Flip This Wholesaler

Steph,

You are a smart and creative lady...and a hustler :-). I have no doubt that you will be wildly successful in your REI even if you have to tweak your strategy from solely flipping REOs.

As for the $75 billion lifeline...its tough stuff. Obama can't sit back and do nothing to stabilize the housing market unless we want absurd numbers of people left homeless. BUT even though he says that this won't help the "unscrupulous or irresponsible", I don't know how that can be avoided....which means that ultimately these folks will be rewarded with a government bailout paid for by all of our children and grandchildren.

It all sucks, but the REI community will just have to be creative and flexible...won't be the first time!

Enjoy your vacation!

Hi Shae,

Yeah, I think I'm definitely going to have to tweak my strategy ASAP. I was planning on the REOs drying up eventually, but figured I had at least another year, maybe two.

I don't agree with any of these bailouts, and am very scared of where our country is headed.

Throwing more money (that we don't have) at the problem has not worked thus far, and I doubt it is going to work in this situation, either.

Steph

Completely agree on your point that bailouts haven't worked so far...and not sure it will work this time either. Simply put, it's a mess.

The good thing for you though is that you already seem to have a strong set of buyers.

I thing that is changing would be how to identify the properties which means doing some marketing to other motivated sellers outside of the banks.

Also...this bailout seems to focus on Freddie and Fannie backed mortgages only. Do you have any idea what percentage of mortgages that is? I know its high, but not sure how high...50, 70, 90%?

Yeah, it's a disaster.

I'm not sure about the percentages of loans that are Fannie/Freddie...I guess I'll find out soon enough, though.

Maybe I should just get in line with everyone else and ask the government for a handout.

LOL! I'll save you a spot in line, Steph ;-)

Lol at having too much to drink. I think you will be fine and will find a way to make money in REI. Im sure you dont want to return to Bartending!

Lol at having too much to drink. I think you will be fine and will find a way to make money in REI. Im sure you dont want to return to Bartending!

Lol at having too much to drink. I think you will be fine and will find a way to make money in REI. Im sure you dont want to return to Bartending!

Wow I just had da javu three times... Its funny cause i was at a sheriff's sale yesterday and over half the properties got cleared due to this moratorium on foreclosures... WOW. Isn't there a saying... Rob Peter to pay Paul- but don't worry Steph this mortgage bailout is like putting a band-aid on a gushing aorta. This is going to fall flat on its face, and you will still be able to clean up!

Hi Steph,

Because of you I am closing my first deal. I want to know how your closings go. I mean, the bank does the title, but you close at your title comp? Do I just let the bank know that I want to close at my title comp, and what do I say to my title company, that I don't need title ran, just a closing? We are doing a double close, and I'll make a little $2k but its my first and I did it thanks to you!

You Rock...
Jessi

Hey Dustin-

Yeah, I agree. I spent the day doing some research into Obama's plan, and I really think it is just going to prolong the inevitable.

If they would just let the market correct itself, I think it would be a much faster road to recovery.

Jessi-

OMG- that is AWESOME!! I'm so happy for you..

Just let the bank's title company know that you want to sign all of the closing docs at your title company. They call it a "courtesy closing" here, not sure if everyone uses that term, though. My title company does tons of these types of deals, so I never had to explain anything to them. You might have to walk your title company through it, though, if they have never done one of these deals before. You will need to get them the HUD and title commitment from the bank's title company as soon as it is ready- they will need it in order to prepare everything for the 2nd closing.

I don't ever get into details w the bank's title co about what I am doing. I just ask them to email all of the docs to my title company along with wiring and closing instructions.

Please come back and post when you get it closed or if you have any questions.

CONGRATS!!

It will be interesting to see how many changes take place in his plan during the process of getting it written/passed.

Oh, and by the way Steph I read that Freddie and Fannie own or guarantee approx. 31 million homes which represents "over half" of all U.S. home mortgages.

Jessi, just wanted to tell you congrats too! Nice work!

Hi Shae,

Do you know when it goes into effect?

I really think this is going to turn into an even bigger mess than what we have on our hands right now.

