who have thousands of names on their list, but the reality is that only a handful of the people on it are actually buying properties. While I do recommend having buyers lined up before you start making offers, I dont want to give you the impression that you need a humongous list before you get started. I usually only have five or six active buyers on my list at a time, and I keep selling to them over and over until they either stop buying houses, or run out of money. Once they stop buying, I go out and find more people to sell to. Dont get hung up thinking you have to have a huge list before you can get started- instead, focus on getting a handful of quality buyers, find out exactly
what type of deals they are looking for, and then go out and find deals that fit their criteria.
Q35: What Questions do You Ask Your Buyers When You are Finding Out What Type of Properties They are Looking for?
I dont have any sort of script that I use when Im talking to new buyers- I just try to get as much information as possible from them about what they are looking for in a deal. The most important things I want to find out from my prospective buyers are as follows: How are they purchasing the property (cash or financing)? What areas of town do they like to buy in? What price range are they looking to buy at in those areas? Do they prefer any particular type of construction (concrete block, wood frame, etc)? Is there a minimum amount of bedrooms or square footage that they require? Those are the five most important details that I am interested in, but I will also try to find out other information from them if I can. I always try to get either their first and last name, or the address of one of their investment properties. Once I get this information, I can look them up on the property appraisers website and get a much better idea of the type of properties they are looking for, and the prices they are willing to pay for them. I want to get a clear picture in my mind of exactly what kind of deals my buyers are looking for. Once I have that figured out, I head to the MLS and start making offers on properties that I think they would be interested in.
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Q36: How do you Get the Buyer Inside the Property to View it?
This is another instance where having your license, or being an assistant comes in handy. Most of the REO properties have coded lockboxes, so you will need to get the code from the listing agent in order to get inside. Some of the agents will not give the code to you unless you are a licensed agent, but most of the time, especially when it comes time to do your inspections, the agents will just give you the code so you can get inside the property and do what you need to do. If you are having problems getting access to the properties, Id recommend either getting your license, or befriending someone who has their license so you can get inside the houses when you need to. This will make your life much easier once you start putting deals under contract and shopping them to prospective buyers.
Q37: What Should I Tell Prospective Buyers When They Ask Me if I Own the Property?
I always tell my buyers exactly what is going on- I have the property under contract with the bank, and will be selling it to an end buyer on the same day that I purchase it. It rarely happens, but if I have a buyer who is confused about the mechanics of the transaction, or is questioning the legality of it, I will refer them to the attorney who owns the title company I use so he can answer any questions that my buyer may have. The last thing you want to do is lie to your buyer and tell them you own the property. Most savvy investors are going to look the property up in the county records anyway, and can easily find out that it is bank owned. Theres no better way to burn your relationship with a new buyer than by lying to them right off the bat (or ever, for that matter), so just be honest and upfront with them from the start so there are no problems down the road.
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Q38: What if my buyer sees that the property is listed on the MLS for less than what I am selling it for?
Most of the buyers that I work with do not care what the list price is of the properties I am selling to them. They are looking for a good deal, and if I am offering them a deal that fits their criteria, they dont give a hoot about list price. That being said, there ARE buyers out there who will have a problem with you making too large of a profit, and who will refuse to purchase something from you (even if it is a great deal) if your price to them is higher than list price. Theres not a whole lot you can do to prevent this from happening, and while the majority of the investors will not care about list price, just keep in mind that some will. In such cases, I simply cross the buyer off of my list and move on to the next one. There are plenty of buyers out there who dont care about anything but the numbers, and those are the ones that you want to be selling to.
Q39: Do you get a deposit from your end buyer? If so, how much?
ALWAYS, ALWAYS, ALWAYS get a deposit from your end buyer. Do not ever accept a contract unless it is accompanied by an earnest money deposit. If I am working with a buyer for the first time, I will require that the deposit be in certified funds (cashiers check or money order). Unfortunately, I didnt learn my lesson the first time a buyer wrote me a bad deposit check, but the second time it happened, I put my foot down. Now I will NEVER accept a personal check from a buyer unless I have closed several deals with them and they have proven to me that they are trustworthy and reliable. I always collect a 2k deposit from my buyers. NO EXCEPTIONS. The deposit is due when the contracts are signed. Many buyers will prefer to have their deposit held in an escrow account at their
attorneys office or title company. In these cases, make sure you call the title company and verify that the deposit has actually been made. Dont just take someones word for it, or you are likely to get burned. Ask me how I know.
Q40: Do you put any special contingencies in your contract between you and your end buyer?
