In simple terms, you can not assign a bank owned property unless you get the permission of the seller and buyer. This is because banks put this into their contracts…
“This Contract may not be assigned without the written consent of Buyer and Seller. If Buyer and Seller agree in writing to an assignment of this Contract, the original parties to this Contract remain obligated hereunder until settlement.”
This doesn’t mean that they will not allow an assignment. On rare occassions I have heard of investors being able to get the banks to sign off on an addendum at the last minute to allow the assignments. This doesn’t happen enough to make it a viable strategy however.
Over at Flipping Homes, where Steve Cook makes his home, I came by a method that you can use as your wholesaling real estate strategy of choice. The basic concept is that you purchase the REO in the name of an LLC, and then you sell the controling interest in that LLC to your buyer for your assignment fee.
The reason why this works is that as far as the bank is concerned the buyer, which is the LLC, has stayed the same. Once you have the assignment signed you then can give your buyer the LLC documents, just make sure you don’t hand those over until you get paid!
One little tip is that you don’t have to setup your LLC before you make the offer. Once the offer is accepted you can then create your LLC. And a good idea is to use the street address of the property for the LLC name, that way you can almost garuantee the LLC name hasn’t already been taken. For your first attempt at this method you might want to setup the LLC ahead of time just so you can get the process down and get a feel for how long it will take.
Hope this helps…
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Comments 4
where do the funds come from for obtaining the reo in llc.. ? also how do you get approval if buying in llc for loan if this is the case.. What we all want to know here is how can we do this with little to no risk, and lil to no money dwn using the strategies stated.
Phil,
Thanks for asking your questions. Even though you will be buying the property in the name of the LLC, you will have to personally guarantee the loan. The LLC will not be seasoned enough to get the loan backed by it.
You will do this with little to no risk because you will have a buyer already lined up to purchase this REO from you. As you are negotiating with the bank you are also shopping this deal to your buyers list.
Doing all of this with little to no money down is possible by using a flash cash type of service such as Coastal Funding where they will lend you the money for a day (at say 2%) to purchase the reo. You will then double close to your end buyer and repay your loan and take home the difference.
You could also use private money or find a title company that will do a simultaneous close like TampaSteph (flipthiswholesaler.blogspot.com) does. With the simultaneous close you will be using your end buyers money. This strategy is sometimes not possible if the bank insists on using their title company.
Hope that helps answer some of your questions.
where do the funds come from for obtaining the reo in llc.. ? also how do you get approval if buying in llc for loan if this is the case.. What we all want to know here is how can we do this with little to no risk, and lil to no money dwn using the strategies stated.
Author
Phil,
Thanks for asking your questions. Even though you will be buying the property in the name of the LLC, you will have to personally guarantee the loan. The LLC will not be seasoned enough to get the loan backed by it.
You will do this with little to no risk because you will have a buyer already lined up to purchase this REO from you. As you are negotiating with the bank you are also shopping this deal to your buyers list.
Doing all of this with little to no money down is possible by using a flash cash type of service such as Coastal Funding where they will lend you the money for a day (at say 2%) to purchase the reo. You will then double close to your end buyer and repay your loan and take home the difference.
You could also use private money or find a title company that will do a simultaneous close like TampaSteph (flipthiswholesaler.blogspot.com) does. With the simultaneous close you will be using your end buyers money. This strategy is sometimes not possible if the bank insists on using their title company.
Hope that helps answer some of your questions.