Tuesday, February 24, 2009

Bulk REO Packages

In my quest to become a successful real estate investor, I have been attending CAREI meetings and anything else they offer. I've met several already successful investors to add to my buyers list and made a connection with someone who is working to put together a package of bulk REO properties (REO means real estate owned by a bank - generally, it's properties taken back in foreclosure) that they are selling at .60 on the $1.00, according to the bank's BPO value (BPO is broker's price opinion).

Since that seems like a very good deal, I've contacted several folks, including a wonderful realtor who answered an ad I put in Craigslist. These people want to buy 13 houses (so far) and I could probably get at least 3 more by making a few more calls. What can I say? Apparently no serious buyer turns down that kind of deal.

So, tonight I talked to the guy and he is emailing me the paperwork to give to my buyers. They need to put the money in escrow for the properties, then will get a list of properties to choose from and must close within 7 days. Frankly, I'm not too clear on how I'm going to get paid on these deals... though a few of the buyers have offered to pay me a finder's fee.

I'm probably not the Queen of Negotiation in this case - but it's really exciting to see this happening. If it works the first time, I'll be able to contact several more people to buy properties... talk about the ability to make a profit with no money out of pocket! This rocks. Even though it's nothing that was even addressed in any of the courses that I've gone through.

Eventually, I will get some of my own properties. My main goal is to have a steady passive income. They tell me that some of these properties are multi-families... which is what I want. So, this is kind of like Dave Lindahl's chunker strategy - buying single families to flip in order to get multi-families to hold.

This first house buying spree is supposed to go down on Friday. I'll definitely be on top of it! If it works, it can happen every week or so - this is so exciting!

Until next time.


  1. Hey, way to go! Keep us posted on how it turns out with this.

    In terms of how you get paid, I'm assuming you're not licensed, or you could just take your piece as a commission.

    You may need to just be a middle man with you on contract to buy while simultaneously signing up your folks to buy from you, double closings same day. And using transactional funding if need be.

    Would that work for you?


  2. He's correct about doing the double closing with transactional funding, but that can be expensive.

    You've got two other options...

    1) Does the contract specifically say that it is not assignable? If not, then it is by default assignable, and you should simply assign the contract for a small fee - $2000 is usually not out of line.

    2) If it is not assignable, find out how your buyers are buying...if they're closing in 7 days, they're likely using cash or hard money. In either of these cases, you can do a double close, using their money to "pass through" you to the seller, with you collecting the difference between your sale price and the bank's sale price. Some states will not allow this to happen, so check with a RE attorney or a title agent.

    One more thing regarding the double close "pass through"...if your end buyer is using institutional funding, DO NOT DO THIS. This can constitute mortgage fraud.

  3. Yes, I am not licensed, so I can't make a commission. I used to be many years ago, but dropped it.

    I have 7 buyers for these properties, 4 represented by a real estate agent. And if this deal works, I can bring in 4 more buyers. Since there are so many buyers, they have cash and/or lines of credit.

    I have a flash cash funder, but he charges 2 points. Surely he could come up with the $1,500,000 or so to be put in escrow. Then I could have the properties under contract in my name and assign the contracts. Yes, expensive, but it might make sense if the price continued to be right - it would be cutting it close with the realtor's clients because he needs to be paid too. The lender would be making way more than I could. Do you guys know any 1% flash cash lenders?

    The seller wants the funds escrowed before the people get to see the properties - escrow can be with their title companies. I just found this out tonight - not sure if folks will want to put their money in escrow b4 they know what they're getting... but the seller says that if they don't like their first option, his provider will let them choose from a list of 10 others.

    So, I wonder if I can put all the properties under contract in my name using the seller's escrowed funds and assign them to the buyers? That would save the flash cash fees. Or would it make more sense to have the people pay me a finder's fee, or whatever is legal in Colorado?

    I'd be pretty thrilled with $2,000 per house, considering that I had to do no marketing, no negotiating, no property locating... just had to chat with a few people. It would certainly be my best hourly wage ever.

    Right now, it's all verbal - no contracts, no property addresses - just the promise of a dream.

    Thanks for your suggestions! You guys have helped me a lot. I need all the advice I can get.