My contracts with my end buyers are as-is with no contingencies allowed for financing or inspections. I include the following clauses in my contract when I am selling a bank owned property to an end buyer: Purchase price is net to seller. Buyer is responsible for paying all closing costs incurred in this transaction. Closing to be held at the title company of Sellers choice. This sale is contingent upon Seller obtaining clear title and purchasing the subject property from (INSERT LENDER NAME HERE). Purchaser shall not assign this contract without the express written consent of the Seller. You want to make sure that the closing dates in your contract with your end buyer mirror the closing dates in your contract with the bank. Make sure to read the fine print in the banks addendum, as many of them will contain a clause that states that their contract will automatically be extended if the bank is not able to close on time. If the bank has an extension built into their contract with you, then you need to include the same extension period in your contract with your end buyer. If you dont include this in your contract with your end buyer, and the bank is not able to close on time, your buyer can walk away (with his deposit), while you are still on the hook with the bank.
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You will want to consult with a local real estate attorney in your area to make sure you have everything you need in your contract to properly protect yourself. It may cost you a few hundred dollars, but this is something you do not want to skimp on.
Q41: How do you screen your buyer to make sure they are for real? How do you know they are actually going to close?
If your buyer is paying cash, ask to see their proof of funds. If they are getting financing, get their lenders contact information and call them up to verify that the financing is indeed in place. Like I mentioned previously- ALWAYS collect a non-refundable deposit from your buyer when you sign the contracts. No exceptions. This way if they walk from the deal, they forfeit their deposit and it goes right into your pocket. I have found that getting a large non-refundable deposit is one of the best ways to separate the tire-kickers from the serious investors. The real buyers will have no problem coughing up the deposit, and will be much less likely to walk from the deal when they have their money on the line.
Q42: What happens if my buyer backs out the day of closing? Am I still on the hook to buy the property?
It depends on what your contract says, and what contingencies you have in your offer. If your buyer backs out the day of closing, and you made your offer with no contingencies, or you used an inspection contingency and the inspection period has passed, then you are either going to have to purchase the property yourself, or back out of the deal and lose your earnest money deposit, along with your credibility with the listing agent. If you are not able to close on the deal yourself, you can try to get an extension from the bank to give yourself more time to find another end buyer. In most cases, however, the bank will charge you a per diem fee (usually $50-$150/day)
for every day you go past the closing date. The banks addendum will usually include information about extending your contract and how much it will cost you to do so. If you made your offer with a financing contingency, and you are not able to get funding from your lender, then you should be able to get out of the contract and get your deposit back. In such cases, the details will be spelled out in the banks addendum, so make sure to read it carefully.
Q43: If I made an all cash offer with no contingencies, and my buyer backs out of the deal, can the bank force me to purchase the property?
No, they cant force you to close on the property if you do not want to. Like I stated above, if the bank is ready to close on the date specified in the contract, and you are unable to do so, you can either try to get the contract extended or you will have to back out of the deal and lose your earnest money deposit.
Q44: My end buyer wants to use conventional financing. Will this work, or do they need to be a cash buyer?
Most conventional lenders will NOT fund an REO wholesale flip. If you want to line up financing for your end buyer, your best bet is to find a small local bank or hard money lender who is not going to have title seasoning requirements. Make sure you explain to the lender that you are going to be selling the property on the same day that you are buying it. You want to be very clear with them and let them know exactly what is going on with the transaction so there are no surprises once closing time comes.
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SETTING UP THE CLOSING Q45: Can you assign an REO contract to your end buyer?
No. 99% of the banks will include a clause in their addendum that states that you are not allowed to assign your contract. If you try to submit an offer with and/or assigns after your name, the bank is going to reject your offer in a hurry.
Q46: If you cant assign your contract, then how are you able to wholesale your deals to your end buyer?
I close my REO wholesale deals at my own title company using a simultaneous closing. When a simultaneous closing takes place, two separate transactions occur at the same time- the transaction where I am purchasing the property from the bank (the A-B sale), and the transaction where I am selling the property to my end buyer (the B-C sale). The funds from my end buyer are used to fund both the A-B and the B-C transactions, so I do not have to bring any money to the closing table.
Q47: The banks addendum says that I have to use their title company. How are you able to close your REO wholesale deals at your title company?
While most of the banks will stipulate in their addenda that you must use their title company to complete the title work and prepare the closing documents, in most cases, you can do the actual closing wherever you want to. Once the banks title company completes the title work and has all of the closing documents prepared for the A-B transaction, I let them know that I prefer to sign everything at my title company. I then request for them to email