How are the mortgage companies going to handle the millions of calls that are going to be coming in from homeowners who want to refinance or rework their loans? They are already overwhelmed, I can't imagine how bad it is going to get once this is passed.

Steph

Nope, not sure yet. I suspect that it could take them about 2-3 weeks to write, argue, re-write, and then vote on legislature. They seem to be in a hurry so I don't think this will linger for long. However, you never know...Dems only need 3 Republicans in the Senate to back their plans but it may be harder to get those 3 consider how much money we just spent in the last bailout/stimulus package.

...Oh...and to your point. Yes, the mortgage companies will definitely be overwhelmed. A combination of new folks wanting to get loans and the people who want to modify their loans.

As an example..this from Reuters:

Refinancing volume at mortgage broker LendingTree.com was up 88 percent week-over-week on Wednesday, while applications for new home purchases were up 30 percent during this time.

Wow, 88%?

On the bright side- this should create a whole lot of new jobs, I would think.

Steph,

Ive been enjoying your blog since JScott directed my this way. I can't post while at work (I guess I shouldn't be either lol) but thank goodness I can still read along.

Just wanted to say I think this can be a blessing for savvy folks like yourself. Many people may drop out of the game, while you adjust to the new rules. Leaving more pie for you.

Ever decide to wholesale in Denver, you will certainly have at least one buyer lined up.

Stop worrying Steph. Mess creates opportunity! There will still be cheap houses and people to buy them.

Hi Jason- Glad you stumbled upon my site...thanks for reading :)

Jerry- I'm done worrying. We're going to kick 2009's ass. That's all there is to it.

Man, Steph, I wouldn't even give that the time of day. The price you and your buyers pay may go up. That's all. Might wind up being a good thing for your margins.

Kickin' 09 butt...now THAT is what I'm talkin' about!

Thanks Steph,

I do have another question. I am limited on funds. So, I was using my buyers funds for the earnest money. I would then give it to the bank. However, I met today and got the contract signed and he told me that he would send me a copy of the check and that he had an escrow account set up. I know he is doing a lot of deals, and that he has the money but what do I give the REO agent? When does the earnest money get deposited? Can I write a check to the agent and then just have my buyers earnest fund wash my earnest check at closing? Please help!

Thanks,
Jessi

Hi Jessi,

I always have my buyers make the deposit check out to my LLC.

I make my offers through my realtor friend, so I send my deposit check in certified funds to the banks title company once all of the contracts/addenda are signed. This usually takes a few days (sometimes weeks).

If you are making the offer directly through the listing agent. and he/she is holding your check, they will probably deposit it as soon as the contracts are ratified.

Can you borrow the money from someone until the deal closes?

Steph

Psh, there is nothing to worry about because that bill won't do very much. For one thing, it's still *voluntary* for the lenders. Are they going to write down a loan to 31 percent of a borrower's income when the income is a mere fraction of what they said it was when they applied? In exchange for, what, $1,000? Puh-leez, this has "failure" written all over it -- although it won't stop people from trying to refinance.

What worries me are all these moratoria. I think it's just a ploy for the lenders to avoid responsibility for the vacant homes. Unbelievably, they think if they hold out another few months, the market will recover. They are sorely mistaken if they think prices are going UP anytime soon (in bubble cities).

There's always a lot of questions about signs here and I wondered if there were some cheap sources that don't involve cutting metal. Turns out the cheaper ones are typically called political wire stands, and meant for those ubiquitous campaign signs.

I found these, and they sell as low as 75c each: http://www.yardsigns.org/realestatehousesigns.html

These go for 36c in quantity: http://www.gtmprinting.com/WireStandsForYardSigns.htm

Hope that helps!

Wow, I searched for bandit sign stands and found these: http://witnessdesigns.com/stakesstands.html

this one gives you stakes free with your printed signs (watch his video): http://disposablesigns.com/

Hi Steph,

I could not borrow the funds however I found a pawn place that will loan me 2000.00 if I put up collateral (my wedding ring) and it cost me $350 to get it out. So, I wont make as much but I'll get my first deal done and I can move to the next! YEAH!!

