REO Help/Double Closings
I am working as a birddog. I have a whole list of REO's. I asked my RE agent to find some homes for me and this is what I have. Now it's my understanding that I cannot assign contracts on REO's. Is that a hard and fast rule, or does it depend on the bank?
I am a new investor and I would prefer not to use my own money at this point. What can I do with REO's? Do I just do a double closing with a buyer lined up and ready to buy. What if the buyer backs out of the deal, what's my exit strategy?
If I do a double closing after applying for a bank loan, then the 12 month seasoning law (or whatever it's called) kicks in and that would prohibit me from doing any additional deals using my credit.
Help!
Confused,
Andrea 
Im new and have thought about REO myself. Maybe get a hard money loan for the purchase of the REO and then rehab and line up a buyer. Check around on this site, there is a page of Lenders. You could probably find the HM and a lender for your buyer.
I am new to REI as well but here are my thoughts (I am sure the pros will follow with clarification and further explanation). My understanding is that banks usually will not allow assignment of contracts as they don't want to see you making a quick profit with no ownership. To them you just increased their cost. The whole contract assignment issue is one of much debate here with issues of brokering without a license coming up (outside of the REO issue). You may want to check out Scott Rister's article (link below) that talks about REO and flips. Not the same as contract assignment but it deals with the same issues about how banks like to see REO's handled.
http://www.thecreativeinvestor.com/modules.php?name=News&file=article&sid=174
Thanks for the link to the article Midwest. That was VERY helpful.
I think I may have found another way around this too and I'm investigating that now. I may be able to just show proof of funds, present a letter of intent and then flip it when my offer is accepted.
I'm thinking a HM lender just as PA birddog suggests might be the way to go in order to show that I have the funds to make the purchase.
Anyone else have any suggestions?
Thanks PA and Midwest!! I appreciate the help.
Andrea
Andrea,
Maybe I missed the point of your original question around seasoning but I thought I would discuss anyway. "Seasoning" requirements are not laws, but internal bank by bank policy implemented in anticipation of a new policy from the government. The policy would apply to any bank that has loans backed by the government agencies. The policy would be intended to stop fradulent flippers who in th epst have falsified documents, got inflated values from paid off appraisers on low value homes, defaulted on the loan and then take the money. Long story short, seasoning would not prevent you from doing other deals using your credit. In your example the seasoning would not affect your financing, just the ability of yor buyer to get funding. The seasoning rule may prevent your buyer from getting a loan from certain banks because you did not owned for property for 3 or 6 or 12 months depending upon the lenders internal policy. I think I understand your comments above and I hope that helps. If not, feel free to set me straight!
Midwest,
If I apply for the loan, flip the property and go on to the next deal and also apply for a loan (say all within 2 months time), I'm thinking the seasoning rules would keep me from getting the loan. You seem to be saying that I won't be effected at all, but the person I flip to will. I guess I'm missing something.
Andrea
My understanding...The seasoning rule applies to the property being purchased. If it has been owned by the current owner (the seller) for less than the seasoning period (i.e. 12 months), the buyer's lender may not approve for fear the seller is trying to fraudlently flip the property with an inflated value to the buyer. They don't want to be on a $100,000 loan covering a $30,000 beat up property via fraud. Seasoning does not apply to a borrower who wants to make multiple transactions (purchases) in a short period of time. It is always possible I am missing the point. You may want to go ahead and search in the Forums or Articles using the keyword "seasoning" . This issue has rec'd some attention on this board and it will clear up any confusion we might have. Isn't learning about REI great?