the title commitment, closing documents, and wiring instructions for the A-B transaction to my title company. I tell them that my title company will do a courtesy closing for them, which means that they will get all of the closing documents signed, and collect the funds for the A-B purchase. Once everything is signed and funded, my title company will FedEx the signed documents back to the banks title company and wire them the funds for the A-B purchase. I do not EVER tell the listing agent or the banks title company that I am flipping the property on the same day via a simultaneous closing. Trust me when I tell you that this will only cause confusion. The only parties that know about the B-C transaction are my title company, my end buyer, and me. The B-C sale between my buyer and me is a totally separate transaction which is handled by my title company. The banks title company has nothing to do with this transaction, and so I do not ever tell them that it is taking place. There is no need to do so. The key to closing deals in this manner is to have an investor-friendly title company on your side who is familiar with this type of transaction. They will handle all of the title work for the B-C sale, and will coordinate the two closings so that both deals get closed at the same time. If you decide to close your REO wholesale deals in this manner, you will need to have your title company lined up ahead of time. DO NOT, I repeat, DO NOT wait until after you have an REO under contract to start looking for a title company who will close your deal. You need to have your closing strategy lined up ahead of time or you will find yourself running around like a chicken with your head cut off.
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Q48: What is the best way to find an investor-friendly title company who will do a simultaneous closing?
The best way to find a good title company is to ask for a referral from someone who is actively doing REO wholesale deals in your market. That is how I found mine- I sought out the wholesalers who were doing the most volume and I asked them who they were using. Peer Title in Tampa was the recommendation that I was given, and I have been with them ever since. If you grab the phone book and start cold calling random title companies and asking them if they perform simultaneous closings, you are most likely going to get a lot of negative feedback. Most title companies do not do simultaneous closings, and many do not even know what they are. Save yourself the headache, and just ask someone who is active in your market for a referral. Where Im at (Tampa), there are several title companies who will perform simultaneous closings, and as a result, this is how the majority of the wholesalers in my city close their REO wholesale deals. In other parts of the country (CA, for example), you may be hard pressed to find a title company who will do a simultaneous closing. If this is the case in your area, you need to seek out the wholesalers who are actively flipping REOs and find out how they are getting their deals closed. Theres no need to reinvent the wheel- its much easier to find out what everyone else is doing, and then do the same.
Q49: What if I cant find a title company who will do a simultaneous closing?
If you are unsuccessful in finding a title company who will do a simultaneous closing- not to worry- you have other options! Following are four other methods you can use to close your REO wholesale deals:
Double Closing
A double closing is the same as a simultaneous closing, except when doing a
double, you have to bring funds to the closing table to fund the A-B transaction between you and the bank. If you do not have the cash to fund the deal yourself, you can borrow funds from a transactional funding source such as FundThisWholesaler.net. There is no credit check or income verification required when you are using a transactional lender. The only stipulation is that you have to have an end buyer lined up to purchase the property from you immediately after you close with the bank. Transactional funding sources will not fund your deal unless the end buyer is in place and ready to purchase the property. Keep in mind that if you decide to do a double closing and use a transactional lender to fund the A-B sale, there will be fees associated with borrowing the money. You want to be sure to factor these costs into your numbers when formulating your offer.
Quitclaim Method
Another way to wholesale your REO to your end buyer is to have them added to your purchase contract and then give them a quitclaim deed (this will remove you from the title) immediately after closing in exchange for your wholesale fee. Once you have the property under contract with the bank and an end buyer lined up, contact the listing agent and let them know that you need to add your partner onto the purchase contract. Either you or the listing agent will need to draw up an addendum that reads: Buyer and Seller agree to add (INSERT END BUYERS NAME HERE) as an additional buyer to the purchase contract for (INSERT PROPERTY ADDRESS HERE) . Once the addendum is drawn up, it will need to be signed by both you and the seller.
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On the day of closing, your buyer will show up with two checks- one for the purchase of the property, and one for your wholesale fee. Once the closing is over, your end buyer will give you your wholesale fee in exchange for a quitclaim deed which will remove you from the title. If you decide to go this route, be aware that there is no guarantee that the bank will allow you to add on an additional buyer once the contracts are already signed, so make sure to have a backup plan in place in the event that the bank refuses. Another point to consider- if for some reason your buyer backs out of the deal, you are going to be stuck with their name on the contract. This is going to be a problem if/when you end up finding a new end buyer. You would then have to draw up another addendum to remove the original buyer from the contract, and add the new buyer in their place. While I have never found myself in this position, my guess would be that there is no way the bank is going to allow you to add a second name to the contract. I closed my first 3 REO wholesale deals using the quitclaim method, and while all three of them closed without a hitch, I decided to switch to simultaneous closings because of the potential problems that could arise when using a quitclaim.
The LLC Method

