How to handle wholesale transactions when dealing with REO’s.
In the first place you have to get around the non-assignment clause that most banks have in their contract. When I buy foreclosures, I either double close or I make sure I have the money (from multiple hard money lenders) to wholesale my deals even if I have to close on them before I actually found a buyer.
Another important thing I do, I focus on foreclosures that have been on the market for quite a long time - 100 days or even more. You will be at an advantage making offers when the banks are ready to negotiate.
I also always get thirty days before I have to close. I start marketing the property before I sign the papers, just a habit I have. Meaning, once the realtor tells me I have the property I immediately start marketing.
In a large city there will be a lot of REO agents but only a few of them move most of the deals in the area. You definitely want to build a relationship with these people. You will know you are talking to a big REO dealer when you make a low ball offer and they don’t even blink. They want you to do it because they know that the more low offers they will submit, the faster the bank will negotiate, the lower the price will get and ultimately the property will sell faster.
A lot of the small time realtors don’t understand this. They tell you the bank wont accept the offer before they even try to submit it. I am being quite direct when I tell them that they just need to do their job and let the banks decide. I try to be nice, but sometimes I get pissed and have to verbally smack them around. It’s OK when they know you close all your deals and that you do a lot of them. But I don’t recommend this approach if you are just starting out.
One more thing I do when dealing with REO’s is to make a lot of offers. Right now 99% of the deals I pick up are foreclosures. You just can’t beat the discounts the banks are willing to give because there are so many of them; you can never have such good deals when dealing with homeowners.