by Michael Jake
Remember, this works for any bank owned property (or short sales) listed on the MLS (Multiple Listing Service).
Again, We use the LLC method to AVOID double closing problems and to AVOID using flash cash lenders that eat up our profits.
I’m eliminating everything I’ve already covered up to this point, so I’m assuming you have REO leads (or MLS listed Short Sale Leads (cheap and ugly are best)), and you’re ready to put that offer on paper and you want to do it right.
1. First off, YOU don’t write offers. Your realtor does for you. You only need to talk the talk and direct them (if they need it) on what goes in the blanks.
2. These will all be CASH or Hard Money Offers with NO FINANCING CONTINGENCIES whatsoever. I prefer to write them all as cash offers…even if I know my buyer will likely be using hard money. (more on that later).
3. You tell the agent what ENTITY (your LLC you created to sell) and what price you want to offer based on the formula I gave you. Then only other important information is:
- How much for Earnest Money
- When is the Earnest Money Delivered
- Inspection Deadline (date)
- Closing Date
- Other Dates
Earnest Money: you have to at least put up the minimum but I usually offer more. It makes my offer stand out from some others if there’s multiple offers. It’s not uncommon for me to do $5,000 even if they are only asking for 500-1,000.
If you don’t have that much, that’s fine, use the minimum…you can even have the offer written to allow you to deliver earnest funds 1 or more days after the acceptance of the contract by the lender. I do this all the time. ESPECIALLY for short sales. It might be 30 days to several months later before a bank accepts your offer. No way I’m leaving thousands dollars laying around in escrow on a deal I might not even get.
You fill out your assignable contract with the seller. (example below of one of my offers)
4.1. Price and Terms. The Purchase Price set forth below shall be payable in U. S. Dollars by Buyer as follows
|5||4.7||Seller or Private Financing|
|8||4.3||Cash at Closing||$60,000.00|
Inspection Deadline: I use this as my way out if something goes wrong. 10 days is a standard inspection period. It’s even standard on the lead based paint disclosure required on any pre-1978 construction house purchases…this gives you 10 days to find a buyer with No Risk! No buyer? Ask anyone that looked at the deal what they would pay and counter your own offer on your “inspection findings”. Never back out directly on inspection…counter your own offer…it will save you some “face” if you made a mistake, both in your realtor’s eyes and the listing agent (who probably gets many other REO listings)
Closing Date: Keep it short but 2-3 weeks is about as fast as any lender can get to the closing table so that’s usually the time frame I give.
Other dates: See below as an example:
2.3. Dates and Deadlines.
|Item No.||Reference||Event||Date or Deadline|
|1||4.2.1||Alternative Earnest Money Deadline||3 Days After MEC|
|2||5.1||Loan Application Deadline|
|3||5.2||Loan Conditions Deadline|
|4||5.3||Buyer’s Credit Information Deadline|
|5||5.3||Disapproval of Buyer’s Credit Information Deadline|
|6||5.4||Existing Loan Documents Deadline|
|7||5.4||Existing Loan Documents Objection Deadline|
|8||5.4||Loan Transfer Approval Deadline|
|10||6.2.2||Appraisal Objection Deadline|
|12||7.2||Document Request Deadline|
|14||188.8.131.52||CIC Documents Deadline|
|15||7.4.5||CIC Documents Objection Deadline|
|16||8.1||Title Objection Deadline|
|17||8.2||Off-Record Matters Deadline|
|18||8.2||Off-Record Matters Objection Deadline|
|19||8.3.2||Survey Objection Deadline|
|20||8.6||Right of First Refusal Deadline|
|21||10.1||Seller’s Property Disclosure Deadline|
|22||10.2||Inspection Objection Deadline||7 Business Days After MEC|
|23||10.3||Inspection Resolution Deadline|
|24||10.5||Property Insurance Objection Deadline|
|25||12||Closing Date||9/10/2010 10 Days After MEC||Friday|
|26||17||Possession Date||At Closing|
|28||32||Acceptance Deadline Date||9/3/2010||Friday|
|29||32||Acceptance Deadline Time||COB|
Keep in mind, when I’m dealing face to face with a seller (or someone’s doing this for me), I’ve already given them a verbal or written letter of intent (often with 3 or more ways I can buy their property (complete multi-offer system is HERE!) ) and I’ve let them decide which one is best…so, I’m just filling out on paper (the contract) what we’ve already agreed on. This isn’t a “here’s my offer, take it or leave it” situation. You just need your contract to be assignable. You’ll also want some way out of the deal if something doesn’t go to plan. I usually use a simple inspection clause without a date limitation on it. This gives me up to the closing to exit safely.
4. When your offer is accepted, usually my agent calls me (or emails me) that we have a deal. It might be a day or more later before I actually see a signed copy of the contract, but I immediately upon a “verbal” acceptance start marketing the deal to my buyers list. I’m usually calling my “A” buyers as soon as I hang up the phone wth my realtor telling me I have the deal. I’ll also blast it out to my e-mail list with a picture and the specifics on the after repaired value, repairs and the total price of the house (purchase + my assignment fee)
5. Get buyers in to see it. Usually REO properties are on a combo box, not an electronic box requiring a realtor “key” to unlock…so they are easy to show or have your buyers go by and see.
6. Once your buyer says yes – you have them bring you a certified funds deposit (equal to or greater than your earnest deposit) and have them sign an agreement to purchase the LLC you have on the contract. You’ll need a legal document for this. I had my attorney draft one that covers all the important aspects of a real estate agreement, but as the purchase and sale of an an LLC. Mine cost $1250 but you can get it, and my entire seminar on wholesaling for a fraction of that price HERE!
7. You then coordinate with the title company who will be signing at the closing…it will be your buyer, because at closing they will be the owner of that LLC on the contract.
8. Make sure your buyers and any hard money lenders involved are CC’d on any title work emails and all are aware of the closing date. (if you wrote the deal as cash and your buyer is bringing in a hard money lender, you have to notify the title company and they may require you to sign an addendum to the contract.
9. Go to closing and get a big check – your final payment, and make sure everything goes smoothly, and focus on your relationship with the agent and your buyer.
10. Celebrate your victory. Take a little of your profit and treat yourself for you accomplishment. With the rest of it…what’s the best investment for your cash? Invest in more marketing? Invest in more real estate education to increase your cash getting skills? Pay off bad debt? A combination of a few of the above perhaps. Either way, congratulate yourself…you did something awesome!
To Your Success,
Your Local Mentor
“I just closed my first wholesale deal and made an assignment fee totaling $22,200! I’ve already received a check for $11,000 and will receive the other $11,200 soon . . .I couldn’t have done it without the help of Michael Jake’s guidance and expertise. Michael taught me everything I needed to know such as marketing for wholesale deals, talking and negotiating with sellers, making the right offers, and how to quickly find a buyer for my deals. Michael’s system has given me the confidence to repeat this process and make these big paychecks over and over again!” – – Kevin Kudrna, Retired Air Force
P.S. Find out what Kevin already knows HERE! It’s the most up to date content out there on Wholesaling Houses and Wholesaling REO’s.
Tagged with: REO
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