Another way to wholesale your REO deals is to make your offers in the name of an LLC , and then sell your rights to the LLC to your end buyer in exchange for your wholesale fee. In this case, you would not be selling the property to the end buyer, but rather the LLC which owns the contract to purchase the property. In most cases, you will not need to actually form the LLC until your offer has been accepted. Once accepted, you can form your LLC online using a service such as Incorporate.com.
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The fees for forming an LLC are going to vary by state, so this is something you will want to take into consideration if you decide to go this route. Many of the banks will require you to submit the Articles of Organization for your LLC once your contract is accepted, but every once in awhile they will request for them to be submitted with your initial offer (of the 100s of offers Ive made, Ive only had this happen once). In the event that the agent requests the Articles of Organization be submitted along with your offer, you can simply explain that you set up new LLCs for every property you purchase, and that you will form a new one for this property upon the banks acceptance of your offer. If they do not agree to this, you can either go ahead and set up the LLC and submit the required documentation with your offer, or just move on to the next property.
The Land Trust Method

Similar to the LLC Method, you can make your offers in the name of a Land Trust, and then assign the beneficial interest in the Land Trust to your end buyer in exchange for your wholesale fee. Just like the LLC method, you are not actually selling the property to your end buyer, but rather the entity which owns the contract to purchase the property. In both cases, there is only one closing taking place, so there will only be one set of closing costs to pay. If you decide to use either the LLC or the Land Trust method, the necessary paperwork is going to vary depending upon which state you are in, so you will want to contact a real estate attorney in your area to draw up the proper documents for you.
Q50: Are there two sets of closing costs when you are doing a double or simultaneous closing? If so, who is responsible for paying them?
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When you are doing a double or a simultaneous closing, two separate transactions are taking place, so there will be two separate sets of closing costs involved. For the A-B transaction between you and the bank, you will need to check the addendum that the bank sends you to see which costs they are covering and which fees you will be responsible for paying. These fees can vary greatly from state to state, and title company to title company, so your best bet would be to ask around to some of the REO agents in your area to get an idea of what sort of fees you are going to be looking at when you close on a bank owned property. The closing costs you will be responsible for paying on the B-C transaction between you and your end buyer will depend upon how you negotiate the deal and write up the contract. I always sell my deals at a net price to me, which means that my buyer is responsible for paying all of the closing costs on the second transaction. You may or may not be able to get your buyer to agree to this, but by structuring your deals in this manner, you will save quite a bit of money on closing fees.
Q51: How long does a typical REO deal take from the time you submit the offer to the time you collect your check?
I would say the average time from start to finish would be somewhere around 30-45 days. The fastest I was ever able to close an REO wholesale deal was just under 2 weeks, and the longest one took over 3 months. In general, the REO listing agents, asset managers, and the banks title companies move VERY, VERY, SLOWLY, and they are rarely able to close on the date specified in the contract. Most times, you will need to sign at least one contract extension because the bank and/or their title company does not have everything ready to close. When dealing with REO properties, be prepared to hurry up and wait. It just comes with the territory.
DEAL ANALYSIS Q52: Can you give examples of some of the deals youve done, including list price, contract price, DOM, and your sales price to your end buyer? Sure 10108 Brooks St. Tampa, FL 33612
