Help With This Flip, Please.

Comments(17)

• 
  results_one9th December, 2003

  Hi;
  I believe there are special steps that you need to take in order to flip a REO because a bank is involved. BUt I do not have the details. I believe there is an article on this topic and it is also addressed in some previous posts.
  I would start there....
  Good Luck!!!!!!! <IMG SRC="images/forum/smilies/icon_smile.gif"> [ Edited by results_one on Date 12/09/2003 ]

• 
  rickpozos9th December, 2003

  Usually REOs are purchased on a cash basis. They dont want to mess with a contingency for financing, they want to get rid of the property now.
  
  As far as marketing, if you have keys for inspections, then I would put an ad in the paper and let everyone in my investor club know the details and show it. I would NOT put a sign in the yard.

• 
  johnqreplies9th December, 2003

  Thanks for the answers.
  
  So what you're saying is banks that hold REO's won't wait for me to line up financing to purchase, even with a deposit? They'll only take cash offers, which of course, means I need to have financing before going in with an offer.
  
  Is this a universal policy, or just your experience?
  
  Thanks for any info.
  
  -J

• 
  Birddog19th December, 2003

  If it were me, I would get pre approved for 75k. Bring it to the bank, tell them you'll pay 75k for it, and here is my proof of funds. That is your best shot on this one.
  
  
  Eric
  [addsig]

• 
  johnqreplies9th December, 2003

  Thanks Eric.
  
  Here's another bizarre question, please just bear with me.
  
  Let's say I had trouble getting a pre-approval through a traditional lender.
  
  Would a hard money lender work here?
  
  The loan to value fits at 30%.
  
  (I know it's not the best case scenario. I'm just trying to wrap my head around ALL the options.)
  
  -J

• 
  davehays9th December, 2003

  Eric, have you purchased REO property before?
  
  The way you phrased it..."If it were me..." as opposed to "I have...." makes me think you haven't had experience with REOs, but if I'm wrong, please let me know - we're all just trying to help each other out in here, for sure .
  
  And neither have I, but I know enough to know you need cash to deal with banks, and those contracts are not assignable either. REOs are a cash game, or at the very least I know of rehabbers who may have used Hard Money Loans to purchase, but no brokered or conventional financing. Most likely, the rehabber just used cash or private investor cash.
  
  You should be working on developing a list of private lenders you can go to, or find Hard Money Lenders and ask them if they will lend on bank owned properties, what their experience is with that, to see if it is possible.
  
  Final summary:
  * Someone else's cash, either private lender (think doctors, attorneys, other rich folks with cash on the sidelines wanting 9-14% return on their money vs. crappy T-bills, CDs, mutual funds, etc.) OR a hard money lender
  
  Though for hard money lender, they charge points up front to originate the loan, plus 15-17% interest only payments, and this deal doesn't seem that fat with profit.
  
  Good luck, hope this helped. - Dave

• 
  johnqreplies9th December, 2003

  Dave:
  
  Thanks.
  
  I'm very familiar with private investors. I'm a media entrepreneur and have extensive experience with LLCs, private placements and such. Real estate is new territory (pun intended) and that's why I'm here with you guys.
  
  SO regarding Hard Money. Where do I find lenders who are licensed in Virginia?
  
  -J

• 
  LarryTX9th December, 2003

  Generally on REO type deals if you are planning on Flipping this deal then you would need to do a double close since a bank does not want to be in a position where they are leaving to much money on the table. That has been my experience when working with REO's.

• 
  LarryTX9th December, 2003

  Quote:
  On 2003-12-09 10:57, johnqreplies wrote:
  Dave:
  
  Thanks.
  
  I'm very familiar with private investors. I'm a media entrepreneur and have extensive experience with LLCs, private placements and such. Real estate is new territory (pun intended) and that's why I'm here with you guys.
  
  SO regarding Hard Money. Where do I find lenders who are licensed in Virginia?
  
  -J
  
  
  Here is a list:
  
  Name: READY MORTGAGE
  Phone: 972-889-7323
  Website: www.readymort.com
  
  Name: Wonder Funding, LLC
  Website: www.lanceday.com
  
  Name: CAPITAL RESERVE CORPORATION
  Dallas, TX 75206
  Phone: 214-237-3320
  Website: www.capitalreserve.com
  
  Name: Mark Higgins
  Contact Name: Mark Higgins
  Address: 3515 Cedar Springs Rd.
  Suite 100
  Dallas, Tx 75219
  Phone: 214-252-0303
  Emai : **Please See My Profile**
  
  Name: ALLIED LENDING GROUP
  Contact Name: Mike Brown
  Phone: 972-650-0102
  Website: www.alliedlendinggroup.com

• 
  johnqreplies9th December, 2003

  Thanks for the links. Unfortunately, none (except Wonder) lend in Virginia.
  
  I'll keep looking for a local company as I've found it easier to get deals done in person.
  
  Thanks again.
  
  J

• 
  ronjung9th December, 2003

  Just to clear things up a bit. In a very hot market an REO will probably need an all cash offer- I guess. I have bought and rehabbed four- all with conventional loans. The competition is not as tough as it is in MA, I'm sure, but you can get bank financing for REOs.
  Ron

• 
  DanLioz9th December, 2003

  Regarding REO's and assigned contracts:
  I read about this in one of the TCI forums or articles about this guy who is bypassing the REO no-assignability clause by creating an LLC and purchases the house from an REO in the LLC's name, after wards sells or assigns the LLC to another investor. So from the REO's perspective it is always the same person (or LLC) that is closing. Plus there are no costs for double closure...just a $45 fee at the municipal court to register your new LLC.
  I hope this helps.

• 
  pserber11th December, 2003

  Yes! I read that article. What a brilliant idea! I need to find the article and read it again. Anyone know where it is?
  
  And you can use conventional financing to buy an REO. You simply need to provide a prequalification letter along with your offer. I have been trying to buy an REO for a while. Finally got a good one!
  
  Paula S.

• 
  edmeyer11th December, 2003

  My recent REO purchase was a cash deal and went very quickly, but financing was an option. The bank turned down other offers because of too many contingencies. Certainly the bank will be more attracted to an all cash offer with few contingencies.

• 
  SteveCook15th December, 2003

  Hi J,
  
  Here are a couple of things that you need to keep in mind.
  First, you aren't buying it cheap enough to where you can make a profit and move it quickly to another investor. Your buyer is going to have to be a retail buyer.
  
  Your retail buyers are going to have a tough time getting financing on this deal because of seasoning issues. Do you have this addressed yet? If you do not have it addressed I suggest you do so before moving forward with this type of deal. You will most likely get stuck with the home if you are expecting an investor to come up and buy it from you quickly.
  [addsig]

• 
  roncoletta23rd December, 2003

  I thought the standard formula is
  After repaired value (ARV) x 70% - repairs = maxium offer. According to your numbers this deal would be about 20k too high.

• 
  Sandbahr23rd December, 2003

  All 4 REO's that I have purchased had financing contingencies. However, in all cases I did present a letter of pre-approval from my bank stating that I was approved up to "$$$" amount as long as there was no substantial change in my income or assets prior to close. The banks all accepted this contingency without any problem. It may be different in areas where REO's are "hot". where I live they move a bit slower than the average listing mainly because the buyers here don't like to buy houses that "need work". The "rehab" market here is just starting to become popular. It will probable get to be a more difficult "game" when more people get into it here.