Jessi

Hi Jessi,

Wow. I admire your willingness to get the deal done. Just please, please, tell me that you have confirmation that your buyer actually submitted his deposit?? Don't just take his word for it- ask to see proof from his escrow company, or better yet, call them yourself and verify.

Let me know what happens.

You are doing really well, and the next one will be SOOO much easier now that you know how the process works.

Nice job. :)

Steph,
Been reading your blog for a couple days and it's really informative and inspirational! You're doing an awesome job.

Had a couple questions-I'm new to this to bear with me- You said that you deal with mostly REO's. How are you able to get banks to agree on assignment clauses in the contracts?

Also, how are you able to sign a contract with them without actually showing them that that you have the funds to buy the property yourself? Thanks for the help!

Hi Eugenius- thanks for stopping by..

The banks will not let you assign REOs, so I do a simultaneous closing, which is basically 2 separate sales- me buying from the bank, and then me selling to my buyer. I use the funds from my buyer to fund both transactions, so I don't have to bring money to the table.

As far as the proof of funds- I use a statement from my Dad's line of credit.

Hope that helps,
Steph

Also, I wanted to ask you how you deal with comps as this is an area I've run into trouble with. I find a house that I'm interested in but the comps from Zillow and Trulia are all over the place so I'm not sure which ones to go with. Do you just have an agent do it for you? If so, is it the agent listing the property or any agent that you usually deal with? And how do you compensate them? Sorry if I'm asking a lot lol...this is the roadblock that I'm at. Thanks!

Hi Eugenius,

I have mls access and also access to RealQuest, so I use those sources if needed. Honestly, though, I don't really need to look at comps much anymore because I am so familiar with the areas I am working in.

My advice to you would be to pick one part of town/neighborhood, and start learning the values until you know them like the back of your hand. It makes it much easier once you are intimitely familiar with a neighborhood.

If you don't have mls access for comps, perhaps you could become an assistant to a realtor so you will have access. That's what I did..

Good luck,
Steph

Hey Steph,
Sounds great. I've already made a couple of realtor friends so I'll be asking them if they could use an assistant.

I had a first part of that question from before that somehow got erased...and that was...when you were making offers originally to the agent, did you tell them that you would do a simultaneous close? If so, what is the point of showing your proof of funds if it's not your funds that you are buying the house with? Also, I wanted to make sure I understood your actual process...so at closing, your end buyer actually pays for you to buy the property and then pays your "assignment fee?" How is that not actually "Assiging the contract," which the back won't allow?

And last, since there is no assignment clause what happens if your buyer backs out at the very last minute? How do you get out of the deal?

No, I don't tell them about the simul close. No need to confuse people.

A simultaneous close is totally different from an assignment. There are two separate transactions/sales in a simul close- me buying from the bank, and then me selling to my buyer. There is no assignment fee because there is no contract being assigned.

When you do an assignment, you get a property under contract, and then assign the contract to a buyer for a fee. There is only one sale. In a simul close there are 2 sales.

Steph

Gotcha, so you actually physically buy the property and then sell it to the end buyer. And, with that, you end up paying both sets of closing costs as well as a percent to your agent, correct?

Also, you said that you use funds from your buyers. I'm guessing it took you a bit to build up relationships with your buyers to the point where they would allow you to use their funds. Before that, did you use a funding service like Coastal Funding? And this part I'm concerned about - What happens if the end buyer backs out right at the last minute, say the day of the closing. How would you get out of the deal?

There are 2 sets of closing costs, but the bank pays the majority of them on the 1st transaction, and I have my buyer pay all of them on the second, so I am only out a few hundred bucks usually.

I don't get into the specifics of the simul close with my buyer. Buyer shows up to closing with their cash, and the title company uses their funds to fund both transactions.

If your buyer backs out and you can't close it yourself, then you will lose your deposit as well as your credibility with the listing agent. I always get a 2k deposit from my buyer and put up 1k to the bank, so if they walk I end up 1k ahead of the game.

But if the buyer backs out and you've signed the contract to purchase with the agent, aren't you on the hook to buy the property yourself? Or does the contract just get terminated if you can't close and you just lose your deposit? Thanks again for all your help!

If you can't buy it you lose your deposit.

They can't force you to buy the house.