DOM: 327 List Price: $64,900 Contract Price: $50,000 Repairs Needed: Full Rehab Sold price: Sold to cash buyer for $65,000 This property started out listed at $121,000. There were 12 price reductions over the course of the 327 days that it was listed. When I got my offer accepted at 50k, it was the third offer I had made on this property over the course of 3 months. The first two times I made the exact same offer and the bank rejected them without countering. I sold the property the same day I got it under contract to a rehabber who I knew was looking for concrete block homes in this neighborhood and price range. I closed this deal at my title company using a simultaneous closing.
8315 Libby Lane Tampa, FL
DOM: 153 List Price: $73,500 Contract Price: $58,000 Repairs Needed: New roof, paint and carpet, cosmetics Sold Price: Sold to cash buyer for $65,000
This property started out listed at $100,000. There were 2 price reductions during the 153 days that it was on the market. The Realtor had it listed as a 2/1 in the MLS, when in actuality, it was a 3/2. If it was listed as a 3/2, there probably would have been much more competition for it, so the agents goof worked out in my favor. This taught me not to narrow my search in the MLS to just 3 and 4 bedroom homes, but to search by minimum square footage instead. I sold this property the same day I got it under contract, to one of my landlord buyers that I found by calling For Rent signs. I had recently sold him a similar property right up the street so I knew he would be interested at this price. On this deal, I added my buyer onto my purchase contract, and then quitclaimed myself off after closing in exchange for my $7,000 fee.
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10208 N 17th St. Tampa, FL
DOM: 32 List Price: $34,900 Contract Price: $22,000 Repairs Needed: Cosmetics- paint and carpet Sold Price: Sold to cash buyer for $31,500 This property was only listed for 32 days, with no price reductions. The listing agent on this one let me know that the bank was about to drop the price, so I was able to get my offer in and accepted before anyone else got to it. I had recently sold a similar property in this neighborhood for $35,000, so I knew I had a great deal if I got it at $22,000. Another wholesaler sold this property to one of his cash buyers and we split the profit 50/50. This deal was closed at my title company using a simultaneous closing.
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2018 Clarice Cr Tampa, FL 33619
DOM: 49 List Price: $63,900 Contract Price: $44,000 Repairs Needed: Cosmetics Sold Price: Sold to cash buyer for $49,000 This property started out listed at $75,900. There was 1 price reduction in the 49 days that it was listed. I was actually kind of shocked that the bank took my offer on this one, as it hadnt been on the market too long, and was in relatively good condition. The agent had this one listed as a 2/2 when it was really a 3/2. This house is in an area of Tampa that I know very well, and when I got it under contract, I knew I would be able to sell it quickly. I put this one under contract on a Friday, and spent Saturday and Sunday putting signs out in the neighborhood advertising the deal for 52k. On Sunday afternoon, I got a call from a cash buyer who offered me 49k. I met him at the house a few hours later, and had a deposit and a signed contract by the end of the day Sunday. I closed this deal at my title company using a simultaneous closing.
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NOW WHAT?
Q53: What should I do now? If you were starting over, what would be some of the steps you would take to get the ball rolling?
Now its time to put the information Ive given you to good use and start taking ACTION. Following are 7 action items that I recommend you start working on immediately:
Get MLS Access- If youre serious about pursuing REO properties, I highly
recommend that you figure out a way to get access to the MLS. While it is not an absolute necessity, having access will make your life a heck of a lot easier, and there will be far fewer hoops for you to jump through. If you dont want to go through the hassle of getting licensed, see if you can become a Realtors assistant instead.
Network With Other Wholesalers- If I were starting from scratch, one

