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Flipping REO's is definitely a business model that many investors practice. Just not me.
In today's market ( I hate that phrase, BTW) there is a flood of REO's. I'm sure you're wondering if you can flip the houses that are REO (Real Estate Owned by Banks) a.k.a. "wholesale" these properties. I mean, after all, they are owned by a big corporation.
Are they motivated to sell? Are they willing to let you assign your rights in your contract for a fee? And how do you get around the $1000 Non-Refundable Earnest Money Binder Deposit issue if you don't have the funds to risk? Hmmm....all of these are very good questions, little mobsters. Learn the lessons about flipping REO's here.
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Flipping REOs is just one dynamic to the real estate wholesaling business. It's all about lead generation, and how many qualified [motivated] seller leads that you can generate and move through your funnel. When it comes to keeping this part of your business consistent, newbies tend to get frustrated and quit. That's the wrong thing to do! All you need to do is remember that we're in the marketing business FIRST. You must learn how to generate your own leads, and keep that train moving. Relying on other people and sources (like REO) will keep you hungry.
Question from Maurice
My question is when I make offers on properties listed with a realtor but not REOs…that means I cant use my contract I have to use the state purchase & sale agreement. So do state contracts have a non-assignable clause or only banks have a non-assignable clause in theirs? Thanks in advance!
Hi Maurice! All contracts are assignable by law, unless they specifically state that they're not. The Northeast Florida Association of Realtors uses a contract that does NOT have a Non-Assignable clause (which means it IS assignable). However, most REO contract addendums will have that clause that will not give you the right to assign the contract without getting permission from the seller in writing. I think it's more of an REO clause, instead of a Realtor clause. Each contract is written differently, so you should read and become familiar with every contract that is used in your area.
And don't forget that with REO transactions, you can use transactional funding to close on the deal first with the seller, and then sell it to your buyer. That is not considered an assignment of contract. The banks will ask you for proof of funds in this case, so be prepared for that!