of the first things I would do would be to locate the wholesalers in my city who were doing the most volume, and ask them if I could market their properties for them. In my opinion, this is the quickest, easiest way to learn your market, build your buyers list, and possibly make some money at the same time.and best of all, theres ZERO risk on your part.
Choose a Target Neighborhood and Start Studying it- I probably

sound like a broken record at this point, but I really cant stress enough how much easier the offer making process will be once you have taken the time to familiarize yourself with a few neighborhoods. I would plan on spending at least a month or two studying the neighborhoods that you decide to focus on. Once you have a few buyers lined up and feel comfortable with the market values in these neighborhoods, then head to the MLS and start making offers.
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Start Building Your Buyers List- This is something that you can start
working on right away. Pick one or two of the methods I suggested and start building your list ASAP. Many of the strategies I suggested require little or no money, so even if you are low on cash at the moment, you can still get started immediately.
Line Up Your Exit Strategy- Whether you decide to close your deals using
a simultaneous closing, a double closing, or via the quitclaim method, you need to have your exit strategy lined up before you start making offers. Dont wait until you have a property under contract to figure this out- do it right away. My recommendation is to find out who the active REO wholesalers are in your market, and ask them how they are getting their deals closed.
Line up a Good Title Company and/or Attorney- Having a good

attorney and/or title company on your side is worth its weight in gold. This is another instance where I would ask other wholesalers or investors for a referral. Once you find a competent attorney, they should be able to guide you in the right direction with regards to how you should close your REO wholesale deals as well as provide you with the necessary contracts.
Surround Yourself With Positive, Like-Minded People- This is

something that is extremely important, especially when you are just starting out. You want to surround yourself with people who are supportive of what you have set out to accomplish, and stay far away from those who try to discourage you. I suggest plugging yourself into the Flippinghomes.com community, as well as the BiggerPockets.com community. Both forums offer a vast amount of knowledge and support that will be a tremendous help to you as you are moving forward with your REO flipping endeavors.
Q54: Any words of encouragement for a Newbie?

The most important thing you can do right now is to TAKE ACTION! Even if it is a small action step, it will help build momentum and give you the confidence you need to take even bigger steps.
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Keep in mind that there is a learning curve involved, and it is going to be the most challenging in the beginning. Every single successful investor faced the same challenges that you are facing now. The ones who achieve success are the ones who are willing to work through those challenges and do whatever it takes to succeed. I had a heck of a time getting through the learning curve, but I made up my mind that I was going to keep moving forward until I achieved the success that I was looking for. Thats exactly what you need to do- make a resolve to keep moving forward and keep taking action every single day until you start closing deals. Make a plan and then stick to it- no matter what. When I got started I had ZERO real estate experience, horrible credit, and I was broke as a joke. What I did have was a burning desire to succeed, and that was all I really needed. If I can do it, so can you! I wish you the best in your flipping endeavors. -Steph P.S. Dont wait until tomorrow to get started- take action TODAY. P.P.S. If you liked what you learned in this eBook and want to make some extra cash, sign up for my affiliate program- you get a 50% commission on every book you sell! $$$$$
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Table of Contents

2009 FlipThisWholesaler INC. All rights reserved

GENERAL REO QUESTIONS

Q2: Where can I find REOs to offer on?

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Q5: What if I cant get MLS access?

Q9: How do you select your target neighborhoods?

worth your efforts.

MAKING THE OFFER

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2009 FlipThisWholesaler INC. All rights reserved

Q13: How do you estimate repairs?

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Q16: Can I use my own contract when submitting an offer on an REO?

listing agent and have them send it to you.

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2009 FlipThisWholesaler INC. All rights reserved

Q26: How long should I give myself to close?

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2009 FlipThisWholesaler INC. All rights reserved

FINDING THE BUYER

Handwritten Bandit Signs

Research Cash Sales in the MLS

Utilize Other Wholesalers

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Call For Rent Signs in Your Target Neighborhoods

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Attend Your Local REIA Meetings

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Call We Buy Houses ads or signs

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2009 FlipThisWholesaler INC. All rights reserved

2009 FlipThisWholesaler INC. All rights reserved

2009 FlipThisWholesaler INC. All rights reserved

2009 FlipThisWholesaler INC. All rights reserved

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The LLC Method

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The Land Trust Method

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8315 Libby Lane Tampa, FL

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10208 N 17th St. Tampa, FL

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2018 Clarice Cr Tampa, FL 33619

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Network With Other Wholesalers- If I were starting from scratch, one

Choose a Target Neighborhood and Start Studying it- I probably

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Line up a Good Title Company and/or Attorney- Having a good

Surround Yourself With Positive, Like-Minded People- This is

Q54: Any words of encouragement for a Newbie?

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2009 FlipThisWholesaler INC. All rights reserved

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